Your retail store is making sales and things are going along smoothly. Then someone else releases a similar product and undercuts your prices. What do you do?
This retail store grievance is becoming more common as retailers are able to sell all over the world through the Internet. Brands are no longer just competing with the retail store that opened down the street, but also the one across the globe offering customers similar items.
Thankfully, there are ways to maintain your market share and compete with brands that are offering comparable products for cheaper.
While dealing with competitors that have ripped off your designs or are trying to encroach on your market share is frustrating, all is not lost — there is some recourse for retail store owners. Before acting, take a deep breath, and review the following tactics to deal with this specific situation.
Maintain Your Prices
The first step after discovering a competitor is undercutting you is to avoid making panicked decisions. When you find out a competing brand is offering the same, or similar, products at a lower price, it can be tempting to lower your price to match theirs or even mark products down to undercut theirs.
But it’s better in the long run to temper your response. As Entrepreneur explained so elegantly: “When dealing with the price of a good or service, new companies need to understand that there can always be a cheaper option. Regardless of how cheap they go, their more established competitors can choose to price their good or service lower than the new company.”
If you start lowering your price anytime a competitor challenges your market share, you enter a dangerous game you may not be equipped to win.
Without knowing the details of your competitor’s business, you don’t even know if you’re coming out on top with a lower price.
Plus, price wars are often a race to the bottom where no business really wins — instead, retail store owners will constantly be beat out by newer, cheaper versions of the same product.
So, if retail stores want to stay competitive without altering prices, what can they do?
Know Your Customers
If you know your audience and what they value, then you can position your products in a way that resonates with them. While price always plays a factor in the buying decision, it’s just one part of what customers take into account before making a purchase. Other factors include quality, convenience, and loyalty.
If you haven’t already defined your retail store’s target audience, check out our guide to building buyer personas for your retail store. Once you’ve established your audience, you can tailor your marketing efforts to them, including:
- Conducting surveys, questionnaires, and research to ensure you’re offering the right products to meet their needs
- Researching keywords that your audience searches to make sure you’re showing up in the right searches against your competitors
- Offering a selection of products that your audience is interested in — giving customers the opportunity to meet multiple needs or interests from your website or store
Build Brand Loyalty
You need you have your brand identity established before you can start working on increasing your brand loyalty.
For more on establishing your retail business’ brand, check out how to Build Your Own Brand From Scratch in 7 Steps
Once you’ve established your audience, you’ll want to find ways to increase brand loyalty to keep those customers coming back for more. Encourage loyalty by building a brand that customers relate to and want to support. When customers are loyal to your brand, they’re willing to pay more for your products and services — both to support a brand they believe in and for the peace of mind of dealing with a brand they’ve had positive interacts with in the past.
In the article Brands Need To Step Up Their Game To Win Over Millennials, Forbes found that “millennials who prefer personalized messages from retailers have a 28% stronger brand loyalty than those who don't prefer such messages. And, if millennials think a particular brand communicates with them using relevant messages based on their own interests, their brand loyalty increases 7% on average.”
Target your audience with communications that speak to their needs, through mediums that you know they interact with, and establish lines of communication wherever you can — through loyalty programs, apps, customized emails based on previous purchases, and informative newsletters that offer information about upcoming sales or new products that align with their interests.
Curate Your Products
Another way to avoid lowering your prices and to stay competitive is to offer a unique mixture of products that your customers can’t get elsewhere. While your highest-volume items may be more traditional offerings, having a selection of unique products that consumers cannot easily find through your competitors is a great way to stand out from the crowd.
Think of a brand like Indigo that faces a lot of competition for the sale of books (especially online). In a changing industry that welcomed ebooks and competitors like Amazon, Indigo faced a potential price war that could cripple their brand. When you look at the current state of Indigo, though, you see a brand that brings their customers a varied selection of homewares, gifts, knick-knacks, toys, and fashion items (with higher markups than books) that make the shopping experience unique for their customers.
You can collect information about what other kinds of products your customers would like to see by sending out questionnaires to existing customers, using chatbots to help potential customers navigating your site, and through competitive analysis of what people are purchasing through your competitors.
If your retail store’s main offerings are popular and can be found in many stores, you can set yourself apart with niche products that speak to individual interests. You can win over passionate collectors and hobbyists from your competitors by offering unique items, keeping your brand front of mind for other, more generic purchases as well.
Continue to Innovate
While the discussed tactics help mitigate a price war, you never know what companies, products, and prices the future holds — so it’s important to innovate to stay competitive. As well as staying ahead of the rest of the market — new, exciting product launches are also an effective way to make more money by increasing profit margins. According to The Globe and Mail, an innovative product can sell for as much as five times the price of a normal product, which is a great way to supplement your bottom line against more competitive products.
Keep your retail business innovative by attending the latest retail conferences to check out new technologies and products. Also never become complacent about your product offerings — you should always be on the hunt for new and exciting items for your customers and checking out what new products your competitors are carrying.
Another benefit of staying creative is that innovative companies, like Apple and Google, have high levels of brand loyalty and brand recognition.
For more on finding new products for your retail business check out The 10 Best Places Entrepreneurs Go To Find Product Ideas.
Staying Ahead of Your Competitors
It can be difficult to compete in a global market where there are so many brands competing for sales. But differentiating yourself, keeping your offerings fresh, and ensuring your brand and messaging resonate with your target customers can help you retain your hard-earned market share.
Has your retail store had success selling similar products to your competitors? Tell us about it in the comments.