Why Is It....No One Pays Full Price Anymore — And It's Ruining Brick &

Mortar Retail

By Bill Napier

Last Sunday I read an

article by Mallory

Schlossberg on the

website Business

Insider.

Mallory is a retail

reporter for Business

Insider and wrote an

article with the

title "No one pays full

price anymore — and

it's terrifying

companies"

It's a great article and I suggest you read it before you read what I'm about to write.

When I entered into the home furnishings industry in August 2000 after a marketing career in consumer

products, it pretty much mirrored most retail in the U.S.

Retailers went to shows/furniture markets/Expos and more, to search out new products, trends or the

next big retail idea. AND they all had the same go to market strategy; they would buy those products

and place them in their store, stocking their shelves and warehouses, hoping they guessed right to meet

"potential" demand. That was the model then, and it still holds mostly true today.

By employing this model, stock it and they will come, is a failing model especially today with trends

changing like the wind. Even if you have record sales on an item, eventually the trend will die out and

you'll have to liquidate your inventory which liquidates those once found profits.

It will happen, just look at Kohl's, Men's Warehouse, Macy's, Automobile retailers and all the bellwether

retailers out there. Whenever I see a 40%-60% off sale, the first thought I have is: "Oh those poor people

that paid full price", which ultimately is thought by your customers too....that's why nothing sells

anymore unless it has "A Race to the Bottom" PRICE promotion killing your margins and ability to sustain

a robust retail business.

With the internet, transparency is killing this

old model of charging exorbitant prices on

what was once considered a luxury or unique

brand/product.

People can find anything they want,

anywhere on the web. In the article from

Business Insider I referenced, there are now

companies that are reverse engineering the

manufacturing model.

Look at Everlane. The ecommerce retailer boasts the mentality, "Know your factories. Know your costs.

Always ask why," on its "about" page.

The ecommerce startup breaks down production costs, including labor, materials, transporting the

apparel, and duties.

Yep, those $200 shoes you just bought could probably be found for $49.00 somewhere else.

This "fear" of consumers finding a "lower price" drives retailers to one

of these two options:

1. Don't show any prices...

Ya that works...Ya think? Do you really think

I'm going to call you, dial an extension, wait

for someone to answer, ask what it costs and

then wait again while they look up the price

and? Nope, I'll copy the SKU info and find

someone who has it and find out the

price. Listen up....people don't talk to people

anymore, they text, chat, read reviews and

watch videos....we've become a nation of

"societal thumbs" and you better adapt or

die.

2. I'll lower my price to compete.

Yep, the "Race to the bottom", "the Walmartization of America" or my favorite: The Commoditization of

Everything, including the ability to even survive.

No one pays full price anymore....BUT that doesn't mean you can't charge for and receive a value added

profit proposition for your products and services? Why you ask, I'll show you a couple examples in my

industry and a couple other retail establishments that have adapted and are doing well.

Best Buy

First, let's dissect Best Buy. Two years ago they

were on the chopping block. Remember "show-

rooming"? I even blogged about their potential

demise....HERE....and HERE

Amazon was killing them because people would

go to best Buy, find what they liked, Amazoned it

and bought it for less, sometimes hundreds of

dollars less.

I did it with my 60" Panasonic Plasma TV. I went to the store, found what we wanted, Amazoned it for

$350.00 less and then abruptly asked the salesperson; "Why Should I Pay Full Price"?

We negotiated the price down to where I paid $125.00 over Amazon's price....Why, because they

delivered it, installed it and calibrated it. That extra cost was well worth it "TO ME" and a deal was

struck.

Now what is Best Buy doing? They are giving consumers reason why NOT to buy online from Amazon

and others like them. They are driving traffic back into their stores because they took away their

competitors best advantage....PRICE!

Check out what The Motley Fool said in March of this year:

Click the image to read the article

"Shares of consumer electronics retailer Best Buy (NYSE:BBY) have more than tripled since late 2012,

when fears of bankruptcy drove the stock down to decade lows. Those fears turned out to be overly

pessimistic, and under the leadership of CEO Hubert Joly, Best Buy has slashed costs, sold off

underperforming international businesses, and invested heavily in e-commerce".

