Wendy Larrabee-Ginsberg, co-owner of footwear and accessories shop Verve in New York, earlier this month fielded an unusual retail request. A customer walked up to the cash register, put a $400 handbag on the counter and said, “I’ll pay you $100 for it.”
No sale. But with lots of winter inventory left to unload and bankrupt retailers beginning to liquidate product, Larrabee-Ginsberg and other merchants are asking a simple question: How do they convince consumers, who are now used to those 75 percent off sales, to buy at full price?
“Both sides are drawing the battle lines,” said Emanuel Weintraub, management consultant at the firm bearing his name. “The stores are putting goods out and hoping to get full margin. They’re saying, ‘If you want it, pay for it.’ The consumer says, ‘I’m not going to if you can’t give me a better price.’”
Sure, markdowns are a built-in part of the selling cycle. But in 2008, they started earlier and went much deeper — and are still a factor a month after the holiday season ended. Larrabee-Ginsberg calls it “the Saks effect.” Once Saks Fifth Avenue put goods on sale at 75 percent off in November, competitors, large and small, had to follow.
“Stores are getting their customers accustomed to sales,” said Michael Levy, professor of marketing at Babson College. “It’s like an addiction. It’s very difficult to get them off.”
He and other experts, however, have tips for weaning them.
“Pricing, more than ever before, is top of mind,” said Dan Butler, VP of merchandising and retail operations at the National Retail Federation. “Make sure you have a fair offering price and a good value.”
Janet Irwin, owner of LaBella Shoes in Long Beach, Calif., is conducting a ruthless audit of the collections she carries. Brands that lack name recognition and are saddled with high price points are being cut from her list. Irwin wants to sell more at $300, less at $400. She’s also working with vendors to get more reasonable prices and terms.
“Carry the brands that are hot for your target market,” Levy advised. “It’s easy to figure out — you can do an analysis of what’s selling and who comes into the store.”
Case in point: Larrabee-Ginsberg for the first time created a sales database. She was shocked to find that one Spanish line rarely sells at full price. “I won’t pick it up again.” Another Spanish brand, Chie Mihara, has such loyal followers that they come to the store to find it. “People are passionate about that designer,” she said.
Ugg was another line that inspired passion and held its prices in the holiday season.
But Marshal Cohen, chief industry analyst at The NPD Group, warned that simply carrying the brand isn’t the sure-fire way to prosperity. “When you chase trends, you’re going home empty and alone,” he said.
Still, footwear sales have bested other segments such as apparel.
“Footwear weathered this season a little better than other categories,” said Cohen. Unlike apparel, footwear continues to offer fresh new product. “If merchandise comes in that isn’t dramatic and exciting, then full price is worthless.”
Simon Doonan, creative director of Barneys, agreed. “[For spring, we] amped it up slightly. We offer people the chance to be creative, to use fashion as a platform for self-expression,” he said.
But how do retailers get shoppers to express themselves with thinner wallets?
While markdowns are tempting, sources say they can do long-lasting harm. Butler urged retailers to resist drastic price cuts.
“Markdowns are to clear things out after they don’t sell,” he said. “[They’re] not the way you sell everything.”