First Insight’s recent research on product differentiation and pricing as well as the impact of Amazon and the preferences of affluent shoppers was the topic of the company’s “Exhibitor Big Ideas” panel discussion at the National Retail Federation “Big Show” earlier this week.
The session’s participants noted the importance of internal collaboration at retail and fashion apparel brands, the evolving role of the traditional merchant and why offering products not found on Amazon can drive sales and profits.
Participants included Richard Flaks, senior vice president of planning and allocation at Chico’s FAS; Les Berglass, chief executive officer and founder of Berglass and Associates; Dana Telsey, ceo of Telsey Advisory Group, and Greg Petro, ceo and founder of First Insight, which sponsored the panel session.
Petro noted a confluence of retail market disruptors that is forcing retailers and brands to reinvent themselves, which include a large number of over-leveraged companies; an overstored market; a consumer-centric retail environment, and a lack of product differentiation due to the so-called “Amazon Effect.” On that last note, Petro cited the company’s research that showed 74 percent of affluent consumers “check Amazon.com for products and pricing before looking anywhere else.”
Moreover, 42 percent of the consumers polled for the research said they “frequently shop” at discount retailers while 27 percent frequently shop at “regular price” retailers.
As a result, Petro told attendees that “product differentiation is more important than ever. Seventy percent of Macy’s product can be found on Amazon. If your product isn’t differentiated, you’re relegated to competing on price, which will degrade your margins.”
But blindly slashing prices is not the answer either. “It doesn’t make sense to just lower the price in fashion, your customer will pay for the fashion they want,” Flaks said adding that pricing solutions such as what First Insight and others offer can “help us to understand our pricing strategy for new products.”
Telsey said it is essential to innovate in today’s market. “The keys to retail success are product innovation, execution or speed and having management be informed by data. Your customer rules everything; you have to be innovative, fast and unique.”
Berglass agreed and added that “merchants need data to make more informed decisions, but expertise is still crucial in predicting what’s to come.”
“Today, the merchant owns the product and the cmo [chief marketing officer] or cco [chief creative officer] need to collaborate,” Berglass explained. “The merchant’s role isn’t diminished. It’s just that they aren’t the only ones on the block, they have lots of neighbors. Additionally, marketing alone doesn’t ‘own’ the customer, they are the champion of the customer.”
And to win that customer, the product also has to be right. “In the apparel world, there’s been a lack of newness,” Telsey said. “There used to be four occasions for women to buy — work, leisure, fitness/active, special events. Today it’s only two. Retailers and brands need to adjust their strategies accordingly.”
Flaks said that personalization is also “emerging in importance.”
“At Chico’s we are putting the customer at the center of everything we do,” he said. “Consumer segments are fragmenting and differentiating themselves from each other faster than ever, and retailers must adapt.”