Lower prices at supermarkets – how?

The answer is really quite simple. Super markets like Subhiksha run its stores like own house that is efficiently and economically. Here are a few insights into how they operate.

Large volume discounts. They source large volumes directly from the source and from companies and do not go to middlemen. Thus they get large discounts on bulk buying.

Pay immediately. Of course if you pay faster, you get better goods and better prices and discounts. These supermarkets pay up-front and get the best products all at the highest discounts.

No high street stores. Their stores are located closer to residential areas and not in fancy locations where the rentals and cost of property is high. This accounts for lower overhead costs.

No fancy buildings. Their stores do not offer any frills and don’t believe in fantastic glass buildings or piped music or marble flooring. The stores are made on the simple logic that they are there to serve at the lowest prices and not to serve as sets for film shootings.

They do not adopt a 5 star culture because customers do not go to the store to spend an evening for relaxation but for buying best quality at best prices. They are there to buy what they want and that too quickly at the best prices and get on with the thousands of other things they have to do.

Because of no Air conditioners in their retail outlets and other gimmick looks, these stores need not recover their costs like other expensive looking shops and having A/Cs. They also do not have more staff than that is necessary.

Thus the operating costs are really kept low so that the customers can benefit from lower prices. After all every penny or paisa spent has to be passed on to the customer.

Space optimally utilized. In their retail outlets they ensure that they are not built to provide playgrounds for children. In fact they don’t take very large spaces: this helps them keep costs low. But all the required stocks are provided and all the brands are well stored in the shop.

Space sold to advertisers. Every inch of space available in shops is sold to advertisers. This is again done with the perspective of reducing costs and passing on maximum discounts to customers while ensuring optimal returns for the business.

In short costs are managed just to run the business very consciously and economically.

An example is of Subhiksha as they claim that they believe that they should not do anything that does not add value to consumers. EDLP (Every Day Low Pricing) is a principle followed by leading retailers and value stores like Walmart etc. With EDLP, Subhiksha ensures that on every product the lowest price is charged every single day to the customer, unlike other shops that have a 20% discount this week and the regular MRP (or pack price) next week.

A few selected Supermarkets keep the discounts constant, even if the companies raise their prices. Their system automatically calculates the discount and offers the same discount percentage so that the customer gets the lowest price for any of the purchases from the stores.