Shop Talk
Retailers, consumers and prices
from Raw Japan:
Retailers do well by going cheap
Japan is back in deflation, and price falls look like gathering pace as shoppers' bargain-hunting leads stores to cut prices further to weather the worst retail slump in decades.
Retailers large and small reported hard falls in quarterly profits last week, and the few bright spots were focused on those drawing in thrifty shoppers with their cheap but well-made goods.
Fast Retailing tops the list, as its Uniqlo stores thrive in tough times by selling T-shirts for $10 -- that's cheap here -- and other clothing at similar bargain prices. The company is also seeing strong sales growth at its other basic apparel chain g.u.
g.u., the cut-rate sibling of already-cheap Uniqlo, had a low profile for years but shoppers started flooding in after it slashed prices across the board and started flogging $11 jeans and $5 T-shirts this year.
Check Out Line: No discounts? no customers
Check out Abercrombie & Fitch’s falling profits.
The company played a remix of “Cold as Ice” as hold music for its conference call with analysts. It’s hard to tell if it is supposed to be ironic, or if the company is just tone deaf.
The latter could be possible, as Abercrombie has decided to tune out consumer’s expectations that retailers will offer discounts to try to get them in the door.
In November, CEO Mike Jeffries said the short-term relief provided by promotions would have the affect of damaging the brand in the long term. He defended the strategy again on Friday, though the company has cut some prices at its Hollister and abercrombie chains.
But if people stop going to your store, do they eventually forget about your brand?
Abercrombie’s same-store sales fell 25 percent in the key fourth quarter. Of course, refusing to discount (other than on clearance items) protects profits. Or maybe not. Net income fell 68 percent, though some of the decline was related to a new employment agreement for the CEO.
Also in the basket:
PepsiCo Q4 profit falls, but matches Wall St view
Sears launching online service to connect clients, contractors (Chicago Tribune)
Starbucks to sell instant coffee
Microsoft to open own stores, take on Apple
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