How companies are cutting prices despite soaring inflation

A shopper takes a look at cabbages offered under a low-cost strategy at a Lotte Mart in Seoul, Friday. Yonhap

Multiple retailers are capitalizing on their respective supply networks to offer customers goods at extremely low prices, defying the industry practice of hiking prices in a bid to secure profitability against persistently high inflation.In their low-cost strategies, these companies, discount store chains and convenience store chains, are also cutting costs on marketing and promotion while increasingly adopting artificial intelligence (AI).The low-cost strategy practiced in the distribution sector is considered impressive, as it is made possible without shrinkflation (reducing the size or quantity of goods) or skimflation (reducing quality or features).These pricing strategies are perceived as other ways of hiking prices and thus ticking off consumers.“Under the circumstances, the firms in the distribution business should be given credit for capitalizing on their respective know-how and expertise to offer quality products at affordable prices,” a public relations official at the Korea Consumer Agency (KCA) said Friday. Discount store chains, including Lotte Mart, E-Mart and Homeplus, are buying much larger quantities of fruit, vegetables, meat, fish and other staple foods than usual from corresponding producers in rural regions.Such bulk purchases enable the companies to buy the goods at a lower price than usual. Furthermore, the purchases are made directly without any middlemen, making the cost more affordable for consumers.For instance, Lotte Mart is selling cabbages at 2,990 won each and white radishes at 990 won each, after mass-buying about 20,000 cabbages and about 50,000 white radishes from farms on Jeju Island and other regions nationwide.

At E-Mart, a range of leafy vegetables such as lettuce is sold at 900 won per 100 grams, while beltfish from Jeju Island is sold for 3,280 won each.“The amount we secured is sufficient enough to be sold for the next month,” E-Mart said.Homeplus is running a five-day sale beginning Thursday, offering Korean watermelon from Seongju, North Gyeongsang Province, at 9,990 won per package and bananas at 1,990 won per bunch.The pricing strategy of convenience store chains focuses on private brands (PB), goods that are manufactured for and sold under the name of a specific retailer.The PB products have cost competitiveness against brand-name products as promotion is handled simply by placing the products on store shelves nationwide, and retailers do not spend large sums of money on marketing and advertising.PB products include tortilla chips and cheese balls sold at CU, each priced at 990 won per 75-gram package.GS25 introduced a 3,000-won pork cutlet lunchbox.The companies have been adopting AI in determining prices and ensuring high quality of the products.Homeplus said it uses AI to compare prices with other competitors to optimize its prices.GS25 said it is using AI to display goods on shelves and predict demand at its stores so it can supply goods on 스포츠토토존 time.

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