Sales data shows that Every Day Low Pricing was not a preferable strategy. Armed with this knowledge, Randalls must execute a strategy of changing prices so that there is no confusion with the consumer as to what they can provide: Quality products at consistently low prices. With the elimination of erratic and deeply discounted promotions, Randalls can begin a new era of consistent sales cycles and profitable returns in a marketing environment which is receptive to this development. #1 There are several distinct advantages to having a more stable and single-level pricing structure.
A commitment to this would mean a significant decline in store promotions, but it can be argued that the benefits outweigh the detriments. First, the money that could be saved on largely eliminating sales events accumulates to become a substantial savings pot for the company per year. Secondly, staff members would not be so taxed. Process adjustments borne by the need to honor their guarantee of matching a competitors price or paying back the difference if they were to reduce their own requires extra staff that is unnecessary under a stable pricing structure.
Another benefit of this strategy is a better inventory turnover ratio. Daily sales can be better predicted and more consistent when the prices to not fluctuate constantly. The cost of residual merchandise to be sold in clearance events at the end of the season is too great when Randalls is forced to mark these down at even deeper price discounts. This strategic advantage also spawns another: a lesser chance of stockouts. These occurred when a popular item was discounted unnecessarily.
The item sold so fast that there were no more left to sell, and those products would have sold regardless without a significant discount. Stockouts can be recognized as revenue forgone when a stable pricing strategy is not implemented. This strategy enables the merchants to be able to dedicate more time and effort to planning their calculated assortment coupled with enhanced service measures. With this comes the success experienced when loyalty to the Randalls brand is fostered through excellent customer care and superior product presentation established.
A store-wide adoption of stable pricing could allow Randalls to establish a reputation for good value, even in the sea of competitors who continued their fierce promotions. #2 The introduction of a more leveled pricing was largely unsuccessful in many categories, but successful in certain others. The childrens clothing department enjoyed a relative price inelastic demand structure. This department enjoyed great success derived from implementing Everyday Low Pricing (EDLP) because the childrens merchandise sold carried a lower initial mark-up than formerly and was scarcely promoted at discount prices, if even once a season.
The reason EDLP fell flat in many other areas, including jewelry and mens suits, is because the quality perception of jewelry and suits can be compromised when prices are low from the outset with peripheral promotions going on, consumers anticipate similar discounts on these premier items when they are already at low prices. #3 In the future, Randalls should try to stabilize prices going forward. This recommendation comes in light of the fact that the only department which thrived under was Childrens. But there has already been too much damage done in the perceptual minds of the Randalls consumers their image has been compromised.
The confusion as to whether Randalls is a more like a Marshalls or like a JC Pennys. With a consistent commitment to lower-level initial mark-ups with few discount promotions, the short surges in revenue seen by sales events will not be as great as the steady revenue brought by the sales of a consumer confident in the quality and competitive price of the Randalls item. Randalls cant follow in the footsteps of high-profile competitor Prescotts and run aggressive sales events if they are not committed to promoting as hard, if not harder than this competitor.
The sales will fall short every time and leave Emily ; Caroline Randall back where they started riding the promotion wave, with the breaker close on the horizon. Please see Appendix A for a detailing of the specific plan of execution for Randalls executives to changes prices and stabilize them store-wide. With this plan of action, Randalls can be armed for an era of consistent pricing and steady sales cycles at no expense to their quality perception.