Open a successful business: working on the low cost segment. Part one.

February 12, 2011 | Doing business

In the seventies, many small and medium-sized businesses, have used aggressive marketing to promote their brand:

lowest prices, promotional campaigns, discounts on all products, etc. ..

Some of these entrepreneurs became known nationally and their brands was related to advertising with testimonials that made become in the years following very popular the brands and products sold.

Therefore, the positioning of businesses in segments on medium and low-cost and often very low, allowed to some brands to grow or at least thrive very well in a period between the seventies and eighties in Italy.

But from the late eighties and subsequent years, the transformation of trade, has stealed many spaces to these brilliant personal initiatives, the work of some ingenious and imaginative entrepreneurs.

One after another, almost all of these business initiatives were replaced by large retail chains: for example, furnishings, Ikea and for example, see Ikea and Mondoconvenienza as realities that have become a leader in low cost of furniture.

In computers and electronics, it sees Unieuro, etc..

In the household expenditure we find: Coop, Esselunga or various hard and soft discount, etc..

In the hosting Web services, the supply of Aruba, has wiped out thousands of small operators, some of which, had already offered low cost service.

The market for low cost: the rules to win.

Who wants to be operating in a low (or low) price sector, he must consider one important aspect:

to be competitive, it needs to do economies of scale, namely high turnovers that justify the low reloading on products and services with which they work.

The reason for the bankruptcy and closure of many small, medium and occasionally large business operating in the segment of low cost price or at least on medium / low price, is due to the fact that new entrants have offered products and services in the market place in an even more aggressive , giving further depressed prices and being able to support their offer due to the high turnovers.

This allows to new subjects to:

achieve economies of scale

have better terms from suppliers, banks, etc..

Self-financing in some cases due to high turnover compared to expenditure (costs) that are moved forward.

Create a recognizable brand that is growing rapidly in popularity.

Gradually increase the number of products or services offered, thanks to a number of clients and requests that continue to rise.

Continue.

Image source:

parma.repubblica.it

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