Silk Purses and Sow's Ears

Carole Sloan, August 17, 2009

There's an interesting phenomenon taking place at retail as the country's leading merchants struggle to get out of the cycle they're in.

Profits are improving — albeit minimally — at the same time that sales are still struggling to meet comps or even total sales. What this indicates is that the retailers are wringing out costs to a point where they are showing pluses instead of minuses. Looking ahead, however, one wonders whether what has been wrung out will have a long-term negative impact on sales. This is especially critical in terms of sales personnel — and the training of this key group of players who meet customers on a day-to-day, minute-to-minute basis.

Yes, inventories had to be contained, even before the bottom dropped out of the business. And store openings had to reevaluated, since virtually every expert agreed that the country was woefully overstored. But until mid-year '08, virtually every major retailing player believed that their new stores were by far a better investment than the next guy's.

And yes, there needed to be a renewed effort to bring technology more into play at retail and wholesale levels to optimize efficiencies.

Then there's the whole price-point dilemma — one could call it nightmare. The prevailing mantra is one of “lowering price points, maintaining fashion and quality” and increasing sales volume.

There's not enough space here to carry on a full fledged conversation about the equation or validity of the concept of quality and lower price points — whether the goods are made here, in China or Timbuktu.

But there's an even more basic question: If one lowers the retails by a quarter or third, as many retailers have indicated they are planning to do — while of course maintaining the quality and fashion forwardness of the product — are there that many more beds to cover with lower priced bedding, more dining rooms to hold the needed tables or window coverings to equate with the volume required to increase sales?

Having posed this question to a number of retailing and supplier experts in a broad range of product businesses, the responses could be defined as evasive at best.

The challenge of the quality issue can perhaps be seen most explicitly in what the apparel business calls the bridge and better categories. Retailers are forcing suppliers of many of the brands in the higher priced category to lower price points while still maintaining the same fashion and quality levels.

Have you looked at a buttonhole or a skirt hem lately? 'Nuff said for now!

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