In this morning’s San Francisco Chronicle, a story reports that “Discounts failed to help sales” over the holidays. Despite deep discounts of up to 70%, the sales figures were dismal.
The biggest loser was Neiman Marcus, which reported a 27.5% decline in sales compared to the previous year’s holiday selling season — the five week period ending January 3.
But Abercrombie & Fitch was down 24%, Saks down 19.8% and my favorite retailer Nordstrom was down 10.6%. A few retailers, mostly discounters, managed to keep the decline in the 4-5% range: Costo, Macy’s, Target and TJX.
There was only one major retailer that reported an increase: Wal-Mart (1.7%). While this fell short of expectations, of late Wal-Mart has been one of the few retailers able to keep growing in an economy that’s going the other direction.
All this leads me to my question: Are low prices customer-centric?
I ask because nearly all the discussion on this site and elsewhere about customer-centric business seems to revolve around “service” or “experience.” The conventional wisdom these days seems to be that product and price are not differentiators, so focus on the experience.
Yet Apple thrives mainly based on product innovation (Yes, the in-store experience is great, but would you shop there if the products weren’t cool?) and Wal-Mart succeeds as a low-price leader without winning any awards for great service.
Our research over the past few years has found that the average importance rating in driving loyalty is as follows for these factors:
40% — the product or service being purchased
40% — the experience in using what was purchased
20% — the cost of what was purchased
This data was mostly collected in good times, but notice that price doesn’t have zero value. And I suspect that price would get a much higher weight right now.
So, in this economy especially, why shouldn’t low prices be part of the equation in being customer-centric? I fear that companies will spend too much time and money trying to “wow” customers with a great experience, and not pay attention to the fundamentals — delivering a product/service that does what it’s supposed to do, at the lowest price possible.
I like great service as much as anyone, that’s why I normally shop at Nordstrom. For the past holiday shopping season, though, I spent my money at Costco and Target.