EDLP

Updated on January 28, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What is EDLP?

EDLP (Everyday Low Price) is a pricing strategy adopted by retailers and retail chains which promises the consumer or customer to provide them their goods at a discounted price or relatively lower cost compared to the market continuously instead of giving for a specific period which can also be said as a sales event.

Key Takeaways

  • Everyday Low Price (EDLP) is a pricing strategy that retailers and retail chains use to consistently offer goods at a discounted or relatively lower cost compared to the market instead of offering discounts for a specific period or sales event.
  • The idea of Everyday Low Pricing arises from the fluctuations in demand. It aims to reduce the efforts and cost of customers seeking promotional events to buy products at lower prices.
  • EDLP focuses on simplifying the decision-making process for the customers.

Explanation

Everyday Low Pricing is a strategy where the products are provided to consumers at a lower cost or a discounted price over a longer time at a constant rate instead of releasing sale events. Only then can the same products be bought at a discounted price. These retailers and retail chains provide products at their stores at a continuously lower price for all of their products, thus focusing on their product quality instead of marketing them.

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How Does It Work?

EDLP

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In the everyday low pricing strategy, the stores set their products at a reasonable price and maintain the same price for a longer period. It helps by simplifying the consumers’ decision-making as the consumer need not have to think about when the sale will be coming; instead, they can buy their products at a fair price anytime they want. In addition, this helps the store focus on their products instead of on their marketing of the products that require a substantial amount of funds and time to provide significant advantages in the market.

Example of EDLP

Many large retailers like Walmart, Trade Joe’s’, Avenue Supermarts Limited(D-Mart), etc., follow the EDLP model. Walmart is a well-known giant retailer that offers products at low prices every day. That may result in a lower profit marginProfit MarginProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more for the retailers, but it creates volume, so they gain from their selling capacity. Walmart has branches in many countries and has millionsMillionsThe symbol MM is used to represent numbers in millions, with the symbol M standing for thousand in roman numerals. As a result, MM stands for a thousand multiplied by a thousand, which equals one million. Financial statements and other reports from large corporations often present amounts in the millions.read more of consumers worldwide.

Rationale of EDLP

The idea of the Everyday Low Pricing strategy derives from the following points considerations: –

  1. Fluctuation in demand: During the promotional events, the retailers record a huge increase in the need for the products, increasing the movement cost and activity for the retailers. Through EDLP, retailers want to achieve a continuous and profitable demand for their products.
  2. EDLP focuses on reducing the efforts and cost of the customer searching for the promotional event to sell products for lower prices and focuses on simplifying the decision-making procedure for the consumers.

Everyday Low Pricing vs. High-Low Pricing

Following are the key differences between the Everyday Low Pricing and High-Low Pricing: –

  1. The high-low pricing strategy focuses on the promotional and sale event to temporarily boost their sale by reducing the prices of their products. In contrast, the everyday low pricing strategy focuses on providing their products at a fair price for a longer period.
  2. High-low pricing events last for a short while and may occur one too many times in a year. In comparison, everyday low price runs for a longer time and does not depend on any special event to reduce their costs for the products.
  3. In the high-low pricing strategy, product prices of the retailers are kept relatively low compared to the costs of the product in case of an everyday low pricing strategy.
  4. In the case of the high-low pricing strategy, the retailers incur a relatively very high price over the advertisement of the event and their products compared to the relatively low cost over the ad in the EDLP strategy.

Advantages

  1. EDLP creates a relatively constant flow of customers, i.e., demand for products by the consumers as they do not have to wait for any sale event for the low price of the products.
  2. Retail stores save their funds and pricing over the sudden increase in movement and fulfillment of products.  In case of sale events, stores also save their funds by not providing more workforce or staff over the focused corner where the sale event would be running.
  3. EDLP helps the stores focus on their products’ quality. It does not require the stores to introduce their funds to advertise their products, incurred in case of sale events.
  4. The constant demand for the products helps to forecast the need of the product relatively close to the accuracy and make it simple. Thus, a reduction in the wastage of stocks as the stores only occupy the relative amount of the products they expect to be demanded

Disadvantages

  1. EDLP offers lower prices, thus resulting in a lower margin rate for the retailers, which one can only neglect if the retailer has enough retail of the products in quantity. However, maintaining the demand and supply of the product is no easy task.
  2. Reducing the price of the products may invite price competition from the customers, resulting in bad for the retailer’s business and the market’s economy.
  3. The retailer opting for EDLP cannot introduce any sale event as it may create distrust in the retailer’s customers as they may come to believe that the everyday prices of the retail shop are higher than the expected price in the sale event, which could result in a bad image of the retailer.

Conclusion

Everyday low pricing strategy provides products to its consumers at a lower price than the product’s market price provided by other retailers. And they follow the same regime for a longer time. And they follow the same regime for a longer time. To adopt the same strategy, the retailer must have good business knowledge, the capability to handle the demand of the product at any time, a good working relationship with their vendorsVendorsA vendor refers to an individual or an entity that sells products and services to businesses or consumers. It receives payments in exchange for making items available to end-users. They constitute an integral part of the supply chain management for providing raw materials to manufacturers and finished goods to customers.read more, and not aggravate their market competitors to initiate any price warsPrice WarsA price war is a competition among the competitors of the business in lowering the price of their products to gain an advantage over their competitors in price and capture a greater market share. It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. Overall, the EDLP strategy provides more sustainability and stability to the retailers’ business.

Frequently Asked Questions (FAQs)

1. What is EDLP vs. EDLC? 

EDLP stands for “Everyday Low Price,” a pricing strategy in which retailers offer products at a consistently low price rather than relying on periodic sales and discounts. EDLC stands for “Everyday Low Cost,” which refers to a company’s focus on reducing its costs to maintain low customer prices.

2. Who created the EDLP concept? 

The EDLP concept is often attributed to Sam Walton, the founder of Walmart. Walton believed consistently low prices would appeal to customers and create customer loyalty. Walmart has since become known for its EDLP strategy, which has helped the company become one of the largest retailers in the world.

3. What is value-based pricing vs. EDLP? 

Value-based pricing is a strategy in which companies price their products based on the value that they provide to the customer. This value can be determined by factors such as the product’s quality, features, and benefits. EDLP, on the other hand, focuses on offering products at a consistently low price, regardless of the product’s perceived value.

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