And they've changed their messaging to adapt to today's consumer:

"BUY WITH CONFIDENCE"

Expert Service. Unbeatable Price - (Tag line)

We make it easy to make your purchase — with expert advice, our price match guarantee, free shipping

on orders $35 and up, trade-in and much more.

And.....

1. A Price match Guarantee

2. Free Store Pick Up

3. Free Shipping over $35.00

______________________________________________________________

So, what about the above messaging platform would make you NOT want to visit their retail

store...even after you've shopped everywhere online for stuff they sell?

Let's take a walk into the home furnishings category. I'm going to highlight two retailers "that get it".

(I'm sure there are more, send me the links and I'll use them too in future RANTS, if they are ok with it)

Sheely's Furniture & Appliances

Take a look at Sheely’s Furniture on-line

internet presence and how they promote

their “Retail Brand”.

Sheely’s has made an investment to

educate, inspire and motivate the

consumer to do business with them.

They’ve integrated an awesome website with thousands and thousands of items for consumers to shop,

videos that educate the customer as to why Sheely’s is different and why you want to do business with

them.

Just take a look at these three videos on their website:

WHY SHOP AT SHEELY'S? https://youtu.be/ACpsCnu3eA4

WE SERVICE WHAT WE SELL https://youtu.be/zXsnhuOselo

AN INSIDE LOOK AT SHEELY'S CUSTOMER SERVICE https://youtu.be/HP2ZAvRkGs4

After watching these videos, ask yourself: "As a consumer buying furniture" do you want to buy from an

online retailer and save $50-$250.00, or would you rather shop locally at a company like this that

handles it all?

They have a price guarantee and they show you where THE VALUE is.....PLUS 83% of shoppers would

rather shop locally....if given a reason to....and that's your fault if you haven't given them that reason!

AND..........

Google just came out with new research showing;

We found that 83% of moms search for answers to their questions online. And of those, three in five

turn to online video in particular. Few moms have time to scour a dozen fashion magazines for the latest

trends, or test drive a dozen different strollers around the store (while their toddler is crying). Instead, in

those I-want-to-know, I-want-to-buy, I-want-to-do micro-moments.

Today's moms want show-not-tell answers in the moment.

There's more.....

Take A Look At Sherman's Furniture's ABOUT US PAGE

Click the image to see the video

Let's look at how another retailer

has figured it out;

Sherman's Furniture & Appliance:

http://www.shermansinc.com

On their landing page they have an

"About Us" video that Paul

Sherman and his employees

explain why you want to shop

there; highlighting many of their

core values and retailing principals.

In the video they have one compelling selling point: If you don't like it, bring it back in 30 days...NO

questions asked.

https://youtu.be/YibNSsRIlo0

So...why WOULDN'T YOU SHOP THERE, or at least bookmark them to visit?

Here are the lessons one could learn from these videos and retail brand messages:

Price tier #1 - See it, buy it, wait for it and save $$$$ - Use your suppliers and white glove delivery

services to perform "direct ship" options to the consumer from the supplier’s warehouse by passing on

the savings you’d have with handling/stocking and incremental shipping costs. The suppliers can

essentially "cross dock" the product and deliver to the consumer.... (You could offer curbside, threshold

or complete white glove. Geez, isn't that the Amazon Model?

Price tier #2 - Buy it today - take it home today. Charge consumers a bit more for the convenience of

having it in-stock. Show the consumer at the POS how much more they will pay vs. buying on-line,

picking it up in-store and more. Either way you win here, think about it

Tier #3 - Guarantee the pricing formula. Consumers will shop around, BUT if they believe the low

price guarantee platform, they will gravitate to what/who they know and trust first, especially if they

can see/talk/interact with a real brick and mortar person/platform should they have a concern or

problem. This low price guarantee is based off the exact same SKU model wit the exact same selling

attributes: Manufacturer, fabric/leather, delivered, etc

No one wants to be put on hold, go through the ubiquitous PRESS #1, etc, especially on a big ticket item,

and especially if you’re having a problem. Do you have LIVE CHAT? You should.....heck, anybody could

run that part of the business from their home.

If your goal is to implement a great brick and mortar strategy, you need to develop a compelling

promise! Much like traditional marketing, the goal for a brand is to promote their brand/product as a

promise. Give them all the information, resources, everything they want and need to help them with

their buying decision and convince them your store is the place where they will achieve ALL of their

purchase and service objectives. If you don’t, believe me someone else will!

