Margin Squeeze – Are You in a Race to the Bottom?

margin profit commoditization value businessThe problem with commoditization is it leaves little room for differentiation or innovation.  Some businesses used the recession as a strategic tool to reduce vendor costs by pushing suppliers to renegotiate pricing.  It was definitely a buyer’s market for savvy procurement types tasked with making up for revenue shortfalls by realizing cost reductions.  Even seasoned business people confident in the value of their offerings fell victim to margin squeeze.

Pricing pressures are not limited to B2B or commercial relationships.  Consumers impacted by employment instability are making a mark as they seek new ways to stretch discretionary dollars.  The Hotel giant Marriott is feeling the pain from cash-strapped vacationers looking for better deals.  Even Walmart is feeling the pinch from the formidable growth of dollar stores.

It seems those of us who live in western Canada have become adept at ferreting out a deal according to Shoppers Drug Mart.  The company runs 160 stores in the four western Canadian provinces and is the top drug store player in Canada.  Says Shoppers West President Dave McDonald: “This is probably the most competitive market in all of Canada…”

It’s tough to regain lost ground.  Here are two questions that merit consideration:

  • Are your pricing strategies well understood by the teams who defend them?
  • How firm is the team’s belief in your value proposition?

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