What is Every Day Low Pricing (EDLP)?
EDLP, short for Every Day Low Pricing is a pricing strategy where a retailer offers consistently low prices on all products. EDPL is also known as stable prices - as retailers continue to price their products low without offering any special discounts or sales price.
Since the prices are continuously low customers don't have to wait for a sale to get a great offer. The main characteristics of EDPL is that retailers offer low prices for a long period of time.
Generally, retailers and big retail chains use this strategy to have a constant stream of customers - who naturally choose their store because of the low prices.
History of Everday Low Pricing
The origin of the EDLP concept is more recent than you’d think. The Walmart CEO, Sam Walton - also known as the grandfather of modern retail implemented the “Lowest Prices Anytime, Anywhere” strategy in 1994. Ever since they have continued to follow the strategy.
So instead of relying on different strategies depending on seasonal market conditions or providing heavy discount offers - retailers simply provide the most competitive prices.
Traditionally, retailers have used the high low pricing strategy to sell their products. But with EDLP, the idea is to not move from the highest possible price to the lowest possible price but to rather price the products somewhere in the middle. This essentially offers consumers great value for a long period.
The idea came from the fact that consumers would buy household products in bulk periodically. This is different from when consumers buy a product out of instant necessity. Now, providing the same household products at a cheap rate has ensured a stable and huge stream of customers.
How does EDLP work?
In essence, the EDLP strategy is when a store always provides the cheapest rates for a product without a sales event. Think of your local supermarket or your nearest Walmart with their cheap prices. You can always count on these stores to give you great value.
EDPL essentially works like this - the store provides cheap prices ensuring a bulk of regular and loyal customers. The main attraction of such retailers is their product quality and the “value for money” they provide on those products.
Now with a steady flow of customers, retailers don't have to expend extra effort on marketing campaigns to encourage customer loyalty or new customers. Usually, a single marketing campaign is sufficient which conveys that their store has the lowest prices.
This takes off the huge workload from the retailer's shoulders, as marketing initiatives can be both costly and time-consuming.
The Rationale Behind Using EDLP?
Many companies have successfully implemented this strategy to gain great results. But you are probably wondering why setting low prices could be beneficial. The rationale behind using EDLP is as follows:
1. Simplifies Decision Making Process
From a consumer point of view, they don't have to constantly lookout for sales or discounts at new stores each day. They can always just visit a store that follows the EDLP strategy.
2. Reduced Effort
Consumers are always on the lookout for the best value. Most of them resort to price comparisons so they can buy a particular product for the cheapest rate. EDLP is a one-spot shop for all products sold at a low price consistently. So consumers don’t have to spend extra time and effort on price comparisons.
Everyday Low Pricing vs High Low Pricing
High low pricing is another pricing strategy many retailers use. It is a more traditional and also widely used pricing strategy.
High low pricing is when a retailer or company sets high prices for newly introduced productsand then they eventually lower the price during a sale or a promotional event. The high low pricing strategy primarily relies on special events like promotions or sales to encourage bulk purchases. The relative change in pricing is attractive to the customers.
Compared to this EDLP is quite different from high low pricing, as there is little to no reliance on promotions or sales. Also, they differ by the fact that EDLP has consistent prices while high low pricing relies on events to go from highest possible price to lowest possible price.
The everyday low pricing and high low pricing are essentially considered the two main pricing strategies mostly employed by retail companies.
Real-life examples of EDLP
Walmart Inc. is probably the best example of the successful implementation of an everyday low pricing (EDLP) strategy. Many experts suggest that the reason behind the enormous growth of Walmart is their pricing strategy - which is of course the EDLP pricing strategy.
The everyday low pricing works as a competitive advantage for Walmart with customers automatically preferring to buy from their stores instead of the competition. So high demand is one huge advantage.
But to truly support the EDLP model a company must have other strengths. This is because it can be difficult to operate at lower profit margins which is a direct outcome of lower pricing. Walmart handles this by drastically reducing operational costs, using their bargaining power to get better details, direct sourcing, and also their high sales volumes due to tremendous demand.