Brand Promises: Final Sale? Just Kidding!

The Wall Street Journal: “The phrase used to mean a last-ditch promotion, with steep price reductions on end-of-season castoffs and no chance of returns. But lately some brands are using a different sort of ‘final sale,’ strategically discounting slow-moving merchandise in mid-season, even though future discounts may still be possible. The new tactic still means no returns or exchanges … Fickle shoppers, hungry for discounts but accustomed to changing their minds, aren’t pleased.”

“Lauren Taylor Baker, a 31-year-old digital entrepreneur in Atlanta, says she used to get a thrill from finding a great bargain marked final sale … But after several final-sale purchases she regretted, Ms. Baker says she feels burned and no longer believes a final-sale price is the lowest it will go. Now, she says, when shopping for something marked final sale, she ignores the original full price and evaluates it based on quality and fit.”

“Katie Amato, of Buffalo, N.Y., does most of her shopping online. While she likes a sale, she tends to avoid final sale items. ‘Things might not fit, or the quality might not be as expected, and then you are stuck with it,’ says the 30-year-old postdoctoral researcher. Final sales make her feel ‘trapped or manipulated,’ she says.”

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Dollar Shave & The Digitally Native Vertical Brand

The New York Times: “The same forces that drove Dollar Shave’s rise are altering a wide variety of consumer product categories. Together, they add up to something huge — a new slate of companies that are exploring novel ways of making and marketing some of the most lucrative products we buy today. These firms have become so common that they have acquired a jargony label: the digitally native vertical brand.”

“By cutting out the inefficiencies of retail space and the marketing expense of TV, the new companies can offer better products at lower prices. We will get a wider range of products — if companies don’t have to market a single brand to everyone on TV, they can create a variety of items aimed at blocs of consumers who were previously left behind. And because these companies were born online, where reputations live and die on word of mouth, they are likely to offer friendlier, more responsive customer service than their faceless offline counterparts.”

“It’s striking how few of these online companies could have taken off in the presocial age. At the very least, they would have been sunk by the inability to target ads to the demographics they’re aiming to serve.”

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The Sweet Science of Designer Deodorant

The Wall Street Journal: “Brooklyn, N.Y.-based Soapwalla charges $14 for a 2-ounce jar of deodorant cream. It has the consistency of buttercream frosting … male customers have said they prefer it over a waxy stick, which snags and pulls hair. Cream also makes it easier to apply to other places on the body, such as the feet.”

“Prices for these offerings are reaching new heights, well beyond the old standard of two or three dollars a stick. Sprays and stronger stick offerings, known as clinical strength, come with $5 to $10 price tags. Natural deodorant often costs $15 or more. Tom Ford has two sticks, from his Oud Wood and Neroli Portofino fragrance lines, priced at $52 a piece … … A spokeswoman for Tom Ford Beauty … says the brand’s $52-per-stick price tag reflects the effort it takes to translate a complex, premium fragrance into a deodorant.”

Meanwhile: “Thirty percent of women reapply their deodorant during the day, according to Procter & Gamble Co., maker of Secret, Old Spice and Gillette; 20% of women say they keep it in their car, 25% in a purse and 30% at work. It all stems from a sneaking suspicion that deodorant could work better or has failed altogether. Executives at personal-care companies acknowledge that could be the case, but say many times a shopper has bought the wrong product or is mistaking a weak fragrance for an ineffective deodorant.

“Now more women buy Old Spice, a line typically targeting men, because of how strong its scent is … It is especially popular with women headed for the gym.”

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Direct Disruption: The Tide Wash Club

The Wall Street Journal: “Blindsided by the success of the upstart Dollar Shave Club, an online subscription service that chipped away at the dominance of Gillette razors, P&G executives say they are focusing not only on what consumers buy but on how they buy … P&G is experimenting with … the Tide Wash Club, an online subscription service for the dissolvable Tide Pods capsules that are the company’s highest-priced laundry detergent. The company offers free shipping at regular intervals.”

“Another new offering: Tide Spin, an undertaking P&G is calling the ‘uberization of laundry,’ in which customers in parts of Chicago can use a smartphone app to order laundry pickup and delivery from Tide-branded couriers. With the ventures, P&G is delving deeper into the business of connecting consumers directly with the products it makes, especially a new generation less loyal to the company’s big brands.”

“Privately, P&G executives acknowledge the company was caught off guard by the success of Dollar Shave Club, which started in 2011 and says it now has 3.2 million subscribers. ‘It was probably on the radar but we weren’t necessarily having the right conversation around what might disrupt us,’ said a person familiar with the company’s thinking.”

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Amazon Is Dropping List Prices

The New York Times: Amazon “built a reputation and hit $100 billion in annual revenue by offering deals. The first thing a potential customer saw was a bargain: how much an item was reduced from its list price. Now, in many cases, Amazon has dropped any mention of a list price. There is just one price. Take it or leave it.”

Larry Compeau, of Clarkson University comments: “They are trying to figure out what product categories have customers who are so tied into the Amazon ecosystem that list prices are no longer necessary.”

“In some categories, like groceries, Amazon seems to be using just one price, the buy-it-now price. If Amazon brings the milk and music into your house, not to mention videos and e-books and the devices to consume them on, as well as a hot dinner and just about any other object you could want, that presents a pricing challenge of a different sort. Untangling what those deals are worth — as opposed to what they cost — is probably impossible.”

