PLAYING THE PRICE GAME
Byline: Robert Lohrer
Is price the ultimate issue for consumers?
Toss that question out at the next industry cocktail party and it’s bound to get several different responses.
Put it on the table for discussion among industry leaders, and opinions will be wildly divergent.
That was the case at a session on price, moderated by Carl Steidtmann, chief retail economist at Management Horizons.
While panel members stressed value, quality, consumer research and focus groups to figure out what to sell, Steidtmann played the role of contrarian. He called price “the Viagra of retail sales” and said that the importance of price can’t be overstated. “Price is higher and higher on the list of what determines consumers’ behavior,” he said.
As far as consumer research, something Steidtmann is quite familiar with, he said, “I’m loath to listen to consumers because what they say is not what they do.”
He pointed out the general trend toward price deflation in the apparel business. “There are people out there delivering a lower price,” he said. “The people winning market share are discounters like Wal-Mart and Target. Even specialty concepts that are doing well, like Old Navy, are a price offer. Price is at the top of the list of things that are important to consumers.
“If it’s not the right price, you’re not going to be in business, stupid.”
Taking a different view, Paul Charron, chairman and chief executive officer of Liz Claiborne, said price is only one side of the equation in determining value. Delivering value, he said, “begins with an understanding of the consumer. Anybody not doing [consumer] research is headed down a real wrong road.”
Claiborne, Charron said, attempts to build value into product and, by extension, price, by strengthening its presence at retail. In the last three years, Claiborne has created 2,000 shops. Its new 13,000-square-foot shop at Macy’s Herald Square houses 27,000 garments. And it has 13 light boxes with national ads and photos of supermodel Nikki Taylor.
According to David Chu, ceo and designer of Nautica International, Nautica can charge a premium price because the product is infused with value, which he defined as “a combination of art and science at Nautica.”
“The art is about the creation of image,” Chu said. “It’s about personal expression. Many people can make a jacket that keeps you warm, but Nautica’s image has value. People are willing to pay for it.”
Nautica’s scientific element is about all the product research, testing and new materials built into the products.
Yet another spin on price came from Hal Upbin, president and ceo of Kellwood. He argued that manufacturers must present a “compelling price-value proposition.”
Kellwood’s Sag Harbor, a leading brand in the women’s moderate market, would be a case in point, Upbin said. It has grown from $40 million in sales in 1986 to over $600 million in 1998.
Upbin said that the Sag Harbor customer buys not simply on the basis of price. He said that versatility is highest among the attributes that drive the purchase of Sag Harbor. “She doesn’t want four outfits,” Upbin said. “Sag Harbor is item-driven. It’s an array that can be worn to work and on weekends.”
For Haggar, a men’s wear company, positioning is more important than price. The company’s research reflects that 50 percent of all men’s wear in department stores is purchased by women and that an additional 39 percent is purchased by men and women shopping together.
Wal-Mart, not surprisingly, believes price is at the heart of the matter, according to Vanessa Castagna, senior vice president, general merchandise manager, Wal-Mart Stores. But price must be a consistent proposition, she said.
“Seventy-three percent of consumers are skeptical of regular price in a promotional environment,” Castagna said. “Wal-Mart doesn’t like rebates and neither do its customers.”
In addition to price, Castagna said the offering must be simple and it must be available in the size and color desired.
“If she’s ready to buy size 10 knit black pants, I have to have them,” Castagna said.
Customer-driven is the mantra at the Disney Stores, not price. Christine Cadena, director, creative development for the Disney Store, cited consistency of experience as one of the strengths of the Disney retail network.
“There’s not a single item in our store that our guests need,” Cadena said, noting that 70 percent of all purchases in the Disney Store are as gifts.
“It’s about wants, not needs,” Cadena said, and creating emotional connections with store guests.”