HOW LOW CAN YOU GO? £2 OR NOT £2? THAT IS THE QUESTION

There has been a lot in the news about the rights and wrongs of selling a £2 T Shirt

The main concerns are whether it is right to offer a t shirt for just £2? Does it encourage disposable fashion and how can such a low price cover worker’s salaries?

Retailers defended their pricing by acknowledging the £2 t shirts and £5 dresses were loss leaders, used to generate footfall rather than with the intention of making profits. They assured us that such cheap merchandise was only part of the mix and did not impact on their commitment to quality and their ethical values

Its easy for us to sit in judgement on the fashion retailers but the headlines only reveal what is normal practise for most shops.

Many retailers call it EPP pricing – Entry Price Point – the price you splash across your point of sale and advertising to draw people in to your shop. Staff are then briefed to try to sell the customer up to a more profitable model using the cheaper priced product as a stepping stone.

Its an addictive and highly visible strategy. Shop staff experience a huge increase in the volume of customers and Head Office relaxes in the glow of an increased market share.

Its not just the lower end of the high street which use headline prices to attract footfall. More up market department stores such as Selfridges and Liberty of London will also lead on lower priced products, especially at key times of the year such as Xmas, to ensure that they appeal to a wider range of shoppers than their normal core customers.

So if everyone does it, is it such a bad thing? The ability to pull more customers in to your shop must always be beneficial?

Although it is probably always a good thing for sales selling a cheap product does not always work for either profit or brand perception

John Lewis does not participate in EPP pricing for some product areas, especially low margin ones like electronics. When I worked for Dixons they viewed John Lewis rather than the supermarkets as their biggest threat simply because John Lewis were not bogged down by the lowest margin products and were therefore able to concentrate on selling products that made a profit. If you make under £1 on a cheap laptop then you have to sell warranties and accessories to make a profit which meant the customer was rapidly detoured in to a hard sell scenario. If you only sell laptops which make you a profit you can concentrate on offering a great customer experience with resulting higher customer satisfaction. While Dixons scrabbled about selling volume John Lewis cherry picked the higher margin and more aspirational brands which added to a better perception of their own brand.

Burberry found to its cost that although EPP scarves gave an entry price in to their brand it also allowed a multitude of imitation/rip off scarves which negatively impacted on their brand in a very high profile way.

For many shops the need to offer pocket money products is a given. A shelf of products ranging from £1 to £5 give parents an easy way to satisfy pester power and buy stocking fillers/small gifts.

However, although having a lower priced offering is a key part of most shop’s merchandise strategies it is important that the product is still representative of the shop as a whole. Stationery is a great thing to offer at low prices because the quality of the product does not have to be compromised. Similarly, fashion accessories, magnets and keychains can all be sold at £5 and under without compromising your values. Different designs can enable lower prices and the customer can see and understand the value in your range offering.

Its much more questionable when lower price points stretch to offering £5 soft toys or T shirts. At this price the products themselves are invariably of visibly lower quality and can do your brand no service. Low quality and low price will also raise doubts about the ethics of manufacturer which ripples out to questions of your own brand.

We believe that the key to the £2 T Shirt question is really about knowing that if the spotlight of social media was turned upon your shop would you be happy with the resulting publicity? I’m not sure that Primark would chalk the publicity for their £2 t shirt up as good for their brand however well they explained it, and Marks and Spencers certainly wouldn’t.

Ironically all of our lower priced products are either fair trade and/or organic so we would be very happy to have the publicity. There is a clear reason why our lower priced products are cheaper, either because of the simplicity of design involved, or because we use upcycled materials or even just because they are smaller!

There is never an easy answer about questions such as these. Pricing and merchandise decisions are subject to so many more influences than money that it is always going to be more complicated than it should be. However what is good about high visibility cases such as The £2 T Shirt is that it allows the rest of us to have a good look at our own ranges in private before the spotlight of publicity makes us do it in public.

Guest Blog from Gaynor at Best Years – WWW.BESTYEARS.CO.UK

 

 

 

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