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Garber on Business: Pier 1 and The Almighty 'Price-point'

Written by: Anne Garber

Article Overview: Consumers are ever more mindful of 'Price-point' -- especially during times of economic downturn. Savvy retailers will wise up to this fact of life. (And those who don't will be left behind.)

Garber on Business: Pier 1 and The Almighty 'Price-point'

What's in a name? Or a few common words? To the bargain-shopper -- in this case, at least -- it's everything.

I've said it before, and I daresay I will say it many, many times before my I give up this earthly existence, but Price-point is everything. Really.

I received a glossy mail-drop sales brochure today, really more of a booklet. Twenty-four pages, full-colour, and probably cost a pretty penny to produce.

The booklet came from Pier 1 imports' Canadian operation, headquartered in Windsor, ON (or at least mailed from there). Back in 2004, Pier 1's U.S. company was in dire straits, having foundered in the retail market for several consecutive seasons. Back then, they admitted their problems in reaching their market, and a business paper said: "A revamped advertising strategy, sharper prices and a reduced merchandise mix are in the works by Pier 1 imports as the home furnishings retailer responds to tougher competition and declining same-store sales."

The story went on to say: "At the retailer's shareholder meeting June 25, chairman and CEO Marvin Girouard attributed the sales softness to tougher price and assortment competition from discounters and general weakness in the home furnishings sector."

Well, DUH!

A different story a few months later was more specific: "Pier 1 imports, Inc. suffered a 39.5 percent drop in profits for the third quarter due to stiff competition from low-price megastores such as Target and Wal-Mart, where heavy discounting has taken place, and a lack of television advertising that has left its floors less trafficked.

"Marvin Girouard, the company's chairman and CEO, said, 'The third quarter was particularly difficult due to a challenging retail environment and company-specific issues from marketing and merchandising programs that are in transition during the last half of the fiscal year.

" 'Although weak store traffic and high merchandise discounting has negatively affected short-term profits this year, we are implementing longer-term plans, such as sku reductions, stronger visual merchandising and creative new marketing programs, to achieve improvements in sales and profitability. In the interim, we continue to carefully monitor inventories and control expenses.'

"The company, said Girouard, has taken a hiatus from television while it revamps all its advertising with the help of outside firms. In October, Pier 1 announced it had named two agencies to helm a strategic and creative repositioning of its marketing initiatives. At that time, Deutsch Inc. and OMD Midwest began work on a new marketing campaign to be launched in March 2005."

In April of this year -- under the stewardship of a new CEO, Alex W. Smith -- the company was able to declare its first profitable quarter in 12 such periods. Among other things, the company reduced its operating costs by lowering administrative salaries, but the crux of the problem -- the fact that its goods are basically overpriced -- has never been addressed.

The company also sold its headquarters in Texas (it is leasing back for a period of years), a move that also improved its profit outlook, without addressing its pricing policies. Said Alex W. Smith, the Company's President and Chief Executive Officer: "To see our customers respond so enthusiastically to our merchandise and in-store experience during the fourth quarter was very energizing for all of us at Pier 1 imports. We have confidence that if we concentrate on developing powerful assortments that speak to our customer base and further enhance our customer service and in-store presentation, that we will continue making progress in returning our Company to profitability and beyond."

Of course, this is all Investment-Speak Babble. My candid observation is that the company has simply never examined its pricing policy vis-�-vis today's marketplace and competitive pricing. It's just that simple. And they (and others like them) will continue the slow descent into retail oblivion until they wrap their little CEO and CFO heads around the concept that -- more than ever in today's market -- the consumer is King (or Queen). Nothing is as it was a decade or 15 years ago in the marketplace. The internet has changed all that.

Here's a prime example: You see a bamboo �tag�re in a Pier 1 imports store (note the lower case "i" in imports, by the way, an attempt at modesty in their logo that fools no one), and it's priced at $280. You seem to recall seeing one virtually identical at a garage sale last weekend. The garage sale people wanted $15, but of course it was used. Probably dirty. Anyway, you decide that $280 is more than you are willing to pay, so you never actually go out to Pier 1 to view this piece -- or any of their other stuff. Instead, you go on Craig's list and eBay to see if anyone has one for sale. Amazingly, someone is offering the exact same one on Craig's list for only $10. They even mention that it came from Pier 1! You contact the Craig's list people, and discover that they live right down the street from you, and when you go to buy the item, it turns out it's the same garage-sale place you saw it at in the first place. You just saved $270, and you were never tempted to buy any other accessories or pieces of furniture at Pier 1, because you never even entered the store in the first place. And why? Because the price-point of $280 seemed ridiculously high.

So, if you're an exec at Pier 1, you have to ask yourself: Why are our stores slowly coasting downhill? Why did we have to sell off 79 stores in 2007? Could it be that -- despite expensive advertising campaigns and new slogans and new promotional Unicef card offerings (that show our corporate heart is in the right place) -- we are simply charging more than what consumers wish to pay for cheaply made imported goods?

Now, I'm the first to admit that I'm a cheapskate, but there are plenty more shoppers just like me.

We are the ones who have arrived at an age where we don't knee-jerk to every marketplace whim or fad; we have decided that our own personal, eclectic taste is just fine -- and in fact that it is a dignified and reasonable hallmark of our individuality. It's really, really hard to sell to us, and we have become pretty much immune to your latest idea for "marketing" to us. We just ain't buying, it, buddy.

We have travelled to India and Thailand and Turkey and Hong Kong and Shanghai and Prague and Korea and Greece, and we KNOW how little those impulse-buy bamboo items or colourful china plates or hand-painted floral room-divider-screens or embroidered pillows or funky wooden dressers or lush fabric window panels cost at their source. We even know how much it cost us to ship said items home. So don't offer to sell us the same miraculously sourced goods at three times our price-point. Please.

We've also learned the difference between a fake Korean antique chest and a real one. Around the time we learned how to tell if pearls are false or if jade is low quality. And we sure know the difference between a poly-blend and a natural fibre. AND we know machine stitchery (or slave labour) in something "hand-made" when we see it. If we want the real thing, we will go to Chintz & Co. and pay their exorbitant rates, because we know that at least we are getting the real deal. Or we will discover genuine bargain price-points at 7 Sisters, who are importers, but after all, they are true wholesalers, too.

So, back to my harping about The Almighty Price-point, I learned many, many years ago (from a savvy discounter) that price-point is everything. That "turns" far outweigh simple mark-ups, and that the stores (and chains) that will survive well into the '20-teens decade are the ones whose leaders get that simple axiom, too. So fie on Pier 1 imports and its lower-case "i." You'll never get your bar-code scanner into MY wallet.

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Article Tags: advertising strategy, bargain shopper, business paper, consecutive seasons, earthly existence, home furnishings retailer, mail drop, marvin girouard, merchandise mix, merchandising programs, pier 1 imports, pier 1 imports inc, pretty penny, retail environment, sales brochure, store traffic, target, television advertising, u s company, wal mart



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