EDLP versus Hi-Lo pricing strategies in retailing--a state of the art article

Abstract

The pricing strategy is seen as one of the five most important priorities in retail management. Over the past years, price wars have emerged and price has become an even more focal point of retailers' agendas. Especially grocery retailers operate on very low margins and have fallen into a price-promotion trap, pressured both by competition and consumers. In times of intensive competition it is getting even more important for retailers to focus on profitable and successful pricing strategies. Furthermore, retailers act under complex circumstances, especially because of broad assortments, and should therefore define a clear framework for their pricing strategy. There are several studies which have been published on pricing strategy in retailing during the last years, but no comprehensive literature review of this topic with its determinants and outcomes exists. Based on the theoretical and conceptual foundations of pricing strategy in retailing, all relevant conceptual and empirical studies are analyzed. First, the different definitions of pricing strategy in retailing are examined and systemized. Furthermore, a division into studies on determinants and outcomes of pricing strategy in retailing is included followed by a discussion of main and further results. Based on this analysis of the existing literature, avenues for further research are identified and prioritized.