Monday, January 14, 2013

Brand Protection and Retail Promotion Damage

It is late December and Barneys has already emailed consumers reminding them of a final 60 percent off international designer. It is January and Mr Porter has announced a final 80 percent off. Why would you go to a boutique and pay full price when it’s available in department stores or online at more than half the price at an earlier, more convenient time?
Mr Porter Final Sale
In a great effort to combat the ever expanding digital market, sale monopolies and to stand against the sluggish economy, many retailers are falling victim to ‘promotion addiction and dependency’.  A universal truth is that the market is more unpredictable than ever.

With such instant access to cross price checking online, cheaper substitutes and increased suppliers, the retail sector has no chance of coordinating sale seasons and commanding power over consumers. Consumers today hold more power than ever and retailers now must be in the bid to equal out the playing field. Falling into a cycle of constant discounting and price cutting is perceived as unavoidable by many retailers today. The only benefits are short term and the damages are all long term.

Walking through New York, a supposed fashion capital, a supposed fashion bubble economy, evidence of an aggregate fail can be seen everywhere, from luxury to lump sum chain stores, end of season sales are starting earlier and heavier. Signs of little growth over the last year are omnipresent and this conditioning exercise is training consumers to wait for sale season. What a brand is essentially doing by folding to sale earlier is diminishing a respect for the brand and its price points. Why would you pay full price when you can wait to get it half price or more. Department stores holding the monopoly on sale movements will suffer the most, but will also cause a domino effect, forcing all housed brands to match tactics or suffer. Any retailer should not bank on majority profits received from sales mark downs; it will only hurt the brand.

With such little coordination or an unspoken agreement for appropriate sale time frames, consumers have retailers cornered and margins will be the least of retailer’s worries in the long run. To resonate during sale time, retailers are aiming to leave greater impressions with heavy additional discounting; ‘save an additional X %’. This is now a widespread tactic and is loosing impact.

Leading Australian retailer Saba is a key example to the case at hand. Since the GFC and many earlier internal changes, the company has been a market leader in many ways but also an advocate for promotions that have diminished all brand value. The brand once held a premium positioning, it now is known for sales and repeat designs. Saba have a very active marketing team and are moving paces with their digital marketing and community building, but are still falling short of the legs needed to stand in an unstable market place, a heavier investment in branding needs to be understood as priority and key to business and brand longevity. A market with consumers that have little respect for a brand means no brand value and a dead brand.

Full priced season for Saba is aided with weekly discounts, spend drivers and gift with purchases. They were at one point buying Facebook likes with vouchers; you cannot buy consumers or a community. While the promotion mix is strong, there has been a heavy decline in full price customers over many years.
‘It will probably be on sale next week, I’ll wait until then’.

A middle ground solution is to invest priority in shifting the fashion seasons, moving them forward as many retailers have started rolling out with the ‘pre-collection’ movement. An earlier start to the season and a quicker finishing time to keep current and profitable. Keeping up with the Kardashians of retail will, like in real life, get you nowhere fast. Abstinence from regular discounting is the only real way to beat the addiction. 

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