Value Store Brands: High-end Taste for Low Spenders
Arguably, the king of cheap chic is US retailer Target. Faced with intense retail competition years ago, Target chose “to reposition itself as a mass merchandiser of affordable chic goods,” according to professors Patrick Barwise and Sean Meehan, co-authors of the book Simply Better (Harvard Business School Press). While Kmart was approaching bankruptcy and Wal-Mart was dominating the retail market with low prices, Target “successfully associated its name with a younger, hipper, edgier, and more fun image than its competitors. Target is often pronounced in faux French, ‘Tar-zhay,’ to connote its trendy sensibility.”
Target achieved differentiation, Barwise and Meehan say, through “upscale discounting, a concept associating style, quality of products, and price competitiveness. This ‘cheap chic’ strategy enabled Target to become a major brand… Target entered high-profile design partnerships, from apparel to kitchenware to food.”
Target’s strong sales results over the past several years prove that the strategy has paid off. In recent months, however, Target has experienced the universal slowdown of most retailers. In August 2008, the retail chain saw comparable store sales drop more than 2 percent, compared to August 2007.
Still, the chain is doing better than many of its competitors, buffered by well-regarded store brands, clever advertising, and novel merchandising.
There is already a fair amount of evidence that store brands, chic or not, are seeing a significant uptick in sales because of the economy. In September 2008, Kroger, one of the largest US supermarket chains, reported that its own store brands accounted for a record 26 percent of its fiscal second quarter sales, according to The Wall Street Journal. Quoted in The Journal, Kroger CEO David Dillon said: “In this economy, customers are much more willing to try a private-label item, and we’re seeing signs that this is happening more and more as the year progresses.”Whether it’s fashion, food, or any other product category, cheap chic is clearly a global trend. ALDI supermarkets, with 7,000 stores across three continents, won the 2007 Quality Food Award for eight of its gourmet store products, with ALDI’s Stone Baked Romagna Pizza getting the top award. European design house Moschino features a line of clothing, accessories, and perfumes under the brand name “Cheap and Chic.” India’s Tata Group has extended cheap chic to its line of Ginger hotels. Now at fourteen Indian locations, Ginger hotels are based on a concept known as SmartBasics—hotels that feature “simplicity, convenience, informality, style, warmth, modernity and affordability.”
Global economic conditions are likely to keep the interest in cheap chic brands high. While the average consumer likes trendy merchandise at bargain prices, the wealthy shopper may find cheap chic increasingly attractive as luxury goods become too pricey. Once the well-heeled consumer discovers the value of cheap chic, it puts a new demographic spin on the concept. In fact, it could mean cheap chic brands will reach a wider level of acceptance.
Retailers like Target, who already know how to create and market cheap chic brands, stand to benefit the most. But adopting a cheap chic strategy could help many other retailers insulate themselves from an economic downturn. That would be a welcome development for consumers who don’t want to sacrifice quality design for price.
[Story Found at Brandchannel]