How Not to Compete on Price

How Not to Compete on Price

“In the U.S., they’re cutting corners and cheating, and driving everything to the lowest common denominator – in the brands themselves and in the channels of distribution: department stores, shopping centers. And it’s reach the point of no return, which means that retail in the U.S. will have to reinvent itself,” claims Value Retail’s CEO Scott Malkin in a recent Glossy interview. Value Retail owns and operates 11 luxury outlet centers in Europe and China.

Malkin explained that it is impossible to have a culture where no one ever pays full price and still make money in retail. Luxury brands such as Gucci and Givenchy no longer offer sale products at their full-price brick and mortar stores. Malkin asserts that luxury brands devalue their equity when they offer lower-priced merchandise through discount models that include Nieman Marcus Last Call, Nordstrom Rack and Saks Off Fifth.

Malkin also believes that luxury brands should avoid Amazon completely. “Everything that makes Amazon brutally efficient and successful precludes their ability to work with luxury brands.” What will an acceptable experience look like at a time when consumers could arguably be printing their own clothing, shoes or cabinets in their own living rooms? The only reason why consumers will visit a showroom will be directly tied to the quality of the customer experience and have less to do about products. And the quality of customer experience is tied directly to the ability of sales professionals to connect and delivery experiences that will motivate consumers to leave the comfort of their homes.

Malkin views his business differently from other shopping center owners. “We’re in the tourism business; we’re in the business of creating experiential destinations that happen to sell merchandise and we’ve embraced elements in our culture that have nothing to do with shopping centers or retail.” That helps to explain why he recruits employees from the hospitality industry, events industry, nightclubs and high-end retailers (a potential source of new staff for your showroom?). Eighty percent of his 1200 team members worked at Gucci, Prada, Dior, Ralph Loren and Tommy Hilfiger.

Malkin believes retail is fundamentally about fashion and fashion is fundamentally about women who shop touristically. Great customer experiences can’t be mass produced. They need to be curated and customized. That why it is virtually impossible to have exceptional sales professionals in a discounting environment and hope to survive. To appeal to human beings’ five senses to deliver outstanding customer experiences requires relying on art as much as science, commitment and passion as much as logic. Appealing to customer’s senses and delivering exceptional customer experiences is the challenge that all retailers face, including kitchen and bath showrooms.

It’s difficult for successful businesses to change. Malkin says that most shopping center owners and large retailers have little to show for their investments in technology, because it is easier to invest in technology than it is to invent an uncomfortable culture. How are you embracing your customer’s senses and making your customer experience the reason why someone would leave their couch?

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