BUT....

There are two huge equations missing from the above retailer's success....getting product delivered

from the furniture manufacturers in order to sell and make money, And getting the manufacturer to

invest in their brand to help your brand!

This is where the manufacturers MUST step up, and many don't and that's why I wrote The Death Of

Brands In The Furniture Industry on October 5th, 2015.

I came into this industry August 19th, 2000. I came from being a marketer in the consumer product

industry with the goal of learning "durable marketing".

Consumer product marketing, for me, had become boring, pedestrian and with unlimited predictive

modeling....YUK.... I always loved the Wild West element of marketing, PLUS I needed a new

challenge/spark to get my passion for marketing reignited.

The first acronym I was faced with in my new position, when I was hired as the head marketing person

at Ashley Furniture was GMROI....

Where I came from it meant: "Gross Margin Return On Investment"...nope, at Ashley it meant: Gross

Margin Return On Inventory". You could make an argument it meant the same....but not to me after I

learned it, understood it and helped Ashley's employees implement it

To me, and thousands of Ashley retailers, IT MADE PURE & SIMPLE ECONOMICAL SENSE and it's still the

main reason they dominate in this industry and probably always will. This and the visionary leadership,

passion, amazing refresh/reinvention of their line consistently, and other reasons that are obvious, that

I won't talk about here, makes them a model for others to be inspired by.

* It should be noted here, I do not work for Ashley and haven't since 2005

OK, Back To GMROI

It's such a basic principal of doing

business; I'm shocked other

manufacturers haven't adapted.

GMROI's principal is all about managing

SALES VELOCITY & COSTS, for their

retailers.

WHY would Ashley do this....because if

their retailers sold more...guess

what...so did Ashley!

Just-in-case, having inventory, is being replaced with …

Just-in-time

Just-enough

You show it, you sell it, they deliver it and you have minimized your business costs across the

board

SO, why is it other manufacturers haven't adopted this "proven model"?

HOW GMROI WORKS & WHY

GMROI works based off a simple economic principle....it uses other people's money, in this case Ashley's

money, so you can show more and sell more without making massive investments in trying to do it all

yourself, as outlined below.

How does Ashley let you take advantage of them?

Because Ashley holds the inventory for you until you take the order.

Then you got paid in full from the customer, probably when they ordered their product, Ashley delivers

it in 2-3 weeks when you order it, invoice you net 30 and your "OUT OF POCKET COSTS ARE" VS. You

spending your money upfront?

Do the math NOW because: No one pays full price anymore

1. The cost of money tied up in inventory

2. The cost of obsolescence - when it no longer sells and you've got a bunch of it causing you to

liquidate the product that erodes/eliminates those once awesome profits you "initially" made.

Industry figures state this accounts for about 6% on average.

3. The costs of damaged goods/loss/theft - I don't even need to go there, but again industry

averages here are around 6% of cost.

4. Personnel - my figures show this could be 33%-40%+ of your costs and you need more people if

you have to move around/handle more stuff

5. Space & Utilities - this is a 24/7 cost? (Where I live in the frozen tundra heat can get expensive).

6. Handling of materials - handling the Receiving, Inspecting, Recording, Moving, Counting, Storing,

Retrieving and then the delivery, That's 7X you handled this product, accounting for an

additional 4% of your costs...

7. The cost of money to finance all of this? IF you can get a bank to even do it in today's economy?

10%, 20%-30% of your holding costs?

8. Then add the Insurance costs for all of this?

And your gross margins are what???

AND you have to charge what to cover these costs?

So, the summary here is simple: GMROI allows you the retailer to focus on creating the selling and

marketing proposition first, while the manufacturer plays the role of warehouse manager, logistics and

more....AT THEIR expense....saving you money, improving your margins.... which allows you to compete

with a "value model" that consumers won't be paying full price anymore, while not sacrificing precious

margins.

Implement This And....No one pays full price anymore

Because you pass the savings on to the consumer...and your NET MARGINS are still very good because

you've "reduced costs".

How Do You Think Amazon, Overstock, Wayfair, One Kings Lane and Others Are Able To Compete On

Price?

