Perception is Reality: Retail's Greatest Tool

In the past months, clothing retailers like Gap and Aeropostle have been combating both high production costs and consumers’ weak spending habits. To confront customers’ prudent spending, retailers have tried to discount items. However, a disappointing second quarter has caused many clothing stores to suggest the likelihood of price increases. Most of these retailers propose that they will raise prices on more embroidered and detailed goods. However, this plan neglects to factor in the exact wants of the customer. For instance, what happens if customers would still rather buy cheaper, less luxuries products? Retailers’ poor sales would continue while also wasting their scarce resources. Instead, I suggest a different approach to this dilemma.

Perception is reality. Rather than raise prices on a few select items, I would first cutback prices for all old or undesirable merchandise. Once new items are available, I would dramatically increase the prices of those products. While this may discourage some buyers right away, once the holiday season rolls through, I would advertise a huge sale. This way, customers believe they are saving money when in fact, they are actually spending more money at my establishment than if I had originally kept many items discounted with a few more expensive and lavished goods.  Hopefully though, with consistent growth and recovery in the economy, product inputs like cotton and wages with decrease in price so that retailers can resume selling cheap, durable goods to less stingy consumers.  


Article used: http://online.wsj.com/article/SB10001424052748704476104575439112892856830.html?KEYWORDS=retail


Mia Rosen