Okay you business savvy types

[Mr. P]

Here’s the deal, I’m researching a business and keep reading from those already in it “don’t undercut the competition with price or you’ll go broke”.

Now why is that? If I make a profit I’m happy with why would I go broke?
It seems I’d be busy as hell (maybe too busy, is that it?). Lower price seems to be working for Wal-mart.

[theHawk]

Here’s the deal, I’m researching a business and keep reading from those already in it “don’t undercut the competition with price or you’ll go broke”.

Now why is that? If I make a profit I’m happy with why would I go broke?
It seems I’d be busy as hell (maybe too busy, is that it?). Lower price seems to be working for Wal-mart.

Yea but Wal-mart uses the cheapest Chinese made crap thats mass produced in sweat shops.

[Mr. P]

Yea but Wal-mart uses the cheapest Chinese made crap thats mass produced in sweat shops.

I know but I would be buying the same supplies and paying the same price as everyone else.

So if my mark-up is only 50% or 75% of the competition, what's the problem?

I'd make less profit than they would but people look for low price, so how would I go broke?

[avatar4321]

it depends on the market you are in and who your competitors are.

For example if you are relatively weak in a market versus a relatively strong competitor, they may be able to match your lower prices with less production costs driving you out of business.

Like i said, depends on the competition.

[Sitarro]

Here’s the deal, I’m researching a business and keep reading from those already in it “don’t undercut the competition with price or you’ll go broke”.

Now why is that? If I make a profit I’m happy with why would I go broke?
It seems I’d be busy as hell (maybe too busy, is that it?). Lower price seems to be working for Wal-mart.

That is the key.....if you make a profit. Undercutting to a point that you can't make a profit in an attempt to get a foot in the door will screw you eventually.
End the end, it is about making enough profit to stay in business and prosper.

[Mr. P]

That is the key.....if you make a profit. Undercutting to a point that you can't make a profit in an attempt to get a foot in the door will screw you eventually.
End the end, it is about making enough profit to stay in business and prosper.

That's my understanding too, Sitarro.

[Abbey Marie]

Mr. P, did you say these opinions came from people already in the same business? Perhaps they are afraid of the competition from lower prices.

[Mr. P]

Mr. P, did you say these opinions came from people already in the same business? Perhaps they are afraid of the competition from lower prices.

Yes, and that's what I'm thinking too, Abbey.

On the other hand I can see if your price is too low the demand will be so great you can't fill all the orders, people will walk next door and you lose your customers. That's the only reasonable possibility to this line of thought I can see.

[jackass]

If your price is too low then people may think you have a subpar product or service.
Another thought would be is all they are trying to say is make sure you dont get caught up in undercutting the competition that you basically go bankrupt.

[5stringJeff]

Undercutting the competition, pricewise, might get people in the door. Beyond that, you need repeat customers, so you also need things like friendly service, a clean store, etc. etc. Price is not the only factor to consider.

[MtnBiker]

I know but I would be buying the same supplies and paying the same price as everyone else.

How do you know you paying the same price for your supplies?

Also Jeff makes a great point, businesses are not built on price point alone. Price, service, quality, location, consumer confidence all play into the sucess of a business.