Research: Why Hi-Lo Pricing No Longer Works for Grocers or Customers?

The hi-lo pricing strategy wasn’t designed for the modern landscape, and the declining market share of traditional supermarkets proves it. Grocers need a new model. In this two-part article, we’ll discuss:

Why hi-lo was once a viable option but will be an untenable one in the near future.

Hazards of hi-lo: price perception problems, margin erosion, mindshare monopolization.

Why we recommend “everyday fair price” instead.

Areas to evolve: promo dynamics, pricing strategy, supplier negotiations and more.

The pillars that elevated hi-lo as the pre-eminent pricing strategy in grocery the past 30 years have crumbled, and it’s time for grocers to clear the rubble and build something new.

Hot weekly deals once helped grocers capture entire baskets; now they mostly draw cherry-pickers and drive low-margin sales.

National brands once differentiated assortments; now consumers can buy those brands more cheaply any day of the week at big- box stores and discounters.

Frequent sales once served as a powerful tool to shape price perception; now consumers can easily monitor prices across stores in real time to discern where value lies, based on the items that matter to them.

The world for which hi-lo was designed no longer exists, and the hazards of pretending otherwise are substantial.

The Proliferation of EDLP

The rise of alternative grocers over the last two decades has trained shoppers that they don’t have to be at the mercy of their grocer’s promotional schedule to get a fair deal on a favorite item.

Instead of waiting to buy or paying more, shoppers simply go elsewhere. More than half of consumers now spend most of their grocery budget in a channel other than traditional grocery, according to FMI. EDLP formats have been steadily gaining share for more than a decade.

Younger consumers are driving that trend. For example, we found that 13% of shoppers 18-24 and 15% of shoppers 25-34 spend most of their grocery budget in club — noticeably higher than the average of 9%.

Going Too Far With the “Hi”

Another problem is that, for many grocers, the “hi” has gotten out of control. When there’s consistently a significant gap between regular prices and sale prices, consumers become wary of buying at full price, and eventually they lose all confidence in the fairness of the pricing overall and defect to a competitor.

In our research for the 2025 “Grocery Shopper Perspectives” report, we found that 32% of consumers want consistently competitive prices rather than ones that are “super-low sometimes and high other times.” Again, younger consumers are driving the trend.

Hazard No. 2: Mindshare Monopolization

At the heart of hi-lo is the relentless and highly programmatic promotional calendar, which detracts time and focus from the parts of the business that drive differentiation, loyalty and traffic.

Too many grocers have become so reliant on vendor funding that merchants spend most of their time negotiating and planning with vendors. Time and focus are zero sum, so if those resources are largely being spent on promotions, then everything else is an afterthought. Merchants need to focus instead on how to enhance the overall category, the customer experience, the stores and other elements that strengthen competitive advantage.

Hazard No. 3: Margin Erosion

For many grocers, vendor funding has long played a significant role in profitability, and organizations have become addicted. Chasing those dollars, which are increasingly contingent on meeting certain volume threshold, becomes a problem when grocers over-rely on promotions. When grocers offer the same deals on the same items again and again, often on a predictable cycle, they train their customers to be cherry-pickers, which drives low-margin sales.

In addition to discouraging full shops, excessive promotion also creates significant inefficiencies.

Even for grocers content to make those trade-offs, the system as it functions today won’t even be an option in five years. Along with more vendor funding becoming performance-based, the rise of retail media networks means funding tied to physical stores will drop as more dollars shift to digital.

What Comes Next

Because hi-lo no longer serves grocers the way it once did and because it now poses considerable risks in addition to not yielding much reward, a new model is needed.

On a spectrum that has hi-lo at one end and EDLP at the other, grocers should move toward a more centrist approach. This could be referred to as “everyday fair price,” a model in which everyday prices are close enough to competitors and promotions are focused on specific goals, like driving traffic or increasing trial of private brand items, rather than offered indiscriminately as a mechanism to paper over unreasonable everyday prices.

Read more: Why Hi-Lo Pricing No Longer Works for Grocers or Customers | Progressive Grocer