from David Hawkings, managing director, KhiMetrics

Sir; Grocery retailers do not need to be told that taking on Tesco by slashing prices across the board will not help them regain market share or profits. Attrition by the market leaders has proven that price wars are only won by giants.

The route to survival and recovery lies in managing prices based on local customer demand and sensitivity - it is a question of knowing what prices, what products and when to lower as well as raise prices.

Proof that this strategy works comes from the United States where retailers are fighting back against the Wal-Mart effect and even gaining market share. Albertsons has used customer demand solution technology to drive sales, gross margin and increase market share.

At the company’s earnings call, chairman and CEO Lawrence Johnston said that the chain was able to track pricing and who the primary competitor was store-by-store on each product. Its competitive pricing moves have been paying big dividends.

Because most grocers are managing SKU volumes in hundreds of thousands, they will need to adopt software support that can monitor pricing by item level across the whole competitive environment - retailer by retailer, store by store and region by region.

AMR Research has shows that aligning price with customer demand and sensitivity has led to sales increases of 1.5% to 8% with margin improvements of 5% to 16%.