When not to follow the market

We named the company Follow the Market. This is the article about when you should not.

There is a failure mode that shows up shortly after a retailer starts watching competitor prices properly, and it is caused entirely by the new visibility. Before, they moved prices monthly, because that was as often as anyone could be bothered checking. Now they can see every movement on every line, every morning, and they start responding to all of it.

Margin goes down. Volume does not go up much. Everyone concludes that the market got tougher.

The market did not get tougher. The retailer started treating information as instruction. A competitor going below you is a fact about the competitor. Whether it should change your price is a separate question, and the answer is often no. Here are the situations where it is most often no.

The competitor who is leaving

The single most common false alarm is a price that exists because somebody is getting rid of something.

Run-out before a model refresh. End of a distribution agreement. A store closing. A seasonal clear-out where the alternative is holding the stock until next October. In each case the competitor has stopped pricing to make margin and started pricing to convert inventory into cash, which is a completely different objective from yours.

If you follow them down, you will hold that price long after their stock is gone, because prices are much easier to lower than to raise. You will have permanently repositioned a line to chase a competitor who is no longer in it.

The tell is usually in the history rather than the price. A single sharp drop with no prior drift, on a model that has been in market for a while, on one seller rather than several, is a clear-out until proven otherwise. Thirty days of price history answers this in about four seconds. A single number in a spreadsheet cell cannot answer it at all.

The competitor who is not selling what you are selling

The second case is the one that survives even a perfect match on identifiers, because the identifiers are right and the product still is not the same.

Grey and parallel imports are identical units without Australian warranty or local support. Ex-demo and open-box stock is genuinely cheaper to hold and genuinely worth less. A bundled listing that includes the battery, the mounting kit or an extended warranty is not comparable to your bare unit even when both scan to the same barcode.

None of these should be matched. Some of them should not even be tracked. If a seller's proposition is structurally different from yours, their price is not a benchmark you are failing to meet, it is a different product at a different price, which is how retail has always worked.

The practical move is to exclude, not to reason about it fresh each week. Decide once that a given seller does not count in a given category, write the exclusion into the rules, and stop spending Monday mornings relitigating it.

The competitor who cannot actually deliver

A price is only a competitive threat if a customer can transact on it.

Out of stock is the obvious version, and it is the one where following costs the most, because you discount on the exact day you had the advantage. But the softer versions are just as real. A six-week lead time when you have stock on the floor. Delivery to metro postcodes only when you cover the state. No install, no removal of the old unit, no trade account, no ability to take the phone call on Saturday.

For a considered purchase, availability and service routinely beat a few per cent on price. Australian retail has spent twenty years being told the opposite by people whose business model is comparison shopping, and it is still not true for a dishwasher that needs installing next Tuesday.

The line where price is not the reason anyone buys

Some products are bought on price and some are not, and most retailers know exactly which are which without ever having written it down.

If a line converts on brand, on specification, on your fitting service, on a trade relationship built over eleven years, or on the simple fact that you have three in stock, then a competitor going five per cent under you is not costing you sales. Dropping five per cent to match them will cost you five per cent.

The test worth applying is whether you can name the last customer who walked because of price on that line. If you cannot, and you have been holding your position for a while, you probably have room you are not using. That cuts both ways, which is the uncomfortable part. Several lines in most catalogues are priced under where the market would happily sit, and the only signal is an absence of complaints.

What "following" should mean instead

None of this is an argument for ignoring competitors. Not watching is worse than watching badly. The argument is that a competitor price should feed a decision rather than trigger a reflex, and the difference between those two is whether you wrote your rules down before you needed them.

Written-down rules are boring and they are the whole game. Which competitors count in which categories, with the exceptions named explicitly, because there is nearly always one brand where the general rule is wrong. A margin floor you will not go below whatever the market does. A ceiling, usually RRP, that you will not drift above without deciding to. Rounding that keeps your prices looking deliberate rather than calculated.

With those four in place, the market moving becomes something you evaluate rather than something that happens to you. Without them, better data just gets you to the wrong price faster.

That is what Follow the Market is built to do. Track every competitor daily, apply the rules you decided on when you were thinking clearly, and show you plainly why a price was recommended, including which competitors counted and where a floor stopped it going further. Then you decide, and sometimes what you decide is nothing at all. That is the point. Price with Confidence. See how it works.