Supreme Luxury: Scarcity is the Best Strategy

The Wall Street Journal: “Supreme, an underground streetwear brand with 11 stores and a cult following, is now worth more than teen retailer Abercrombie & Fitch Co., which has about 900 stores around the globe … Founded in 1994, the seller of skateboarding T-shirts, hats and sweatshirts has tapped into the zeitgeist of teens seeking hard-to-get looks. Unlike traditional retail chains, which aim to sell as much as possible, the label has relied on product scarcity and word-of-mouth referrals to generate hype around its name.”

“Supreme sells merchandise from other apparel brands, but the most coveted items are those with the Supreme logo. A limited number are released throughout the year, and fans frequently check blogs and Facebook groups to learn about the latest offering … Online, the items sell out promptly, appearing later on eBay and other reselling platforms at much higher prices.”

“Supreme’s popularity has surged as ’90s streetwear styles have made a comeback. It ranked as the fourth-most preferred website among upper-income male respondents, after Amazon, Nike and eBay, based on a recent Piper Jaffray survey of 6,100 teens.
With so few locations, the brand’s shop in New York City has become a tourist attraction. On a recent Sunday, families with teens and twenty somethings wrapped around three streets to wait for a chance to enter the store.” A fan comments: “Waiting is part of the experience.”

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Rent the Runway Moves Downscale

The Wall Street Journal: Rent the Runway “is introducing a new subscription priced at $89 a month, 35% less than the $139 monthly subscription plan the company launched last year. The new, lower-priced plan limits customers to four items a month and excludes some high-end designers. Jennifer Hyman, chief executive and co-founder of Rent the Runway, said the new plan is aimed at price-sensitive shoppers, not the affluent professionals who make up most of the company’s existing subscribers.”

“Under the new model, customers can rent up to four pieces a month, including dresses, coats or handbags, from labels such as Tory Burch, Vince and Diane von Furstenberg. The items arrive dry-cleaned and in a garment bag with a prepaid postage label; the customer must return them by the end of a month to obtain four more items … With the new price tier, Rent the Runway is hoping to compete with fast-fashion and discount retailers like T.J. Maxx , Zara and H&M , which have bucked many of the problems dragging down traditional clothing chains by luring shoppers with low prices and constantly changing merchandise.”

However: “‘Getting people to change their behavior is difficult,’ said David Bell, a marketing professor at University of Pennsylvania’s Wharton School. Most consumers don’t do the math to determine whether renting or buying is a better deal, he said; others may be turned off by the thought of putting on a previously worn dress.”

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Late & Great: Arthur Cinader

The New York Times: The late Arthur Cinader “decided to start J. Crew in the early 1980s while running the Popular Merchandise Company, a business, founded by his father in Rye, N.Y., that used a catalog to sell affordable clothing and home furnishings directly to consumers … The new venture took the word “crew” from the water sport and affixed a J in front because it was thought to be graphically appealing … Mr. Cinader empowered his daughter, Emily Scott, to conceive of the company’s aesthetic and oversee the design of its apparel while he focused on the financial side of the business and on marketing through the J. Crew catalog.”

“J. Crew opened its first store at the South Street Seaport in Manhattan, followed by stores in San Francisco, Chestnut Hill, Mass., and other places. The segue proved successful, and by the mid-’90s the company had several dozen stores collectively generating revenue in excess of $500 per square foot … The success of the company owed much to Mr. Cinader and Ms. Scott’s scrupulous focus on their target demographic: affluent, high-achieving people who wanted to signal a certain pedigree with their fashion choices, but not one so stuffy that they would think twice before associating with it.”

“Articles in the business press over the years have described J. Crew’s niche as one notch below Ralph Lauren and one notch above retailers like Gap or the Limited. While the company’s first catalog featured photographs from the Weld Boathouse at Harvard, J. Crew marketed itself to the man or woman who might have attended any college or university and simply wanted to evoke a hint of the Ivy League.”

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Klatch: The $55 Cup of Coffee

The Wall Street Journal: “Earlier this year, Extraction Lab, a coffee shop in Brooklyn, N.Y., that is connected to Alpha Dominche, a manufacturer of brewing equipment, began selling an $18 cup of coffee. It is made using a $13,900 Alpha machine that controls every aspect, from water temperature to timing. The brew is a Panamanian-sourced variety, called Gesha, sometimes spelled Geisha, once described by Don Holly, a veteran of the gourmet-coffee industry, as seeing ‘the face of God in a cup’.”

