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.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

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.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

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’.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

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.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

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.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

Walmart & Zero-Based Shopping Bags

The Wall Street Journal: “Wal-Mart has started using zero-based budgeting in some corporate units and has made cost cuts as mundane as printing receipts on smaller strips of paper—a change that has saved $7 million so far this year … Wal-Mart expects to save $20 million this year by using slightly smaller plastic shopping bags.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

Lidl Effect: So Far, Not Much

The Wall Street Journal: “Since opening its first U.S. store in June, Lidl, the German grocery giant, hasn’t exactly upset the American grocery cart … When Lidl’s first nine U.S. stores opened June 15 in Virginia and the Carolinas, they lured customers away from other grocers, according to an analysis by inMarket, a location-based data firm. But Lidl hasn’t been able to sustain that level of traffic, and grocers including Kroger Co. and Wal-Mart have recovered much of their lost market share, according to inMarket.”

“The timing of Lidl’s U.S. arrival wasn’t ideal. It opened its first stores the day before Amazon.com Inc. surprised the industry by announcing it would buy Whole Foods Market. Supermarkets responded, slashing prices to keep up with growing competition on many fronts while investing in online ordering and delivery. Lidl doesn’t currently have an online grocery-shopping operation in the U.S.”

“Missteps in store location and merchandise have hurt Lidl’s U.S. rollout, consumer analysts say … Other analysts said Lidl stores give prominent display to items that seem geared toward Europeans, whether it is $39.99 cycling shoes or $15.99 badminton sets. Some stores’ produce sections have run low on conventional items while stocking big organic offerings, and in some stores emphasis on wine hasn’t squared with local tastes focused on beer.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

How Whole Foods Steals Walmart Shoppers

Business Insider: “When Amazon’s acquisition of Whole Foods formally went through in August, the e-commerce giant immediately made some changes — most notably, significant price cuts … The biggest source of foot traffic for Whole Foods were regular Walmart shoppers. People who visited Walmart at least twice a month accounted for 24% of new Whole Foods customers the week of the price cuts.”

“Across the board, the customers who defected to Whole Foods from grocery rivals were wealthier than the retailers’ average shopper … Walmart’s regular customers’ average income is $59,264, according to Thasos data; the average income of a regular Walmart customer that is defecting to Whole Foods, however, is $71,697 … While Walmart has aimed for more aspirational customers as Whole Foods cuts prices, Thasos data proves that both retailers are competing for the same shopper: the upper-middle class customer who is increasingly important as wages stagnate for much of the US.”

“All of this means that wealthier shoppers are increasingly influential, forcing bargain-centric retailers like Walmart to expand into more aspirational brands … Walmart is gearing up to cash in on wealthier customers, especially as it expands its e-commerce lines. Whole Foods winning over high-income customers could force Walmart on the offensive in this battle — one that both retailers are determined to win.”

Facebooktwittergoogle_plusredditpinterestlinkedinmail