Discount, discount, discount?

imgresIt is not surprising to see multiple start-ups around new consumer products.  After all we are an economy that rotates around consumer spending.  Brands of the past are not resonating with the next generation or more to the point they have not figured out how to evolve with a new set of eyeballs and desires.  In the world of retail or wholesale you are never too big not to fail.  History  has shown us that.

When I worked at Macy’s in the 80’s they began the advent of the “One-Day Sale”.  It took place every few months on a particular day that would be repeated the following year on the exact same day.  In the business that is known as an anniversary that you have to outdo in sales year to year.

That sale did a few things.  It brought a different customer in to the store, it trained the full price customers to consider waiting for that big sale and the good customers got their top sales people to save specific items for them in the back for the big sale.  The sale also sold a lot of inventory and in turn lowered the overall margins for the season.  We would all get excited about how much volume we did that day but the reality is that these sales slowly killed the business.

Short-sighted?  Vicious cycle?  Customer mindset shift?  The answer to all these questions is yes.  It does not only happens in clothing and hard good retailers it happens in the grocery chains too. Groceries push for coupons, in-store give aways, etc.  The biggest question is how do shift the mind set of customers to buy a product at full price because they love it and they want it.  One customer actually said to a CPG company I am invested in “I love your product, do you have coupons?”

Customers are smart.  That is why flash-sale businesses are short-lived.  They know that they are not buying top products forever.  It is unsustainable.  There is so much crap out there on the racks and the mentality is that marking it down will just move the product.  How about being more thoughtful about what is manufactured and at what price it will sell at all day.  Inflating margins to start and then slowly marking down a product until it sells is just continuing on the downward spiral of the constant sale.  Then as a business you never know exactly what your margin will end up being because the price is in constant flux.

Manufacturing is changing too.  You can make one top in one day and ship it out the next. There will always be a need for products on the physical floors of stores so that concept of one day manufacturing isn’t going to work for every facet of the business but it will change the overall landscape.

I have never been a fan of the discount because I know it is not a way to build a business. Build loyal customers who love your product.  Make products that are ones that your customer wants. You can learn from your customers easier now than you could before with technology.

There is a new customer in town and they are called millennials and the next customer will be generation Z and they are looking for unique, smart, individual personal products that they will be happy to buy at full price anywhere (no loyalty here).  The time is now to get out of the discount mindset.  Value all day long at full prices is a win for everyone.