Not all brands are meant for the ultra-competitive off-price market. Abercrombie, Gap, JC Penney and Coach all learned the hard way that once you get into the discounting rat race it’s difficult to get back out. Once on-trend teen retailers, Gap and Abercrombie tried to maintain their relevance by deeply discounting products. Business Insider reported that “over the past 18 months, the companies (Gap and Abercrombie) discounted an average of 50 percent a month.” But, neither company made money on their price-cuts.
Whereas Gap CEO Art Peck rather hilariously blamed Gap’s poor performance on a lack of fashion trends, Abercrombie has instead shifted its marketing focus to a new demographic entirely, abandoning teens for the slightly older 18-25-year old segment.
Whether selling to professional twenty-somethings will enable Abercrombie to return to a full-price model depends on the uniqueness and quality of apparel they carry. Like the now dramatically remade Aeropostale, Abercrombie made their brand on selling uniformity to teens that wanted to blend in. To penetrate the millennial market, Abercrombie now has to offer apparel that breaks the mold they helped create.
JC Penney might be the best example of the obstacles faced by a company trying to return to a full-price model. After being taken to court for price anchoring, JC Penney attempted to return to a more transparent pricing strategy. Sale prices were replaced by “Every Day” prices, based off the previous year’s numbers.
Honest pricing didn’t take. When JC Penney customers didn’t see discounts, they didn’t buy. This began a holding pattern that lasted until the brand caved and resumed discounting in 2013. At that time JC Penney spokeswoman Daphne Avila told Chain Store Age, “We now understand that our customers are motivated by promotions and prefer to receive discounts through sales and coupons applied at the register.”
Although many companies can’t surmount the hurdles to redefining themselves as full-price retailers, Coach has begun to make it look easy. By pulling its products from lower-tier department stores, Coach elevated perception of its brand, and its numbers reflect this. According to RetailDive, Coach’s fiscal fourth quarter net sales increase was 15 percent higher than last year’s.
The off-price segment, with stalwarts like T.J. Maxx leading the way, continues to grow as one of retail’s most successful segments, but requires special connections between brand and shoppers. When that connection fails and the brand can’t execute its value proposition effectively, the segment brutally punishes, requiring brands to quickly and decisively change course or face plummeting sales.
About the writer: Jasmine Glasheen is Publishing Editor of both Off-Price Retailing Magazine and the Off-Price Retailing Garment Pages. In addition to being an active Braintrust panelist, Jasmine is also a cat mom and kombucha tea addict.
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