A price-plus-value war can be very successful in repositioning the price perception against a direct competitor: When Albert Heijn (AH) started the price war in the early 2000s, it was trying to win back former shoppers who had moved to hard discounters for some of their daily groceries, as well as to win market share from other midmarket grocery retailers. AH did not aspire to be seen as price competitive with hard discounters, but rather as a chain with (more) affordable daily groceries, and thus did not target hard discounters in its price-plus-value war; it targeted a repositioning in the midmarket grocery arena.
Upscale fashion retailer Nordstrom fully utilized the assortment and store environment levers and made a bold move by introducing a separate discount format, Nordstrom Rack, to appeal to the price (perception) conscious shopper. The retailer did this very successfully, growing the number of Nordstrom Rack outlets from 87 stores in 2010 to 167 stores in 2015, with plans for continued growth to more than 300 stores by 2020. More important, Nordstrom has been able to enter the discount business without damaging its full-price format: The retailer grew its revenue by about twice the average industry growth (9.2 percent) in the second quarter of 2015. In addition, profit margins have not (yet) fallen, as there is only a 10 to 20 percent overlap in customers between Nordstrom and its discount alternative.
Even a “slight” repositioning, such as the one Albert Heijn conducted, requires an extremely well thought through plan, including details on which of the price-plus-value elements to leverage when, the development of the capabilities required to execute the plan successfully, and other organizational adjustments required to see the war through (i.e., maintain profitability), even in an adverse scenario. Because a retailer will not be able to complete these preparations in a timely fashion when forced to respond to a competitor initiating a price-plus-value war, it is key for the retailer to understand the competitive landscape it is operating in, determine whether a slight price perception repositioning can be expected, and, if so, immediately start building up the required capabilities — and go to war.