REVERSE GMROI

CLICK THE IAMGE TO READ THE ARTICLE

Yep, they have pretty much perfected

the model. Here's how it works for

Amazon:

As a retailer, you can have a storefront

and sell online....BUT here is the caveat:

If Amazon receives an order for your

product, you must do one of two

things:

Get the product to their warehouse so

they can deliver it

Figure out how you can deliver it

AND.......Amazon takes 15% of your order After The Costs Above !

The Math

So, when it's all said and done, you have a net cost of somewhere between 30%-35% PLUS the cost of

packaging the product to their specifications, which IS expensive and required.

Do The Math...what's your Net-Net? Are you being forced to sell your products with e-tailers because

you haven't invested in a great website to promote yourself or becauseyour vendors aren't stepping

up...maybe both?

Yep Amazon has just done a reverse GMROI on your business!

And the same holds true for the other e-tailers of home furnishings!

Why is it that this GMROI

model isn't being used

everywhere in this industry?

Maybe because it's so simple

and people like to complicate

simplicity with dated rhetoric,

tunnel vision or just plain

stubbornness?

ALL Manufacturers MUST

adapt to the GMROI model to

stay in business, because if

they don't, their retailers will

go out of business and guess

what....they won't have

anyone to sell their products

to and they will "follow them

into obscurity"!

The old model of cut, produce, inventory and then try and go sell it, has sent many manufacturers and

retailers to their grave...I know, I worked for a couple of them after I worked for Ashley.... I tried to warn

them and they all got mad at me....stating: "We're not like Ashley", to which I answered; "you don't

have to be in style, messaging and marketing, you just need to understand consumers and logistics,

adopting their basic business model for retailer success and more throughput".

AND Ashley has just reinvented the GMROI model AGAIN with their Ashley Express;

Any Ashley dealer in the lower 48 states can offer their goods, which includes Ashley branded product

and items under Ashley’s Berkline and BenchCraft brands as well as accessories. Ashley also provides a

continually updated product feed to the retailer’s website, if they have a platform that can sustain

this. (Go here if you don't have that platform)

So now you can put the product on your website, sell it, get the money and then let Ashley handle

everything....AND you make money.... There’s no downside. Full product visibility, credit,

delivery...perfect!!!

There’s no inventory, no sales costs, just have a great website loaded with thousands of SKU's to let all

the Overstock & Amazon shoppers know....you can level the playing field too....LOCALLY” and it's OK

that No one pays full price anymore, because you've cut costs, increased your turns, and can pass the

savings on to the consumer!

This was announced over 1 year ago and I haven't seen any manufacturer even challenge this

awesome new platform. WHY IS IT?

Maybe if retailers start working with vendors that "get this model" at the expense of those that "Don't

or won't", change can be forced and everyone wins!

WHY IS IT....manufacturers are not adopting retail strategies that consumers

want, or business strategies their retailers need....especially since;

No one pays full price anymore — and it's ruining brick & mortar retail.

WHY IS IT....

Bill Napier is Managing Partner of Napier Marketing Group.

He has been the chief marketing officer of several small,

medium and large companies throughout his career, most

notably Ashley Furniture Industries Inc from 2000-2005.

Currently he is a strategic management and marketing

consultant to

Imagine Advertising, Englander Mattress and several other

companies in the home furnishing industry.

Bill is also a featured writer and speaker in the retail industry. His vast understanding of the issues

retailers and brands face to compete in the digital arena, coupled with his humorous interpretation of

his knowledge of trends, facts and solutions for helping companies compete, makes for an engaging and

informative session for every brand or retailer that attends his sessions.

His passion is to help retail brands & brick mortar retailers grow their business by creating, guiding and

deploying successful marketing B2B/B2C solutions integrating traditional marketing with the web/social

media.

___________________________________________________________________________

"Bill Napier is also known to many of the RetailerNOW Magazine readers as the man who likes to “Rant”

and we think that is a good thing…

Sharing frustrations as well as common sense solutions has been his M.O. for years.

Delivering the goods each and every time he writes or speaks at our National Conferences, Bill says what

he means and means what he says."

The RetailerNow Editorial Staff

His passion is to help retail brands & brick mortar retailers grow their business by creating, guiding and

deploying successful marketing B2B/B2C solutions integrating traditional marketing with the web/social

media.

Bill can be reached at:

billnapier@napiermkt.com

bill@imagineadv.com

612-217-1297

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