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When Payless Means ‘Pay More’

The New York Times: “Rummage around on the Payless site and you will find little about refueling rules. But two weeks ago, another of the company’s livid customers — and there are many on sites like Consumer Affairs — said she was charged $79 for a fill-up, although she returned the car with the tank full. Why? She was told that she did not meet two criteria: ■ She failed to fill up within five miles of the airport. ■ She failed to fill the tank within half an hour of returning the car.”

It obviously doesn’t matter when you refill a gas tank. A full tank on Wednesday is a full tank the next Tuesday. But even the five-mile rule is a gotcha. A Nissan Versa, part of Payless’s compact fleet, gets 31 miles per gallon in the city, 40 on the highway. So let’s say that on average it gets 35 miles per gallon. That makes five miles one-seventh of a gallon. A gallon of gas now costs about $2.30, according to AAA. So five miles of gas costs about 33 cents. Payless, in other words, will charge drivers for a full tank — in this case nearly $40 — if the company spends more than 33 cents to top off the tank of a Nissan Versa.”

The five-mile rule “does not apply at Avis or Budget, which are part of the same company, the Avis Budget Group, that owns Payless. (Come out and wave to the people, Chairman Ronald Nelson.) Asked why Avis and Budget don’t use such a draconian standard, the spokeswoman explained it is because ‘Payless is a low-cost provider’.”

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The Swiffer Effect: Walmart & Procter Butt Heads

“Wal-Mart, the world’s largest retailer, and P&G, the world’s biggest consumer-goods company, are increasingly butting heads as both try to wring more revenue out of their slow-growing businesses, The Wall Street Journal reports … A battle last year over the popular Swiffer mop suggests the tensions aren’t likely to abate soon. P&G’s consumer research revealed that existing packages weren’t large enough to prompt repeat purchases, and so it upped the number of wipes in a pack, improved the handle and increased the price … Around the same time, Wal-Mart introduced a less expensive store brand, irking P&G.”

“To settle the matter, P&G had to offer a temporary discount on the company’s Swiffer products. Not only did P&G employees worry about lost sales, they believed the store-brand refills were of a lower quality and would stop first-time Swiffer users from sticking with the habit. ‘They sell crappy private label, so you buy Swiffer with a crappy refill,’ said one of the people familiar with the product changes. ‘And then you don’t buy again’.” A Walmart spokesman said: “Our Great Value products provide a quality alternative for customers looking to save money.”

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Price Trap: Beware the Amazon ‘Buy Box’

The Washington Post: “Researchers at Northeastern University tracked pricing of 1,640 of the best-selling products on Amazon’s site over four months. In particular, they were examining what prices were featured in what’s known as the ‘buy box,’ the area on the right side of an Amazon product page that invites you to add an item to your cart … It has been estimated that about 82 percent of sales on Amazon are made through that box.”

“Amazon relies on an algorithm to determine which seller ends up in the buy box for any given product … the process is significantly more likely to give that spot to sellers who use real-time pricing, in which software is used to automatically optimize prices on the fly based on what competitors are charging.”

“Here’s why that matters: Most sellers using that kind of pricing model don’t have the lowest prices on the site. In fact, the researchers found that 60 percent of those that use real-time pricing have higher prices than other sellers of the same item on Amazon. Most of the time, the price difference is about $1, but … researchers found ‘many’ cases where the price difference was in the $20 to $60 range.”

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Treasure Hunt: The Joy is in the Journey

The Wall Street Journal: “The internet isn’t just a way to speed up the shopping experience; it is a tool to draw it out. Consumers enjoy the anticipation of a big-ticket item, in contrast to the quick fix that comes from an impulse purchase at an inexpensive, of-the-moment fashion chain … The result of all this due diligence: Shoppers are feeling much more satisfied with their purchases.”

“Stylitics, a fashion technology and analytics company, partnered with market research firm NPD Group to look at this behavior. Handbags are a natural fit for this thoughtful approach, as women seek to combine fashion with function. The study found roughly four in 10 women ages 18 to 34 said they started thinking about their most recent handbag purchase more than a month in advance. Six in 10 said browsing online stores was a major influencer in their handbag shopping.”

“Once shoppers go through the drawn-out process and make up their minds, they are happier. Handbag return rates at luxury online retailer Net-a-Porter are among the lowest across the site.”

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Upgrade Downgrade: Bad News for Apple’s iPhone

The Wall Street Journal: “The death of the two-year cellphone contract has broken many Americans from a habit of routinely upgrading their smartphones … Citigroup estimates the phone-replacement cycle will stretch to 29 months for the first half of 2016, up from 28 months in the fourth quarter of 2015 and the typical range of 24 to 26 months seen during the two prior years.”

“Since the early days of Apple Inc.’s iPhone, most customers have avoided paying for the full price for the latest model. But the success of AT&T Inc. and Verizon Communications Inc. since 2013 in shifting customers into plans that force them to pay the full price for devices—and separate that cost from monthly service fees—has consumers holding on to their devices longer.”

“Analysts see the longer device life as positive for the carriers because it could lead to fewer service cancellations or defections in the competitive industry … The longer upgrade cycle lowers equipment revenue for the telecom companies, but Verizon’s Chief Financial Officer Fran Shammo argued last month that the top-line shift is painless … The shift isn’t as benign for Apple. BTIG analyst Walter Piecyk recently cut 10 million units out of his fiscal 2016 and 2017 iPhone estimates because of shifting upgrade rates in the U.S.”

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