“No one goes there anymore because it’s too crowded” – Yogi Berra quote
The never-ending recession has every brand agonizing over decisions on a daily basis. The biggest decision is around Price, and the need for volume balanced off against the perceptions of Brand Equity.
This past week, I was at Holt Renfrew, Canada’s answer to Barneys, Saks Fifth Avenue, and Selfridges. I’m not a big fan of Holts. I wish I was a fan, but my Scottish blood makes me way too cheap to ever find something within a reasonable price range. Well, guess what people? Holt’s is now filled with items you can afford, and the place is packed.
At first glance, it appears as though Holt Renfrew is immune to the recession. So I decided to join the crowd and look around. I saw a Holt Renfrew branded travel beauty bag, which was a $100 value, but for sale at a price of only $25–and it even included a $10 bounce-back coupon off my next purchase. Perfect gift for my daughter. Next, I walked past ladies’ winter hats, saw the perfect gift for my mom. I flipped over the tag: $25. I even got the nice pink box to put the hat in, which I think the box has even more prestige value than the money I paid. I walked out with the nice big pink Holts bag, proudly walking along Bloor Street, knowing that everyone must have thought “wow, that guy has money”. If only they knew, I spent 56 bucks, including GST. It just seems wrong.
For those who want the $25 Make Up Bag, here’s the link and you better move fast:
Did I mistakenly walk into the Bay, instead of Holts? No, there’s no way the Bay would be dumb enough to sell a Travel Bag or a winter hat for only $25. This is like getting a Mercedes for around $15,000 or staying at the Four Seasons Hotel for $59 a night. It gives the masses a piece of luxury, but at a cost.
The short term attempt at sales gains is off-set by the longer-term sales decline when your core customer stops coming. For Holts, they’d have to sell 100 make up bags to the masses just to make up for the revenue lost from one $2500 dress from a core consumer. And in terms of profitability, if we assume the dress has 40% margins and the makeup bag only 10% margins, Holts would have to sell 400 make up bags to make up for that one dress. And it gets even worse when the masses realize they still can’t afford to buy anything beyond these cheap and cheerful items.
But we’ve seen this story before, in Birks. Through the 1980s, Birks had grown to 225 stores and was trying to be all things to all people. You could walk into a Birks in Mississauga, put down $125 for some nice pearls, and walk out with the little blue box, guaranteed to make any woman drool when she sees that box. But in 1992, Birks declared bankruptcy–they went back to what made them famous and who they were. They re-trenched so that all Birks locations were in special locations. And you needed to save up so you could afford something to go in the pretty blue box. They figured out that it’s ok if the masses drool, but can’t afford.
As we’re in the midst of the debate around 99% vs 1%, Holts has to realize who they are and who they cater to. Every time they dip into the 99%, they lose a consumer in the 1%. There has to be some reverence the masses have when they walk past the windows at Holts. They have to feel a bit scared when they look at the price tags. They have to be worried they are out of their element. If that Pink Holts bag I so proudly displayed quickly becomes a commodity, then the core audience–the one-percenters–will find somewhere else to shop.
As Holt’s looks to see if they can see the end in sight to the recession, they might not realize that they are already seeing the beginning of the end in sight of their status as a Beloved Brand. The lesson: trying to be liked by everyone might mean you end up loved by no one.