Friday, 8 November 2013

Price matching

There was a bewildered builder on the TV news last night, being interviewed about the government's very sensible plans for stimulating competition in construction materials. His counterargument was to cite the TV ads from merchants that proclaim they won't be beaten on price.

I think he was referring to Bunnings, which promises to beat by 15% any lower price on the same stocked item (Excludes trade quotes, stock liquidations and commercial quantities).

Bunnings compete with Mitre10 for the DIY market. Despite their strong retail presence, this sector is not where most construction materials are sold. But still, the role of these adverts is interesting.

In some locations, Bunnings and Mitre10 have huge stores very close to each other, so price comparison would be fairly easy (and not just for customers). But this is really not what either firm wants.

Ironically, the price beating adverts are probably designed, at least in part, to soften price competition. The signal they're sending to rivals is: "don't get aggressive on price, because if you do it'll be mutually assured destruction".

Obviously the ads also resonate with consumers, and help to expand the market etc. But they're certainly not a reliable signal of fierce price competition.

No comments:

Post a Comment