In response to my blog about Poundland, one reader suggested that the idea that nobody wins in a race to the lowest price was 'hype' and that I had been 'brainwashed' by the received wisdom of traditional retailing.

This isn't true but then again if I have been brainwashed, I would say that. Let me at least be clear about what I said about Poundland. Although they promote an image of being about low prices, they are not actually involved a race to the lowest price. The fact that they seem to have rock bottom prices is deceptive. Like other supermarkets, Poundland have loss leaders. The price of £1.00 on a well known brand gives them very little profit margin but they make up for it by sourcing other more obscure brands or less familiar products where the apparently low price of £1.00 can make a very healthy margin.

Everyone from Tesco to John Lewis compete on price but you will find that there are thousands of products on their shelves where the price is still highly profitable to them because these products are unfamiliar and the competition is therefore non-existent or we consumers have no idea what other shops are charging. Who would notice that Sainsburys Basic Digestive Biscuits have gone up in price 110% in two years and Tesco Value soft cheese has increased by 25%? Well, the Daily Mail did.

I maintain that no-one wins in a race to the lowest price. This can be seen from the way online price competition is crippling and even destroying businesses. A good example is Amazon who have a lowest price policy on books. After all these years, they still hover between profit and loss, but the books price war that has put countless booksellers out of business.

Lowest prices is not the basis for a successful business model. Services and quality are the ways in which a business can distinguish itself. It is proven that customers are prepared to pay extra for a more care, attention to detail, speedy delivery, fun and other factors that add up to a better shopping experience. So customers like shopping with John Lewis because the layout and lighting are welcoming, the staff are friendly and knowledgable and they give added extras like free five year guarantees.

Despite the cheaper competition from Samsung, HTC and the rest, Apple's mobile phones maintain strong support because people love the company's obsessive attention to detail (or at least they did while Steve Jobs was alive). 

Yes, Aldi and Tesco are now selling 2 litres of milk for a pound but that's just an attempt to grab headlines at the expense of dairy farmers who say they cannot survive on the low price they are being paid.

As a retailer, I have given up selling certain products because the competition has forced the price down to point where the time involved in packing them doesn't cover the profit. As shoppers, we all have to consider whether the short term savings on products will result in long term lack of choice.

Or am I just brainwashed?

This blog was written by Paul Lewis, owner of the marketing consultancy The Lewis Experience and online retailer Your Life Your Style, and former Head of Marketing and Operations at The Mayflower Theatre. You can connect with him on Google+ and LinkedIn.