A Price War Strategy Is The Least Creative Strategy, (What is the cause?)

Note: Tulisan ini adalah terjemahan Basa Enggres bebas dari artikel ini

Lately there more and more is happening phenomenon of a price war in offline stores (market, supermarket), and also in the online store (e-commerce).

Price wars that occur in online stores even already beyond the limits of reasonableness. Many traders are selling their product at a meager price to get customers.

A bad competition!

Price war usually is mostly made by new traders. They want to seize market share by way of shortcuts. And this triggers the occurrence of unhealthy competition among fellow sellers.

While the old traders who have for years gone through their business, rarely among them do the price war trick. Because they are very aware that such way a could lead to unhealthy competition system among fellow traders.

Old traders usually do the price war trick only for specific purposes and reasons. Example: when they are selling cheap their old products (in Indonesia commonly referred to as 'washing warehouse'). Or for promotional purposes of the latest products, year-end sale, and others.

A price war strategy is the least creative strategy. If you allow me to honestly commented, then I would say that this (price war) is a 'stupid strategy'.

What is the cause?

Because price war does not require creativity, therefore, do not you wonder if every one can do this strategy.

Remember one thing: "Everyone can be a trader, but only a few can be an entrepreneur". Because to be able to reach the level of an entrepreneur, one must have a high level of creativity. And not everyone can reach that level.

A person can become a genuine entrepreneur if he has proven his creativity and ability to face every competition.

Example a case.

Suppose you have a fast food restaurant in a place. And the price you set for 1-food package has by the standard rate in general.

Example: $10 per portion.

Your restaurant is very crowded, so 'fishing' others to try the same business as you (near that location).

And it turns out it happened! A later standing up a rival restaurant. And it is located not far from your business, about 100 meters away.

And remember one thing: The competitor sets up a fast food business that is the same as you.

It is likely that your customers will try to taste the food of your competitors.

What happens if it turns out the price is much lower?

For example, one portion of the same food (like in your restaurant), sold by your rival at a much lower price.

He's selling $8! (for example).

The considerable price difference that can make your customers will switch to competitors.

Automatically from time to time, of course, your business will be at risk can 'fall'.

Well, if the conditions as that, then what action will you do?

Events like this happen a lot. And it can happen to all businesses, especially in the type of business that people can easily imitate.

So you should be prepared to face the conditions as in the example illustration above. 😅😅

If you experience such conditions above, maybe you will feel very upset. It's as if the competitor has trampled your head.

Well! Then,

What do you think about the way more intelligent and strategies to solve that problem?

Maybe you think: The easiest is to sell at the same price as your competitors ($8). So in the hope of your customers will come back to your restaurant.

However,

What if your a competitor does a price reduction again, again, and again?

Today your competitors are 'dropping' the price of 1 serving of food worth $7.5

And then you also sell for $7.5

5-Then he increasingly 'drunken' by selling cheaper for $7.

And you also to go down the price.

The next day the competitor is getting 'mad' to selling $6.5 per serving.

And do you know?

If such lousy competition continues, you better close your restaurant business!

Why???

Because,,,,,,,,,,,

Because it's been useless to keep survive with your business.

Try to the think,

If the margin a tiny business and even not enough to pay the operational costs, whether that business is still worth to be maintained?

So, you a better find another business (good prospects). And prepare the best strategy to deal with competitors who use unhealthy ways as above.

The description mentioned above is an example of unfair competition in the offline business. Well, how is the condition of the 'game' in the online market?

His condition is not much different, even worse!

The more day competition and price war in the online business community are getting 'crazy'!

One of the trigger factors is because it is known easier to sell online 'for free' on the internet.

Very different from the offline business that requires a hefty fee to rent a store, on online business is not the case.

On an online business if you have a quota/internet access, then you can create an online store at that time too (e-commerce).

That's why more and more people are opening online stores. Everyone wants to open an online store!

Unfortunately, many new players from online stores are using the shortcuts to seize the market. These shortcuts are used for taking over of customers from other online stores that have long-standing (by dropping the price/price war).

Just look at the local marketplace and e-commerce sites in Indonesia such as Tokopedia, OLX, Bukalapak, Lazada, and others. For the sake of gaining reputation and customers, there are some of them who take margin as much 5% only.

Over time this competition will lead to bad systems.

If these unhealthy systems continue, then ultimately no one will become the winner.

Like the old Indonesian quote: "The win will be charcoal, the losers will be ashes!".

Let's refocus on the topic of the offline business world.

If you face unhealthy competition (price war) by the way playing 'dukun' (dukun: a kind of black magic in Indonesia) or challenge your rival to fight, it's not elegant.

All the above attitude will make your 'image' as an entrepreneur become tarnished!

What is the cause? Because you are not able to compete sportively.

You 'play' roughly like the child who calls his parents after an argument or fighting for something.

In the competition in the business world, lowering the price should be a last resort.

In healthy competition, if a new competitor comes, way a smart in a way is to increase the value of your service.

So do not you compete with how to lower the price. Because that way, will only turn off your business prospects, or it could also degrade the quality. Your business will 'die' because the customer is immediately leaving you.

Well, in the example of the restaurant case above what service and value should be improved?

Here I give some simple examples:

Juice drinks are offered free every 15.00-17.00 noon (the time is usually empty of visitors, so with strategies and promos like this are expected can to 'capture' visitors).

Or it could be put up a large banner in front of your restaurant with the words:

 "Save proof of your payment because a shopping receipt of IDR 50,000 can be exchanged for a free lunch coupon for two people.

So, the conclusion:

Increase a SERVICE and find a side of excellence in your business. So that it has the characteristics and different from other competitors.

That's the way to compete for the most elegant and honorable!

Hope can be useful. If you feel this article is helpful, then share it. Hopefully, it can be useful to your other colleagues.