London – Discounted luxury
fashion and designer deals found in second tier stores may do great things
for a company’s profit margins, but ultimately they damage the cachet of
the brand.
Customers who are willing to spend four digits on a designer handbag at
full price may be alienated when the same bag can be purchased for half
price at discounted retailers, outlets, or stores with regular seasonal
promotions.
There is little aspiration to buy into a brand when every Tom, Dick and
Harriet can be seen sporting the same bag. The aura of luxury will quickly
begin to wane, as discounting has an impact on brand equity.
Perhaps that is why companies such as Michael Kors, Coach and Ralph Lauren
are taking control of their distribution channels, ensuring even pricing
strategies and keeping their key sellers away from discounters.
According to the Washington Post, Coach this week said it plans to pull its
products out of more than 250 department stores, a move that reduces its
presence in such locations by 25 percent. Meanwhile, Michael Kors said
Wednesday that it is reducing the inventory it provides to department
stores and, starting in February, is demanding to be excluded from
storewide promotions and coupons.
When something is available too easily and too affordably, it is not likely
to be considered luxury. Take Michael Kors, whose brand currently operates
771 stores compared with 550 last year. It’s aggressive expansion rate has
meant the products are available in hundred of suburban shopping malls
around the world. There is little elitism to buy into when a brand is so
commonly and affordably available. On the other hand, Coach has suffered
less from its shopping mall presence, but more from relying on its outlet
stores for growth, a move that hurt the brand with a prestige-minded
customer.
The most powerful value contribution of a strong brand is the ability to
demand and defend higher prices than competitors. Since powerful brands
produce higher margins, discounting can be seen a sign of weakness.
According to Killian Branding, research has shown that deep discounts can
cause the consumer to question the brand. Frequent discounting serves to
lower the value of the brand because of an almost subconscious reaction by
the consumer who believes that quality also has been lowered. Quality and
price therefore do not exist as isolated concepts in consumers’ minds. They
are interrelated.
The trick is to be able to entice today’s frugal buyers to continue buying
while trying to maintain tomorrow’s prestige. By discounting too much, too
often, the biggest cost to luxury brands is its cachet.
Photo credit: Michael Kors Facebook, Coach Facebook