Low prices and huge success – says Pepco
We think that when you are in the middle of an economic crisis, every decision has a bigger impact. It’s possible that our internal sensors are triggered. We are more sensitive, not the events are bigger. Just as it may be true that those who make good and quick decisions now will get ahead. While those who wait too long or take the wrong course may well be among the losers. Sure, the risk may be greater, but the way we decide is the same deep down. Wherever we are, everyone talks about prices. We hear that everyday life is getting more expensive by the day. We are inundated with similar news, companies are delaying investments, revivals are slipping. In short, a lot of people are putting on the brakes in almost every industry. But Pepco’s strategy is universal, and you can use it in the hard times and the easy times!
For entrepreneurs, every situation is difficult. They are always trying to figure out how to make more money. But for entrepreneurs, every situation is an opportunity. They are always trying to figure out how to generate more revenue. In this, price is a strategic issue. Because price strategy determines the position you occupy in your market. If I say Jaguar, you know immediately that I’m talking about a British car. Just as you know that if you want one, it won’t be cheap. But I didn’t say anything other than the brand name. It’s exactly the same when I say the name Pepco. You know they have cheap products. But cheap does not refer to the product, but to the price! And it is very important not to associate a negative image with it. Because you might be cheap too! Because your knowledge and skills are worth 100 units to your market, but you never dare to ask for more than 70 units. This is another case of cheap prices, but not of poor quality.
Business made in Poland
Poland is one of the most populous countries in the European Union. It therefore has a huge economy, yet we don’t constantly hear about Polish success stories. If we had to list brands, we could easily get into trouble. What we almost certainly know is the aforementioned Pepco, the national airline, LOT, the oil giant Orlen. But that is not the truth. Pepco is owned by a South African company. Yet their shares are listed on the Warsaw Stock Exchange and their headquarters are in Poland. So the success is linked here, although not as much their own as the success of 5 to go in Romania. They also have 1,191 stores in a country of nearly 40 million people. That means that there are roughly 30,000 customers per shop.
War of numbers
The number of stores is interesting because in Hungary, with 10 million inhabitants, there are 229 stores (43,600 customers per store). In Slovakia, the number is 138 stores per 5 million inhabitants (36,000 customers per store on average). This is basically maths and “just” an average. Still, it is true to scale in all the “developed” markets of Pepco. They also have more than 100 stores in Croatia, Bulgaria or Romania. And Latvia has eight times as many Pepco stores as railways. This could also be an indicator of embeddedness. In 2022, 516 new stores was opened worldwide . So there is a demand for low prices and this strategy! If the average number of customers per store of the order of thirty thousand is multiplied by the number of new stores, then fifteen million customers will be reached physically!
Value for money
Shops of a similar type, KIK, TEDI or Action, coming to Central Europe in 2023, offer the same message. The profiles are similar, the strategy is similar, yet they all have a place. On the one hand, this shows that your competitor could be your supplier, but only if it builds the market for you. If you have a strong entrenchment, it could easily be that their advertising is followed by a boost in YOUR sales! They offer their products at low (often incomprehensibly low) prices, but never claim that they are of the highest quality. Nevertheless, almost everyone has bought something in these shops. Stationery, children’s toys, clothes for gardening or something similar. The offer is often so good that it is almost unmissable. And once you’re in the shop, it’s easy to fall into the trap of impulse buying. We are all tempted by the cheap price, and this psychological effect is exploited to great effect. They are not abusing our human nature, but rather catering to it!
How much your product or service is worth is almost entirely up to you. Of course, it is influenced by the market, by competitors, but you have the right to choose a completely different price. But why is this a strategic question? Because customers identify companies by their prices! They may not know your slogan, they may not know the details of your corporate identity, but they know what your prices are. All together they give your brand value, but very often “only” a feeling gives your price. You don’t have to be expensive, it’s enough if the customer feels it. If the exchange makes them feel that they gave more than they got, you are already expensive. Regardless of the amount you asked him for. If your brand is associated with the adjective expensive, you’re out of fashion. Because now is the time to look for good deals and save money – that’s the average response. Based on this, if you choose the same strategy as Pepco, you’re going to need a lot of customers. Simple math: if you have a small margin, you need a lot of transactions to succeed.
A bit more
You can also decide to go for a higher price. In this case, the customer will have higher expectations. They want to get a premium product or service for their money. And a much better one, because you are unknown and expensive. You may have a well-established brand, but if he hasn’t tried it, you are unknown to him. A dangerous combination, right? But it’s not. You just need effective and careful planning. If you can build a customer journey, show the customer why they’re making the right decision, get them to accept your values, it works. Or you can copy Pepco’s strategy. The latest news is that they plan to open 550 more stores in 2023.
Be careful in a storm
I started by saying that maybe every decision now has a bigger impact. Well, so does pricing. It’s very tempting to see the success others are having, yet their one-to-one success is inimitable. You won’t be able to build a second Pepco tomorrow. But you can learn the planning (just look at their map). They give you a good guide on how to decide when it’s time to expand (see the section on customer numbers and business numbers). You can get strategic thinking from it. In other words, you don’t want to replicate them, but rather use their knowledge for your own success story!