November 24th, the day after Thanksgiving, was Black Friday, the shopping orgy organized by America’s retail chains.
Opening early, many retailers competed to see which chain could offer
At Toys “R” Us from 5:00 am to noon, the chain offered: “Lowest prices ever,” 50 percent off and more.
At Sears from 5:00 am to
At Pep Boys from 6:00 am to 11:00 am, the first 50 customers got a free $10 shopping card.
Some of the promotions were exceedingly complicated. At Ashley Furniture Homestore, it was 20 percent off from 7:00 am to 9:00 am. 15 percent off from 9:00 am to 11:00 am. 10 percent off from 11:00 am to 1:00 pm. And 5 percent off from 1:00 pm to closing time.
The shopping orgy was Friday; the advertising orgy was Thursday. In Atlanta, for example, the local newspaper (The Atlanta Journal-Constitution) carried 385 display ads (not including house ads) in addition to 40 inserts with 358 pages of advertising. America’s retailers paid handsomely for the privilege of offering consumers these deep discounts.
Newton’s third law states: “For every action, these is an equal and opposite reaction.” What is the opposite reaction when a chain offers to sell its wares at deep discounts?
Unfortunately for retailers, the opposite reaction, as far as consumers are concerned, is that “your regular prices are too high.”
Is that what most retailers want to communicate? I think not. Most retailers want to communicate the fact that their retail outlets feature great merchandise at reasonable prices. Or as Macy’s used to say: “It’s smart to be thrifty.”
Coupons, sales, special discounts for customers using membership cards and a host of price promotions have steadily undermined the idea that any particular chain is a good place to shop . . . . . . unless there is a sale.
Over the years, the war between the two major houseware chains, Bed Bath & Beyond and Linen ‘n Things, has been fought with “20 percent off” coupons. Month after month both chains persist in bombarding consumers with their 20-percent offers. Only a spendthrift would shop at one of those chains without a coupon in hand.
Store sales are like crack cocaine. You get a short-term high followed by a long-term low. The only way to get high again is to have another sale.
The Circuit City customer who bought a 32-inch HD LCD television set for $499.99 on Friday isn’t going to buy another one on Monday at the full price of $899.99. Furthermore, he or she is going to be leery of buying any major appliance at Circuit City unless there’s a sale going on.
Where is the discount derby headed? If history is any guide, it’s headed in the same direction as the airline industry. It was the airline industry that perfected the high-low approach to marketing. High prices for consumers who have no other choice. Low prices for consumers who could find cheap fares on other airlines.
What happened in the airline industry can also happen in retail generally. As the Syms slogan says, “An educated consumer is our best customer.” As consumers get educated about retailers’ high-low strategies, they tend to move to chains that feature “everyday low prices.”
In the airline industry, it was the “no-frills” airlines with their everyday low prices that undermined the high-low strategies of the major carriers. Last year every major airline (American, United, Delta, Northwest and U.S. Airways) lost prodigious amounts of money while Southwest made $548 million in net profits.
Warren Buffet famously remarked that if there were a capitalist present at Kitty Hawk in 1903, he should have shot Orville Wright down. It would have saved his progeny money.
I disagree. There are no bad businesses; there are only bad business strategies.
As a matter of fact, last year Southwest’s 7.2 percent net profit margin was higher than the 6.7 percent net profit margin of the average Fortune 500 company and last year was a great year for a Fortune 500 company.
What’s tragic about the retail industry’s “sale” mentality is the almost complete absence of branding in their advertising efforts. I leafed through the 358 pages of insert advertising in the Thanksgiving issue of The Atlanta Journal-Constitution and it was hard to find any mention of what any individual store stood for. Nothing but sale, sale, sale.
Many chains today do almost no advertising except sale advertising. The furniture industry is famous for its “all-sale, all-the-time” advertising. Another heavy advertiser that does nothing but sale advertising is Jos. A. Bank. Its website sets the pattern.
• Entire stock of top coats. 60% off.
• All pinpoint dress shirts. Now $29. Reg. $59.50.
• Entire stock of pattern sport coats. 60% off.
You can bet on it. The day a chain starts down the continuous sale path is the day the chain is headed for trouble.
Strong brands do little sale advertising. I have never seen a Starbucks’ ad offering two cappuccinos for the price of one. Nor have I seen an Apple ad offering 50 percent off on an iPod. Or have I seen a Rolex ad offering two watches for the price of one.
On Thanksgiving Day when all the other retailers were running their sale, sale, sale advertisements, Whole Foods ran an ad in the Atlanta newspaper with the headline: “Today we give thanks to all our local growers.”
That’s class. And that’s a powerful brand.]]>