Ask @RetailPhil: Balancing the Success of Your Product Assortment at Different Price Points
We’ve been over this – there’s much to consider when it comes to your pricing strategy. But have you thought about where you’d like to sell your product?
We’ve seen department stores suffer from a drop in sales in handbags because consumers are opting to buy them elsewhere for much cheaper. Retailer behaviour aside, as a brand, a lot can be learned regarding how to approach your assortment and where you (should) place it.
Problem: lost sales are still your responsibility
At first glance, you’d think the responsibility of recovering lost sales would fall on the shoulders of the retailer. The truth is, that pressure is really on you as a brand. It’s up to you not to land yourself in a scenario where you’re carried by two retailers and one of them isn’t prospering. Retailers make money and draw in consumers – it’s what they do. What are you doing to help them?
If your brand is suffering in sales, expect your phone to ring off the hook – consider it one of the rare occasions where a retailer will be dying to speak to you and not take ‘no’ for an answer. Brands can’t afford to lose channels of business, so to keep that from happening, you must create different ways for retailers to make money and sell your products.
Solution: understand how the retailer will sell your product
A simple but effective way to stay out of a retailer’s bad books is by creating different lineups for different channels of business – you’ve got to work with that you’ve got. For example, department stores want tons of profit and aren’t concerned about how fast they sell things. They need to look like the expert and want to showroom products. The opposite is true for outlet malls. They want speed of sale and a lower price point to drive lots of purchases. They’ll make up profit by driving volume.
As impossible as it seems, there are examples out there of a brand doing this and successfully expanding their brand footprint. Coach has been able to sell their handbags in both premium stores and outlet malls and have done a very good job of keeping each product lineup separate. Coach has had the added benefit of expanding their brand reach and they’ve been able to reduce their number of promotional days (days on sale) to maintain great price points and great brand image.
Unfortunately, the opposite is true of a brand like Michael Kors that just showed a $22 million loss in the three months up until early last month, largely due to declining department store sales. By having the same assortment in both department stores and outlets, the consumer figured out that they could save money by skipping the department store and heading straight to the outlets. To add insult to injury, department stores, fighting the ever-declining foot traffic, also had their products on sale all of which contributed to their considerable loss in revenue.
Managing success will help you stay ahead of your selling market. While everyone wants to sell everywhere, thinking through what avenues of business serves your product and your customer the best is always a worthwhile exercise.
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