Competing on Price Leads to Certain Death

If you have ever been tempted to discount, offer early bird prices, undercut your competition, gather round. Aunty Anita’s got a story to tell you- the tale of the game for the throne as the country’s biggest and best saddlery.

Once upon a time there was a funny shaped country at the bottom of the world and it had one big player in the saddlery space. Horseland really was what it’s names said- a land for all things horse. There were a couple of other players, but in terms of reach, number of stores and sales, Horseland ruled them all.  (you might want to play the video below as you read along to get the full experience!)

But then, the rulers at Horseland got a bit lazy, a bit complacent and it left the side gate open for usurpers to have a go. A saddlery called Europa from the forgotten west had been champing at the bit, and was ready to give it a good crack at knocking Horseland off it’s throne.

Europa came at it hard. It took its then successful model and franchised it, opening stores right across the land. It bought and shaped it own manufactures over the seas, which meant it had control over supply, prices and exclusive brands and products. It took a massive amount of stock to Equitana one year and began it’s run of famous 50% off everything sales, turning over what was rumored to be 7 figures in 4 days.

(And of course, because they also owned the manufacturers, and wholesaled to their franchises, 50% off retail was still 100% margin for them…)

For a while it seemed to be working. Horseland’s hold upon the land seemed to falter. Then, something happened.

New leadership stepped up at the land of the Horse, and with it came a new strategy. They realized that competing on price was simply a race to the bottom, they had seen it many times before in other industries.

So the new leaders were brave, and they were adventurous, and instead of looking for cheaper, easier sales, they instead looked for the gold and the diamonds.

One after the other they acquired premium brand after premium brand, rather than focusing solely on their own manufacturers.

(This competitive strategy certainly wounded many smaller online and local retailers, who had done the hard work to introduce those brands to the country in the first place. Their strategy was like the butcher bird- wait to see what works, then swoop in and take the best).

They revisited who their niche was and decided that their ideal client wanted the lifestyle of having a horse, as well as just the practical side. They wanted a touch of glamour in amongst the dust, the rain and the dirt. They wanted the matchy-matchy. They wanted the shiny. They wanted the very BEST for their beloved horse, and they wanted to look the BEST while they were riding them.

Europa continued to focus on the “lowest prices”, “best value”, in the end resorting to pricing wars that meant that the franchise stores were able to buy their stock cheaper by shopping retail at the head store than through wholesale channels.

Slowly, but surely, their franchise stores died out, leaving just the originals in their home state. Still they persisted with the low price, “best value” refrain, shouting “never pay retail again! Wholesale prices!” in all their advertising.

Horseland grew, it thrived, the people came and they found what they wanted and more. They worked to re-educate the market away from a disposable, replaceable mindset to one that expected quality and prettiness as well as functionality. People were happy to pay the premium, because they were receiving a more premium service. They were able to buy the brands they had only seen in glossy magazines and on overseas riders. They could be a part of that dream.

Europa grew smaller, and smaller, and even still the strategy stayed the same. Maybe that was what they wanted, maybe it wasn’t. I’m just the story teller and not privy to the inner mind workings of the people in charge.

But I do recall saying to a colleague almost 7 years ago when Europa first started down this “cheaper, value, budget” path, that THIS was the best way to damage the industry for all, that it would lead to a race to the bottom similar to what was seen in the ‘dial a pizza’ wars. Fortunately, I was wrong. It didn’t damage the industry for all equestrian retailers, but it did destroy a kingdom, and leave a gaping whole for the premium retailers- large and small- to waltz in and take command.

You might not be a big national chain business with dozens of outlets, but the lessons to be learned from this sorry tale are the same no matter if you are a sole trader or if you have 10 stores.

Competing on price is always going to be a race to the bottom. We have to always remember that our clients and our customers are first and foremost people. Real, fully formed, individual human beings. And human beings want to belong. We want to feel a part of a community of others like us. We want to feel welcome, to be inspired, to feel lifted up by something bigger.

You might laugh when you imagine thinking that as a national chain of stores- but it’s important.

And it’s certainly important when you are considering your strategies in your business.

If you are the cheapest for what you do now, the people who buy from you now will rarely stay when you raise your prices. They aren’t loyal to you- they want the cheapest. Raise your prices, and they will look for the next usurper coming along at the rock bottom price. Charge what you’re worth now, and build your strategy around creating a community, of making your clients feel like they have found their home, create loyalty to you and your ideals and your values- which they share- and that is a business that will not just survive, but thrive.

Besides, it’s very hard to make a difference when you are struggling just to pay your bills.

And that, my friends, is just the beginning.

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Written by Anita Marchesani
I've come to small business the long way round- but enjoyed and learned from every single step. I learned about the power of Media during a BA and while working in Film&TV. I learned about the hard graft while groom for an international eventer in the UK. I learned organisation and staff management from running hundreds of weddings both here and in the UK. I learned from the mistakes of my first business that failed, to create an e-commerce success story, and now I'm here to help you have even greater success in your business. Oh, and I dance to really loud music like a crazy bastard.