The Impact of Competitors’ Store Flyer Advertisements on EDLP/High-Low Chain Performance in a Highly Competitive Retail Market: GPS Information and POS Data Approach in Japan

The Japanese retail market has a high degree of competition among many small stores that use promotional (high-low) pricing strategies. Because store advertisement flyers are effective tools for such retailers, they play a very important role in Japan. However, despite the large impact made by flyers of competitive retail chains in various trade areas, the effects of advertising flyers has not been investigated in Japan, nor has this advertising strategy been investigated in Western countries. In this study, we obtained store traffic information using global positioning system (GPS) data from shoppers’ smartphones, with flyer information from 80 retail chain stores located in different trading areas. We found that while own-store flyers had a positive effect on that store’s performance, competitors’ flyers had negative effects on performance; indeed, these negative effects were of a magnitude that should not be ignored. Store-specific factors and trading area demographics also affect the effectiveness of store flyers. Furthermore, we found that high-low shoppers are more sensitive to competitors’ flyers than are customers who purchase at everyday low prices (EDLP). The results can help EDLP chains stop the practice of designating a loss leader brand.