Australian retailers such as Bunnings, Chemist Warehouse (now part of Sigma Healthcare) and Amazon.com.au have attracted customers through Everyday Low Pricing (EDLP). But does that mean every retailer should adopt the same strategy?
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Many retailers are debating whether they should adopt EDLP as a pricing model to compete, protect margins and respond to changing market conditions. Some have aligned their pricing strategy with their brand to compete more like Amazon, whether this is a good match for them or not. Others have been more hesitant to jump on the EDLP bandwagon. They don’t have the marketing budgets or balance sheets to withstand an economic downturn or carry the financial load.
In this article, we’re going to discuss how retailers can use EDLP to win back customers in the best way possible. We’ll discuss the factors that make high/low pricing successful, the risk factors that make EDLP a risky proposition, and the advantages and disadvantages of using EDLP so you know exactly what the trade-offs are. Furthermore, we’ll share with you the EDLP strategies of Bunnings and Walmart.
Everyday Low Pricing (EDLP) is a pricing strategy where retailers keep prices consistently low instead of relying on frequent promotions or short-term discounts. Rather than encouraging customers to wait for sales, EDLP aims to build trust through stable pricing and predictable value.
Businesses typically adopt EDLP when they have the scale, buying power and operational efficiency to support consistently competitive prices. As this article explains, retailers such as Bunnings and Walmart have successfully combined EDLP with strong customer insight and purchasing power to grow market share.
Before adopting an EDLP strategy, consider the main trade-offs:
- Consistent pricing can reduce demand swings and simplify forecasting.
- Marketing and promotional costs may decrease because frequent sales are unnecessary.
- Lower prices can trigger price wars and place pressure on supplier relationships.
- Constant low prices may also reduce customers’ perception of product quality or make premium products harder to sell.
Whether EDLP succeeds depends on your customer segments, competitive position and pricing capability, which the following sections explore in greater detail.
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What is Everyday Low Pricing (EDLP)?
Everyday Low Pricing (EDLP) is a pricing technique that large brands like Home Depot and Walmart use to set a consistent price that is somewhere between two price levels of competitors using high/low pricing.
High/low pricing is a price-segmentation technique that retailers like Coles and Woolworths use to target a price-sensitive customer segment.
A price-sensitive customer segment is a customer group that is more sensitive to price than other customer groups, meaning they tend to prefer lower prices and are more likely to switch to a cheaper retailer if prices increase. Research also shows that price-sensitive shoppers can wait longer than other customer groups for the next discount before they buy a particular product. In short, price-sensitive shoppers don’t like buying things for their full price and search for discounts and promos. Price-sensitive shoppers tend to like EDLP because it guarantees fair pricing. However, some groups in this segment don’t like EDLP and will continue to shop around because they like to find even cheaper prices and/or are not satisfied until they find the lowest price.
A price-insensitive customer segment, conversely, consists of customers that value more than just price, perhaps product quality, store layout, range, convenience, customer service. They tend to value the convenience of not waiting for sales to buy their preferred products. They also prefer high-priced products because higher prices imply the products are worth more than lower-priced products – even if this is not necessarily the case (psychological pricing). Price-insensitive customers value EDLP to some degree – after all no one likes to feel ripped off. However, price for these customers is not their major value driver.
This approach could be compared to a haggle price environment.
How is Everyday Low Pricing (EDLP) used by Bunnings?
Typically, large brands like Bunnings use EDLP when they have an accurate read on their customer segments. Bunnings, for instance, knows its customer base very well and has long implemented tiered pricing to capture higher margins across different categories. Earlier research from 2015 found that around 40% of Bunnings’ price-sensitive customers were willing to pay 1.5% more for the convenience of not waiting for a sale on specific categories.
“Lowest prices are just the beginning” is Bunnings’ famous slogan that attracts its shoppers. However, it comes with a price-beat guarantee, saying: “Find a lower advertised price and we’ll beat it by 10 per cent.” Thus, customers can get the lowest price on its products without waiting for a sale. While Bunnings wins a larger share of the market without being restricted to a low pricing strategy or EDLP.
For example, Bunnings’ price-beat strategy allows them to sell items at a lower price to their price-sensitive customers and at a higher price to customers that don’t bother shopping around. Meaning, they charge different prices to different customer groups. Consequently, they maximise yield, much like hotels and airlines do.
Price-beat guarantees have been criticised for potentially contributing to anti-competitive pricing behaviour.
However, the company’s website states that it does not “pretend to be the lowest at every instant on everything, which is why we offer every customer a Price Guarantee.”
“Where, if you find a competitor’s lower price on the same stocked item, we’ll beat it by 10 per cent. Bunnings’ price guarantee applies to any lower price on an item that is currently stocked and available from an online store, or in a physical store in Australia. It applies where the other retailer’s final price, inclusive of delivery, taxes, fees and charges, is lower than our price on the day that the price guarantee is requested.”
