Underselling

Underselling is the practice of offering goods or services for sale at prices lower than those of competitors or the prevailing market rate. It can be a deliberate pricing strategy, a temporary promotional tactic, or a consequence of aggressive discounting. In retail and business-to-business contexts, underselling is often used to attract customers, increase market share, or clear inventory, and may involve loss leaders or below-cost pricing in the short term.

Underselling can take several forms, including aggressive promotions, volume discounts, and targeted price reductions designed to win business from rivals. It can be sustained through cost advantages, economies of scale, or favorable supplier terms. In some cases, underselling intersects with broader pricing strategies such as price leadership, competitive pricing, or promotional campaigns.

Legal and strategic considerations include the potential for predatory pricing, where prices are set below cost with the intent to eliminate competitors and recoup losses later through higher prices. Predatory pricing is illegal in many jurisdictions if it can be shown to be an anti-competitive practice and likely to harm competition in the long run. Businesses may also face reputational risk, customer expectations for persistent low prices, or damaging margin pressure if underselling is not sustainable.

Impacts of underselling are mixed. Consumers may benefit from lower prices in the short term, but there can be negative effects on product quality, service levels, supplier viability, and innovation if price competition becomes overly aggressive. Individuals and small businesses may also undersell their own services, risking undervaluation of skills and long‑term career or organizational instability.

Related concepts include loss leaders, price wars, and competitive pricing strategies.