“In Southern California, $55 is what it will cost to get a special cup at Klatch Coffee, which plans to roll out a particularly prized version next month, dubbed Esmeralda Geisha 601. The ‘601’ refers to the price per pound that the coffee sold for at auction … The store is set to offer it at ticketed events. But for those who can’t attend, Klatch will ship the coffee out—for the same $55—in 15-gram packages of pre-roasted beans, good for making one cup. A souvenir mug will come with mail orders.”

“Some Starbucks enthusiasts have created their own price-be-damned drink by ordering extra shots of espresso and bringing their own oversize vessel … William E. Lewis Jr., a political consultant in Fort Lauderdale, Fla., said he once paid $148.99 for a Starbucks Flat White coffee with 170 extra shots. Mr. Lewis said he didn’t consume it all at once, saying that much caffeine in one sitting might be deadly. Instead, he packed it to go and enjoyed it over a couple of days. ‘It’s all about the hunt. It’s all about doing it’.”

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Surge Pricing: The Customer is ‘The Boss’

The New York Times: “When Bruce Springsteen decided to do a run of shows at a Broadway theater with fewer than a thousand seats, he appeared to reject the laws of economics — or at least what would seem to be in his financial best interest. He limited ticket prices to between $75 and $850 and has been allocating them through a lottery that includes identity verification. His goal was to prevent scalping. Yet not everyone who sought tickets got them at those prices. The tickets that have leaked onto the open market on StubHub ranged in one recent search from $1,200 to $9,999.”

“Fans don’t want to think their favorite artist is gouging. And the entire concert experience may be better if raucous superfans are in the front rows, rather than whoever is able to pay four figures for a ticket. The goal is to create an experience that makes everyone leave with a warm glow, their fandom of that artist that much deeper. If artists did raise prices sharply, there’s a risk they would need to discount prices later to fill up the arena. Research shows that when people find out they overpaid for something, they buy less in the future.”

“That might be a lesson for the other industries where variable pricing could make a lot of sense … What the successful examples of variable pricing have in common is that they treat customers’ desire for fairness not as some irrational rejection of economic logic to be scoffed at, but something fundamental, hard-wired into their view of the world. It is a reality that has to be respected and understood, whether you’re setting the price for a highway toll, a kilowatt of power on a hot day, or a generator after a hurricane … one view of the Springsteen approach is that it is economically irrational. But another is that it is part of a long-term relationship between a performer and his fans.”

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Broadway Bargains: There’s An App For That

The Wall Street Journal: “A veteran Broadway producer is instituting what he believes is an industry first: A best-price guarantee on show tickets. Ken Davenport, lead producer of the revival of ‘Once on This Island,’ … says the guarantee will ensure that ticket-buyers won’t have to scour the web for deals through theater sites advertising discounts. Instead, they can go to the show’s website.”

“While Mr. Davenport says the idea is to make pricing fairer and more transparent, he also allows that he stands to benefit from the guarantee. If theatergoers come to see the show as the best source for a discount, he says he doesn’t have to spend as much time and money marketing various other deals. Moreover, when theatergoers go to discount sites in search of cheaper seats, they often learn about deals for other Broadway productions, Mr. Davenport says. In turn, that could lead them to buy tickets for a different show.”

“But while Mr. Davenport’s strategy may resonate with theatergoers tired of the bargain hunting, not everyone thinks it will pay off. Larry Compeau, a Clarkson University professor who specializes in consumer psychology, says Americans have become accustomed to the hunt. He notes failed experiments by prominent retailers and manufacturers to simplify pricing and do away with discounts. “The general American consumer values the deal,” he said. Others say Mr. Davenport could be sacrificing revenue from ticket-buyers who don’t necessarily worry about deals.”

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Leinenkugel: Cult Classic or Soda Beer?

The New York Times: “Leinenkugel’s and its parent company, MillerCoors, would like to make the brand more than just a cult or local favorite. And they have largely succeeded with Summer Shandy, a breakout hit released in 2007 that has inspired a whole line of flavor-enhanced brews — watermelon, pomegranate, cocoa-raspberry — and, for the first time, brought the country’s seventh-oldest brewery to taps and store shelves nationwide.”

