When Price Cuts Fail to Pay Off: Behavioral Mechanisms Mediating the Price Reduction-Purchase Behaviour Relationship in Multi-tier Fast-moving Consumer Goods Distribution

Abstract

Price cuts are widely used in FMCG distribution to stimulate purchasing, yet lower trade prices do not always translate into stronger buying decisions when retailers face inventory risk, cash-flow limits, and local market pressure. This study explains how price reduction influences purchase behaviour among retail outlet owners and wholesalers by examining the mediating roles of competitive perception, price policy, and stocking intention. A quantitative survey was conducted with 278 retail outlets and wholesalers in Manado, Palu, Kendari, and Makassar after data screening from the initial target sample. The proposed relationships were tested using partial least squares structural equation modelling (PLS-SEM) to assess the direct and mediating effects. The results show that price reduction significantly strengthens competitive perception, price policy evaluation, stocking intention, and purchase behaviour. Competitive perception and stocking intention significantly mediate the relationship between price reduction and purchase behaviour, while price policy shows a positive but insignificant mediating role. These findings suggest that FMCG suppliers should connect price reductions with margin logic, sell-out support, stock rotation planning, and local market positioning. This study extends behavioural pricing literature by showing that price cuts work through retailers’ interpretation of competitive usefulness and inventory feasibility.