Case Study: Is the Price Right? – ‘Express Value’ seem to think so!
Express Value may have a name that is unoriginal and lacking in imagination, but that’s exactly what brothers James & Tobias Veinwart were intending when they launched their chain of supermarkets in English speaking countries such as the UK and Ireland in 2002. Having achieved unrivalled success in their native Germany, the discount supermarket chain sought to roll out the same business model in the UK food retail market where four stores control the vast amount of market share – ASDA, Tesco, Sainsbury’s and Morrison’s.
Express Value’s business model is simple. They seek to offer convenience, speed of service and value for money. One journalist described Express Value as ‘Ryanair but with manners’. Express Value specialises in staple items, such as food, beverages, toilet paper, and other inexpensive household items. Many of its products are own brands, with the number of other brands usually limited to a maximum of two for a given item. This increases sales for each item and allows Express Value to operate from shops smaller than rival stores with more brand choice. This practice let Express Value avoid price tags, even before the introduction of bar code scanners. Express Value, on many of its in-house brands will place, if feasible, multiple bar codes on products to speed up the checkout process. Occasionally, Express Value will stock branded items such as DVDs and DIY products for a limited period of time at vastly reduced prices.
The effects of this marketing strategy have been well documented. Company pre-tax profits rose 65.2% to £260.9m for the year to 31 December 2013. Group turnover rose 35.7% to £5.27bn over the same period. Its market share grew from 3.1% to 4% in 2013 and is now 4.8% after a continued strong performance in 2014. “We keep prices constantly low while keeping product quality consistently high, which is exactly what shoppers want,” said Heinrich Van Meyer, Express Value’s UK group managing director. “They had become used to thinking you have to pay more for better products. We’ve shown them this doesn’t have to be the case.” The result has been quite dramatic with Tesco and ASDA announcing profit warnings and a fall in their market share. Smaller retailers and convenience stores have significantly suffered as a result of Express Value’s low cost, low price strategy.
Analysts however feel that although growth is strong, their market share is significantly behind those of the other larger chains with Tesco on 28.7% and ASDA on 18.6%. In order to continue these growth figures long term, many believe that Express Value will need to develop other avenues of competitive advantage in order to continue growth. Express Value has a policy of not advertising, apart from a weekly newsletter of special prices called “Express informs” that is distributed in stores and by direct mail, and often printed in local newspapers. It claims this is a cost saving that can be passed on to consumers. Express Value has never used an external advertising agency and its use of above the line promotions is far behind those of its rivals. Although profits continue to rise, the lack of variety in their stores mean customers can only complete partial amounts of their weekly shop at Express Value and multiple trips to include that of the more recognised supermarkets is required.
1. Analyse the benefits of the pricing strategy/tactics being adopted by Express Value in the UK market. (9 marks)
2. To what extent do you think the pricing strategy chosen by Express Value will continue to be the main reason for success in the UK? Justify your answer. (16 marks)
Hiya that is the case study I got sent I can’t find any help or anyones work to help me see if I’m on the right lines can you please help me with question 1 and 2?
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