“But for some longtime drinkers, including many among the 11,000 who gathered in Chippewa Falls for the anniversary party, watching trendy shandies eclipse the workingman’s beers their grandparents once enjoyed is disorienting. During a question-and-answer session with the company’s brewmasters, one wistful Leinie’s drinker shouted, ‘When are you going to brew some beer that tastes like beer?'”

“In August, MillerCoors released Leinenkugel’s Original nationwide for the first time, part of a fall sampler pack of Leinie’s classic brews … with light-bodied German beers enjoying a resurgence, Leinenkugel sees an opportunity to attract new drinkers to the clean, malty lagers beloved in Wisconsin — particularly the 35 percent of shandy drinkers who, company research suggests, didn’t previously drink beer. It won’t be easy. ‘That’s a tall order,’said Ryan Schmiege, assistant brewmaster at the 29-year-old Deschutes Brewery in Oregon and a Wisconsin native. ‘Shandies are the soda of beer. They’re fun, but I wonder whether they’ll really convince people to try the old stuff.'”

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Is DIY DOA for Millennials?

The Wall Street Journal: The Millennial “generation, with its over-scheduled childhoods, tech-dependent lifestyles and delayed adulthood, is radically different from previous ones. They’re so different, in fact, that companies are developing new products, overhauling marketing at companies such as Scotts, Home Depot Inc., Procter & Gamble Co. , Williams-Sonoma Inc.’s West Elm and the Sherwin-Williams Co. are hosting classes and online tutorials to teach such basic skills as how to mow the lawn, use a tape measure, mop a floor, hammer a nail and pick a paint color. and launching educational programs—all with the goal of luring the archetypal 26-year-old.”

“J.C. Penney Co. says the group is willing to hire others for projects. The retailer has pushed into home services, including furnace and air-conditioning repair, water-treatment systems and bathroom renovations, and expanded its window-covering installation … Home-furnishings retailer West Elm offers service packages, which start at $129, to provide plumbing and electrical work, painting, installing a television and hanging wall art and mirrors.”

“Home Depot executives want to establish stores as an education center so young adults can learn household maintenance for themselves. Snagging a new homeowner’s first purchases, says Ted Decker, Home Depot executive vice president of merchandising, helps drive return trips and represents potentially ‘thousands and thousands of dollars’ in lifetime sales … In June the company introduced a series of online workshops, including videos on how to use a tape measure and how to hide cords, that were so basic some executives worried they were condescending.”

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Airbnb Antidote: Hotels Take Aim At ‘Self-Worth’

The New York Times: “With competitors like Airbnb nipping at their heels, hotels are rolling out experiences to their most faithful customers that go far beyond extra nights and room upgrades. Want to improve your cooking skills? How about a class with a Michelin-starred chef? Or snorkeling in Hawaii with Jean-Michel Cousteau? Or basketball tips from the N.B.A. standout Dwyane Wade? … In offering such exclusive experiences, hotels are looking to establish deeper connections with their customers in the face of growing competition from start-ups.”

“Marriott is trying to differentiate itself by focusing on self-improvement activities, in part because its own research suggests this is how people will increasingly spend their money when traveling … Such experiences not only increased travelers’ self-worth and satisfaction, the research found, but travelers sought to share the interactions with experts on their social channels.”

“The large hotel brands are mindful that right over their shoulder, Airbnb, in particular, is reinventing what travelers expect from a local stay by introducing smaller-scale experiences and classes, which people can bid on through its site even if they are not staying in an Airbnb rental. One in Paris, for example, offers to teach patrons how to sculpt a head from clay, taught by an artist who studied at the Louvre museum. Another offers a class in San Francisco on creating a French macaron.”

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Apple’s Insanely Great Idea? Stores.

Scott Galloway: “Apple made this crazy irrational decision 20 years ago to forward integrate into the medium that was supposedly going away. Stores. And they have somewhere between five and six billion dollars in store leases now on their balance sheet and have reallocated capital out of traditional broadcast media, which is declining every day in effectiveness, into the store where people still make physical contact if you will. They still consummate the relationship with the brand at the point of purchase.”

“So you have this temple to the brand which is this unbelievable experience called an Apple Store, and then you have this very mediocre experience called an AT&T or Verizon connect your phone experience for Samsung and the other Android players. The biggest value-creating decision in the history of modern decision: Apple’s crazy decision to forward integrate into stores.”

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