Bunnings is ahead of the curve on playing smart psychological games to camouflage healthy mark-ups. What’s more, they continue to generate strong financial results. For the 2025 financial year, Bunnings reported revenue of $19.6 billion, with earnings increasing to $2.34 billion. The business attributed its performance to its value proposition, lowest price positioning and continued investment in customer experience.
How Walmart Uses EDLP to Outperform Competitors
Walmart is another successful company that has effectively used an EDLP strategy. The giant retailer offers low prices to customers throughout the year, not only during sale events.
Its purchasing power coupled with its EDLP strategy allows Walmart to overwhelm its competitors across retail categories. Ultimately, Walmart can offer customers lower prices than its competitors, and not even have to provide a better selection of products in any given group.
Walmart’s ability to maintain everyday low prices is underpinned by disciplined operating processes, purchasing scale and a consistent pricing philosophy. From its founding, the company positioned itself as the retailer that offers customers everyday low prices.
One can argue that Walmart exemplifies EDLP. Though the strategy provides small margins, the retailer can generate remarkable revenue from high sales volume. The EDLP pricing strategy has helped Walmart establish itself as a well-respected company offering low prices.
Walmart now operates more than 10,500 stores and numerous e-commerce websites across multiple countries. In its fiscal 2024 results, the company reported total revenue of more than US$648 billion, demonstrating how its EDLP strategy continues to support growth at scale.
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Advantages and Disadvantages of Everyday Low Pricing
Advantages of Everyday Low Pricing
Businesses benefit from using the EDLP strategy. Here are some reasons why the marketing strategy works effectively:
- Demand forecasting is easier
EDLP helps businesses minimise demand fluctuations that typically happen during sales promotions.
- Lower marketing costs
Advertising costs are lower because stores need not promote each sale item and advertise sale events individually.
- Staffing requirements are lower
During sale events, stores save time and effort in having to mark down each item.
Disadvantages of Everyday Low Pricing
By setting prices lower than the competition, businesses can gain market share. However, they may not be able to carry on with the practice. The incessant struggle to make up for offering lower prices and selling bigger quantities can put tension in the operation. Some disadvantages include:
- Get into price wars
You may find yourself in a price war when your competitors lower their prices to beat yours. And you will lose your competitive edge when you reach rock-bottom price and still, your rival can beat your prices. Therefore, make your message clear to your customers that you’re not offering the lowest prices, just low prices.
- Poor relationship with vendors
If you persistently haggle for lower prices from vendors so you can pass on lower prices to your customers, you might annoy them. Some vendors may even stop doing business with you. Others may give you defective products so that they can meet your price requirements.
- Lower revenue
You need to regularly monitor the volume of sales of products that were greatly reduced to track if you are getting the ROI on those products.
- A Reputation for Poor-Quality Products
Customers will suspect the quality of your products once you establish a reputation for having everyday low prices. You’ll have a hard time introducing higher-priced and higher-quality products because customers won’t trust you offering goods of excellent quality.
- Difficulty Running Sales Promotions
It won’t be easy to put products on sale when you advertise everyday low prices. Giving a discount during a sale would lead customers to think that your prices are higher than they need to be the rest of the time because you already claimed that you have the lowest prices.
Discussion
Unlike independent or smaller stores, big retailers like Walmart and Bunnings have more opportunities to set lower prices. They have a pricing team that is continually reading the market and informing their pricing strategy. They also benefit from lower inventory costs than many smaller retailers. Their sales level is constant. They do not need to pay to advertise periodic sale prices. Their volume purchasing means that they get better terms and dating on all their purchases. Put all of this together; they can offer lower prices in the store for price-sensitive customers and the convenience of not having to wait for a relatively low price or discount.
Higher prices help customers raise their internal reference prices. The distinction between high and low prices provides a contrast that humans need to understand and determine value. This is particularly important when the item’s quality is difficult to assess or ambiguous as, for example, is the case for fashion retailing.
Typically, it is difficult for high/low retailers to guarantee EDLP. However, they can offer customers a perceived gain. Paradoxically, though, raising your customer’s internal reference price can make it more desirable to obtain the low cost. They know they are getting something of value for a bargain, as illustrated by the Bunnings example above.
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Implication
Ultimately, you should handle an EDLP strategy with care. EDLP removes the contrast that humans need to determine the value. This shifts customers’ focus almost entirely to price, making it harder for businesses to communicate value beyond cost.
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Conclusion
The EDLP approach, when used correctly, can strengthen a retailer’s competitive position across channels and retailing categories. As many of the brands above have shown, businesses don’t always need the widest product selection or the highest quality to increase their share of wallet.
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