The retail world was abuzz as Saks Fifth Avenue announced recently that it was going to return to regular pricing.
The move was no doubt sparked by dismal results and the continued erosion of margin due to the deep discounting the chain undertook last November to jump-start the holiday shopping season. Offering discounts up to 70% off before the season even started, Saks was quickly matched by Barney’s and Neiman Marcus like a no-frills airline promotion. The new sale mentality has decimated the very model that luxury goods and the retailers that sell them is built on, according to an article in the Wall Street Journal.
Now Saks is trying to undo what they’ve done by working with designer brands to lower prices, boost service at the stores and throwing more special events according to an article in Chain Store Age.
According to the article, It also hopes that stocking less of the items shoppers want will entice them to buy now.
“Our customer … feels very insecure,” chief executive Steve Sadove told investors at the Bank of America Consumer Conference Thursday, which was webcast from New York. Sadove added that “there is a demand for luxury brand names,” and said the said the company is making adjustments, including cutting expenses such as inventory, in order to be strong when the market improves.
THE REAL WORLD RETAILING TAKEAWAY
You can’t turn off the discount mentality with the flick of a switch.
Retailers have created a discount monster. Consumers more than ever come to expect a deal, no matter where they’re shopping and no matter what they’re buying. Just look at ads running on TV, in newspapers and magazines. Gone to a large extent is image advertising. Here to stay for the foreseeable future is value advertising.
Even Target, the design brand that eschewed value advertising for cool, hip and relevant ads geared toward an increasingly design-centric world, has returned to value messaging, while maintaining some of the cool factor in its ads.
We’ve all heard the adage about extremely wealthy individuals being some of the thriftiest individuals around. Retailers have not only given them a taste of value, they’ve supplied them an all-you-can-eat buffet of discounts. It’s going to be a weaning process that’s going to take a considerable amount of time to return consumers to full-priced spending, regardless of whether they’re luxury shoppers or not.
As for me, you won’t see me at Saks or any luxury department store any time soon. And that’s simply because you’re never going to get me to pony up $75 for a 70% off “deal” on a $250 t-shirt. I’ll stick with my $15 variety I can find just about anywhere. Sure, they don’t have a designer label, but with every retailer carrying a slew of T-shirts these days that all seem pretty cool, it’s impossible to tell what’s designer and what’s not.