Monday, August 20, 2007

Some news on supermarkets and search engines

One of the main differences between an everyday low pricing (EDLP) strategy and a high/low pricing strategy is that the former is often retailer lead, while the latter can be more supplier lead. Today’s edition of The Guardian newspaper carries a story on just how much an EDLP strategy may be retailer lead.

When I was last here in the UK in June, a banana price war broke out, and subsequently spread to other products. In the process of completing a study on the way the UK supermarket industry operates, the Competition Commission has discovered that a couple of the supermarkets may have been a bit too demanding of their suppliers during this price war. You can read the full Guardian story here.

Meanwhile, and this isn’t exactly a pricing story, Google is finding itself in a bit of hot water of late. As this story tells, it is reportedly being sued by American Airlines, who are finding that users who search for the airline are being given sponsored links to AA’s competitors in the search results. A similar practice was discovered in Australia a couple of weeks ago. A search engine, such as Google, is a two-sided market. It must please both its users and its advertisers, though Google only monetises one side of this market (the advertiser). But clearly, failure to provide its users with relevant search results can be detrimental to its cost-per-click revenue stream.

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