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Buy High And You Might Just Have to Sell Low

July 16, 2010
Several years ago (read: before the bottom fell out of the economy) I decided to bring in some containers of Chinese-made wrought iron. It was a great value. A five piece set could sell for as little as $349. Not only were the price points good, the product quality was high. In fact, we haven’t had a single customer call us in the intervening years to complain about rust or broken welds.

 

But, as with all best laid plans, there were a problems. These products significantly cut into our higher end wrought iron sales. Worse, my sales staff cost per unit went up because it took just as long to sell a $349 set as it did to sell a $749 set. Same for my delivery costs pet set. It took just as long to deliver a $349 set as it did to deliver a $749 set. Then, my delivery system got clogged with these low-end sets to the point where we were having trouble arranging delivery of our higher end groups. So, after carrying the product for a year, I stopped and went back to my old model of carrying just the higher priced, American-made wrought iron.

 

In the face of a still sputtering economy, I am now wondering if I have to add lower end products to my 2011 product mix. Yesterday, a friend who owns a store like mine told me their customers snubbed high end merchandise this year. Whereas in prior years their high end sold regularly, this year they were lucky to sell one high end set a month. However, they were having extraordinary success with lower end price points in the same categories. I am hearing the same story from other friends in the industry, too.

 

Two years ago, I blogged that we had to keep the high end going because that differentiated the specialty retailer from big boxes and warehouse stores. I changed my story in 2010. I dipped my toe into the lower (not low) end with Cast Classic’s value priced line. This line consisted of extruded rather than cast aluminum pieces using cheaper fabrics for cushions. It sold well and, more to the point, didn’t affect sales of my higher end goods.

 

Although I didn’t go to premarket, I do know several companies are planning to introduce “value” lines of their own for 2011. Companies that worked exclusively in high end cast products are now working in less expensive extruded, too. However, they are emphasizing design in these lines to differentiate themselves and, therefore specialty retailers, from big boxes. As long as the economy makes consumers spend less, I think this strategy is going to be very important for us.

 

That is not to say I am going to convert my store to lower end products exclusively. Goodness knows we had a very successful year with Brown Jordan’s high end products. True, this was a direct result of their “factory authorized sale,” Even at "factory authorized sale" discount, their prices remained the “best” range; yet, there was still strong demand for their product. So, I don’t see us getting out of that price point.

 

Instead, I expect to see a larger mix of “value” priced products on my floor for next year. I am hoping to have more five piece chat or lounge groups $2,500 - $3,000 range. I do know one thing, though;  I am not going to lower my design standards just to carry lower price points. Our consumers won’t stand for that.

 

I guess what I am saying is carrying low end can do harm to the high end of the business when the economy is good. But when the economy is slow and the high end isn’t selling, you can’t do much harm to it.

 

Under the best of circumstances, pre-market and market are confusing times for us. These are not the best of circumstances; so, I think this year is going to be even more confusing, which is why I remain,

 

Yours in confused retailing, Bruce