Create Dynamic Pricing/edlp_strategy_governance.md
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Dynamic Pricing/edlp_strategy_governance.md
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# Everyday Low Price (EDLP) Strategy & Pricing Governance
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**Document ID:** PR-EDLP-001 | **Version:** 5.1 | **Owner:** SVP Merchandising
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**Effective:** 2025-01-15 | **Review Cycle:** Annual
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## 1. Purpose
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Codifies Walmart's EDLP philosophy, price leadership commitments, zone
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pricing, competitive response rules, rollback mechanics, and pricing
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governance across all categories and channels.
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## 2. EDLP Philosophy
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Walmart's EDLP promise: **everyday low prices on the items customers buy
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most**, backed by a cost structure that lets us win on price without
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relying on high-low promotional gimmicks.
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Core tenets:
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1. Price leadership on **key value items (KVIs)**.
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2. **Rollbacks** used strategically, not as permanent discounting.
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3. **Opening price points (OPP)** protected in every category.
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4. **No bait-and-switch**: advertised price must be available.
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## 3. Price Zones
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| Zone | Definition | Price Adjustment |
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|---|---|---|
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| A | Urban / high-cost | +0–3% vs. base |
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| B | Suburban | Base |
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| C | Rural / low-cost | −0–2% vs. base |
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| D | Competitive hot zones | Dynamic, weekly review |
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Zone assignments reviewed **quarterly** by Pricing Strategy team.
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## 4. KVI Management
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- KVIs are the ~1,500 items most price-sensitive to customers.
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- KVI price gap vs. nearest competitor target: **≤ 0%** (match or beat).
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- KVI list refreshed **semi-annually** using customer panel + elasticity.
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- KVI violations flagged daily via **Price Intelligence Dashboard**.
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## 5. Rollback Mechanics
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| Attribute | Rule |
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|---|---|
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| Minimum duration | 30 days |
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| Maximum duration | 90 days |
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| Signage | Yellow Rollback flag required |
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| Margin floor | Category-specific (see §6) |
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| Approval | Category Manager + Pricing |
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Rollbacks exceeding 90 days require VP Merchandising approval and are
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reviewed for conversion to **permanent price investment**.
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## 6. Margin Floors by Category
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| Category | Min Gross Margin |
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|---|---|
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| Grocery | 18% |
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| Consumables | 22% |
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| Health & Wellness | 28% |
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| General Merchandise | 30% |
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| Apparel | 38% |
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| Electronics | 12% |
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| Toys/Seasonal | 25% |
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Any price action breaching the floor requires **VP-level exception**.
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## 7. Competitive Response Rules
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1. **Match** competitor price on KVI if gap ≤ 5%.
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2. **Beat** competitor by 1–3% if gap > 5% and margin allows.
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3. **Ignore** competitor if item is not a KVI and margin floor breached.
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4. **Escalate** to Pricing Strategy if competitor price is below cost.
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## 8. Governance & Cadence
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| Meeting | Frequency | Owner |
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|---|---|---|
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| Daily price exception review | Daily | Pricing Ops |
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| Weekly KVI gap review | Weekly | Pricing Strategy |
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| Monthly margin review | Monthly | Finance + Merch |
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| Quarterly zone review | Quarterly | Pricing Strategy |
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## 9. KPIs
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| KPI | Target |
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|---|---|
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| KVI price gap vs. competition | ≤ 0% |
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| Price change accuracy | ≥ 99.5% |
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| Rollback compliance | 100% |
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| Margin floor breaches | 0 |
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