Question

Why would stores wage price wars in a declining economy?

Answer 1

In declining economy wages comes down and that leads to decrease in sales in stores and they can't pay rents and wages to its employees.To increase revenue in this situation,the best way is to reduce costs.Although they use different way to reduce their expenses like cutting advertisement costs, decreasing work hours of employees, maintaining thin inventory and less cost in supply chain.Many stores use different strategies to increase their new sales like daily low prices,cost cutting of goods, new special offers,and back to school budgets.Only new sales stimulate businesses rather than any techniques.So, In order to boost sales ,all stores decrease prices against each other to attract customers.This further decrease average sales although rise in general sales.This further incur losses to the stores.