dm-drogerie markt: Everyday Low Prices and Employee Culture

Why a drugstore chain is instructive for small businesses

Hardly any industry depends as much on special offers as the retail of everyday goods. Weekly flyers, discount campaigns, and volume deals are the rule. In the mid-1990s, dm-drogerie markt decided against this pattern and nevertheless grew into Germany’s drugstore retailer with the highest revenue. At the same time, the company is known for an unusual training culture.

The guiding question of this case study is: How are everyday low prices and employee culture connected at dm, and what of this can be transferred to a small business? To answer it, we first compile the documented facts, then explain a mental model by comparing everyday low prices with promotional pricing, review what research knows about it, and finally turn to transfer.

A price the customer can rely on is an offer in itself.

The documented facts

Götz W. Werner opened the first dm store in Karlsruhe in 1973. At the time, drugstore goods were subject to resale price maintenance, which the legislator abolished in the mid-1970s; dm used the new freedom for low prices. Since 1994 there has been the dm Dauerpreis. According to information from 2023, it applies for at least four months, the price tag shows when the last price change took place, and dm has no promotional offers. Werner died on February 8, 2022, at the age of 78. The chairman of the management board is his son, Christoph Werner.

The mental model: everyday low price or promotional pricing

Two pricing strategies face each other in retail. With an everyday low price (EDLP), prices stay permanently low and largely unchanged. With promotional pricing (Hi-Lo), regular prices are higher but are frequently lowered for short periods. Hoch, Drèze, and Purk (1994) described and tested both strategies. In their account, promotional pricing rests on an old economic idea: it distinguishes between price-conscious customers who buy deals specifically and loyal customers who also buy at the regular price.

The authors list two groups of reasons for an everyday low price. First, credibility: frequent promotions undermine confidence in regular prices, while a constant price is easier to communicate. Second, costs: less assortment and service effort, steadier demand and therefore lower inventory and handling costs, fewer in-store changeovers, and less advertising.

What research shows about everyday low prices

Hoch, Drèze, and Purk (1994) conducted field experiments in 26 product categories at a supermarket chain with 86 stores in the US. The result was sobering for proponents of everyday low prices. Cutting everyday prices by 10 percent increased sales by only 3 percent, while raising prices by 10 percent under the promotional model reduced them by 3 percent. Because demand barely responded to regular prices, profits fell by 18 percent under the everyday low price, while they rose by 15 percent under the promotional strategy.

The authors themselves name an important limitation: the lower everyday prices were not widely advertised. For an everyday low price to increase sales significantly, it would have to change the price image in customers’ minds, and that hardly succeeds without advertising and in a short time. In addition, an everyday low price requires a suitable cost structure. The experiment lowered only prices, not costs.

The calculation reveals the core of the problem, which the authors call margin arithmetic. A permanent price cut costs margin on every item sold. If you do not recover it through significantly more volume or lower costs, you lose. How strongly discounts hit the contribution margin is described in the guide Controlling discounts.

Two readings: pricing strategy or business model

The first reading sees the dm Dauerpreis as a pricing strategy that succeeded against the research findings. It points to the company’s growth and to the loyalty of customers who do not have to wait for the next deal. This reading has a weakness: it does not explain why the everyday low price cost profit in the experiment and apparently did not at dm.

The second reading, which I share, sees the fixed price as part of a business model. Hoch and colleagues describe that an everyday low price only works with a suitable cost structure and only if the price image is credible. dm has built up both over decades. Doing without promotions saves changing flyers, short-term changeovers, and order peaks. These are costs a retailer with a promotional model bears. Whether these savings fully offset the lower margin cannot be read from public information. The direction, however, is plausible.

For the employee culture, this leads to a conjecture that I mark as an assessment: a store without weekly promotional changes requires less changeover work and leaves more time for advice and order. A pricing model that brings calm to operations and a culture focused on advice fit together. Whether dm planned it this way is not documented. As with IKEA, it becomes clear that the price is not created in purchasing alone but across the entire process; the case study IKEA describes this using its distribution model.

The employee culture: what is documented

There are many accounts of dm’s culture but few verifiable facts. Two training formats are documented. In Abenteuer Kultur (Culture Adventure), trainees work for eight consecutive days with professional artists on a play, at specially rented venues, with a performance in front of colleagues, friends, and family. The format has been a fixed part of vocational training and degree programs for about 25 years, not a voluntary extra. dm justifies it with the development of the whole personality. In trainee-run stores, which have existed since 2001, trainees run a store for about a month; in 2025 there were eleven such stores. dm calls its trainees Lernlinge, roughly “learners.”

A sober picture also includes the fact that the culture did not arise without tensions. Works councils have existed at dm in Germany since 2002, introduced on the initiative of employees at two distribution centers. This shows that employee participation did not come only from the top, even in a company with a pronounced self-image.

• Culture is anchored in fixed formats, not only in mission statements.
• Trainees take on real responsibility for a store early on.
• Personal development is mandatory, not a voluntary offer.
• Employee participation is also formally regulated.

How values work in daily practice rather than on posters is described in the essay Company values that hold in daily work. What keeps good employees in a small business is covered in the guide Employee retention.

What small businesses can transfer

A trade business or B2B service provider does not sell drugstore products. What can be transferred is not the price tag but the logic behind it: reliable prices save negotiation effort and build trust if costs fit.

The first point deserves a qualification. Uniform prices for everyone are not always fair if effort and service differ greatly by customer. Different prices then need a visible reason, as the article Price differentiation describes. Reliable means: the same service, the same price, regardless of who negotiates loudest.

Conclusion: how fixed prices and culture are connected

How are everyday low prices and employee culture connected at dm, and what can be transferred? At dm, the fixed price is not an isolated pricing decision but part of a business model built on reliability. Research shows that an everyday low price alone costs margin as long as costs and price image do not fit. The documented training formats show a culture anchored in fixed routines rather than in mission statements. Public sources do not prove a causal link between the two; I consider it plausible that calm operations without promotional changes and a culture focused on advice fit together. What a small business can transfer is the idea that reliable prices save negotiation effort and build trust if the costing supports them. The limits are clear: dm is a large retailer with purchasing power and millions of customers, and the case study relies on public information without insight into its cost accounting.

1. This week: Count how many orders last year were closed with a discount and calculate the total of the discounts.
2. Next week: Draft a fixed price list with a validity date for your three most common services.
3. In a month: Give a trainee or young employee their own customer with clear support.

dm shows that a price that does not constantly move is a promise. Only a business whose operations fit can keep it.