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Pricing Strategies

Small businesses will play a vital role in the Indian economy. Worldwide, a good Pricing Strategy is key for any business to succeed. There are different strategies for pricing that retailers can adopt to profit in business, both in the long run as well as for short term goals.

  1. Premium pricing

It is for businesses that sell unique goods. In this strategy businesses sell at a higher price than its competitors. This strategy should be backed by the goods that have an impressive performance to create a favourable perception and customers are willing to pay a premium price.

  1. Penetration pricing

This technique is used to penetrate into the market. A business sells goods at a very low price to increase future demand and capture the market share. As the market share increases, prices are increased.

  1. Backward expansion pricing

This strategy is used by businesses who sell everyday use goods to common people. They keep the prices at an everyday low and attract customers from lower and middle classes. This strategy is used by large companies like Walmart and Target. This technique can be discouraging to small business who struggle to generate sufficient profit when prices are low.

  1. Creaming or skimming pricing

This strategy is designed for new products or product line launched in market. The product is launched at a very high price in the market. Businesses forego high sales to sell their product at a high price to gain a high profit. The prices are gradually lowered after the early adopters market is captured. It is most commonly seen for branded mobile phones.

  1. Psychology pricing

It plays with the psychology of consumer. If a product price is Rs. 99 then customer will go to Rs. 99 item than Rs. 100 item as it ‘seems less than 100’. This strategy is successful with businesses that can figure out the psychological pricing points of the customer.

  1. Bunch pricing:

In this strategy a business sells a low value item with a high value item. This boosts the sale of low value goods which are not otherwise fast moving items. They will lower the price of bundle and will sell along with slow moving items.

It’s a fantastic time for the Indian retail segment

It’s a fantastic time for the Indian retail segment

This is the fantastic time for the Indian retail segment, not only in the phenomenal GDP growth and consumerism that is happening but also, we are seeing a number of new formats coming in from Indian retailers as well as international retailers. Clearly, this is a golden era of retail – something that we have seen after a very long time in the Indian retail industry.

What does the future of retail hold in India?

The future of retail continues to remain exceptionally positive in India especially since the goods story is very positive. Businesses will mature as newer, international retailing formats make their way into India. We will continue to see a lot of the foreign retailers coming in either in partnership or subsidiaries in India because it is a large market. So, it remain very enthusiastic about the retail sector, as do retailers. Hopefully this will encourage more mall developers to come forth and build new spaces as well.

In 2016, we saw that there were more number of malls that were shut down than the number of malls that opened. So clearly, there was a negative supply.

However, 2017 has been a better year as far as the supply is concerned.

Today, mall owners are smarter, and they are churning tenants faster. At the end of lease periods they are letting go of tenants who are unable to contribute to revenues and growth in the mall, the retailers who are not able to hit the right numbers. This happens internationally, and this is happening in India too.

It is the survival of the fittest because those retailers who are the fittest and who are able to come up to the mark and deliver the revenue numbers that they have promised the mall developers, continue to stay and survive and those who fail are unfortunately asked to exit the malls.

Which category will perform the best in retail? And do you see any new categories evolving?

All the categories will continue to do best be it fashion, entertainment or food. I think what you will see is food doing perhaps better than some of the other categories. It is now dominating in many of the malls, and it is also becoming very experiential.

Malls owners are also leaning towards more food offerings because it does de-list them from the online slot of the retail. Also, mall owners use three senses of consumers to draw them in – taste, smell and sound. This holds true for the entertainment segment as well. Indians are very appetite sensitive and new food outlets in mall draw them. So, in the near future you may see this category go further than some of the others.

As per you, when compared to the global scenario, where is India lacking in retail?

India is not lacking in anything, but a lot more needs to done in terms of retail maturity. Newer retail formats need to come in and the relationship between retailers and mall developers needs to grow more.