Value has moved firmly from accessory to necessity. Retailers with a convincing value proposition – be it price, quality or payment terms – will fare best during the year-end holidays.
I’ve just returned from two retail-focused conferences (the Shop.org Annual Summit and another NYC apparel-focused show). The overriding theme at both was that value will be the predominant message of the holiday. Those who promote value and whose message resonates with customers will win, and those who don’t will miss out.
Today we’re on the cusp of the holiday, but back in July, Kmart was already promoting their Christmas tree section. At the time, I read a few articles criticizing the retailer for pushing the season, but I don’t think that was Kmart’s sole mission. Rather, the offer in Kmart’s aisle was layaway, an old fashioned practice whose time is once again appropriate.
I don’t know how this campaign did for Kmart, but it would have been nice to see some other merchandisers testing it. I’ve debated the layaway issue with other retailers and have been told that Bill Me Later is already offered on many websites. But the fact that one option enables you to take the merchandise now and pay later and the other requires you to make payments before you can take possession seems very different to me. With tight credit and a prevailing climate of frugality, the latter is an offer that would appear to fit the moment more.
During Fashion Week there was lots of discussion that luxury will never again be what it was. I don’t know if that’s true, but I do think it will take a long while to come back, and it’s no secret that current luxury brands are having difficulty. Last week I heard Norma Kamali speak about her three fashion lines – her high-end Made in the USA fashion brand, her mid-range EBay line, and her low-end Walmart line in which her highest priced item is $35 with $25 being the average.
Norma Kamali at Walmart
Kamali was as excited about her Walmart brand as either of her other two lines, and I think she’s definitely nailed the value equation that’s prevalent today. From a marketing perspective she is covering all ends, which is smart (and a little risky) but with the appeal of her low-priced clothing so huge, she is definitely strategically aligned. High-end designers who are not considering lower-priced options are going to be far less relevant this coming holiday and possibly for years to come.
It’s easy to finger luxury as an obvious sector who’s going to take a big hit this year, but all the mid-tier brands that are more affordable for the masses (Gap, American Eagle, Victoria’s Secret) are also going to struggle unless they, too, can appeal to consumers with a strong value message. People are hunkering down not necessarily because less-is-more is fashionable (although some would argue that it is) but because so much personal wealth was lost last year, and any retail purchases must wrestle wallet share away from utility bills, day care, etc.
Price will be extremely important this holiday and the competition for wooing consumers with limited resources will be fierce because people just don’t have the money to spend lavishly on a cardigan cashmere sweater that so perfectly matches an item in their wardrobe. This may once have been thought of as a necessity but is now regarded as slightly frivolous, unnecessary, wasteful and expensive. When competing with limited wallet share and faced with purchases that can no longer be put off, price will be a huge driver. I predict another good year relative to their higher-end counterparts for Walmart, Target and Kohl’s.
While price is a big component and will be a consideration this year for consumers, it’s not the only component when consumers regard value. Styles aren’t so radically different that items from last year can’t be worn, and good style is always in fashion. An outdoor clothing company who sells quality down jackets may outsell retailers who sell similar-looking merchandise at a far discounted price but whose clothes lack the same level of quality. Despite the higher price point, in this case the value is perceived to be so high that consumers will pay.
However it’s done, those retailers leading with the value message this holiday will fare the best.
Update: Stuart Elliot’s article in the New York Times today, More Ads for Basic Brands as Shoppers Spend Less, discusses the impact of current economic times across all consumer brands, not just retail. The article points out how “suddenly budget conscious consumers” are looking for value in the everyday purchases they make. Marketers everywhere are adapting to this, shifting focus to a broader audience.
In addition, according to the National Retail Federation, holiday sales are expected to drop 1% on top of last year’s 3.4% decline. Yesterday’s New York Post article, Retail Group Sees Grim Holiday Season states that major retailers “have been slashing prices in a desperate effort to hold shoppers’ attention.”
Suzy Sandberg is President of PM Digital.