Tuesday, March 10, 2015

The Component of The Successful #Pricing Strategy Of #Auchan

Auchan is to me one of the retailer that understand better how to work on pricing. Indeed, even though in France Auchan is far from being the best in the price competition charts, it has developped some skills on how to communicate on price, and therefore, have a strong price image. 

As a result, as shown in this blog previously, Auchan is one of the retailer that has the best gap between their actual price and the image shoppers have (see chart below).

What are the key components of Auchan's pricing strategy?

The Corner Of Fruits and Veggies for less than 1€
It has been several years now that Auchan has a corner with a selection of products for less than 1 €, which is quite successful. It secures then the lowest price to customers, and is theatralized in store as shown below. Now Auchan also has a corner of meat for less than 1 € the piece.

Theatralization of the Promotions
Auchan has always been the king of promotion thanks to its big stores and large aisles. It knows how to communicate on those both in stores and out stores. Here is a great example.


Work the Pricing Consistency
Pricing is most of the time getting crazy for FMCG products. Indeed, in order to compete with other retailers, most of the time pricers lower the prices of the most sold products. The problem is that most of the time it creates gaps in the very same product range, which is totally not understandable for one customer: How could a vanilla yoghurt be 20% cheaper than the pisctacio's one?

This is the reason why Auchan is working on some categories to harmonize the product range and therefore have a consistent pricing strategy, which makes sense to the customers.

They open Shop in Shop Hard Discount Stores
Even though it is not my favorite move, while the hard discount chains were rising in France, Auchan made the decisions to open "Self Discount" shops in shops, which were full hard discount stores inside the stores.

What I dislike about this one is that it takes a lot of room, and most of the time, it doubles cheap SKUs, which is to me a bargain for sales/square meters.

Offering Discounts On Premium Categories, like Organic Goods
It is also the roles of discount chains to find new markets to lower the price. And Auchan has set up a communication with products lower than 1 € for organic foods. Moreover, they propose self service products in stack, in order to allow people to save on packaging and get the right quantitites they want.

There maybe more components that I have not noticed, but obviously, they work really well on their image without investing really on price. 

What is great about the strategy is that they work on an understanding for the customers pricing strategy, and this is the reason why it works.