Retailers Have Designs on More Black Fridays

Lining up in the wee hours waiting for a store to open isn’t just a Black Friday phenomenon anymore. Retailers are increasingly leveraging limited-edition designer merchandise to get shoppers spending.

SmartMoney.com

It seems to be working: Gap’s line of kids’ clothing with Diane von Furstenberg, which debuted at 206 stores in the U.S. and Canada last week, sold out in many locations within hours. Target’s recent capsule collections from Missoni and Jason Wu sold out just as fast — and the Missoni demand was so frenzied that it crashed the retailer’s web site. And last month, shoppers in pursuit of Nike’s $225 Foamposite One Galaxy sneakers rioted outside malls in Florida and Maryland over limited availability. Much of this sold-out gear ended up in one place: eBay, where a small number of buyers resell the merchandise for inflated prices.

SmartMoney.com

Experts say retailers have been turning to such exclusive collections to bring more shoppers into stores. “With so much choice, people need incentive to pull the trigger and make a purchase,” says Kit Yarrow, a professor of psychology and marketing at Golden Gate University. That’s usually a discount, but scarcity works just as well. “Half of it is the consumer wants the item and half of it is they don’t want to miss out on getting the item,” she says. Unlike discounts, fast-selling exclusives can help retailers improve both their image and revenues. “I’m not sure that it moves the needle that much,” says Jaime Katz, an industry analyst for Morningstar, since many exclusive collections number only a few items. But shoppers may still spend hundreds of dollars at the store that they wouldn’t have otherwise..
Deals can be had without buying into the frenzy — or over-paying on eBay, says Michelle Madhok, the founder of sale-tracking site SheFinds.com. Gap’s line, for example, was quickly replenished and is still readily available online in advance of its March 28 global launch. Missoni and Jason Wu pieces trickled back into stores over Target’s 90-day return window. Many Toys R Us exclusive toys show up at mom-n-pop stores on Amazon’s marketplace, for example, while Madhok says she spotted Gap DVF Kids clothing at Diane von Furstenberg’s own stores

Case Study: Is subscription based model useful to retail

ShoeDazzle Ditches Monthly Subscriptions For Boutique-Style Pampering

The online shoe company cofounded by Kim Kardashian announces it's scrapping the monthly subscription model and adding lingerie and dress lines. The moves reveal its true secret sauce.

ShoeDazzle started out as one of the new generation of consumer startups centered around a monthly subscription model: Sign up for the service and you get a new pair of pumps (or wedges, or boots, or stilettos, or…) every month for a mere $39.95. And they were celebrity-endorsed, no less.
But today, after just three years in operation, ShoeDazzle is announcing it is jettisoning the subscriptions. Does that mean they were a bust? Or is there something more profound at work?
The latter, say ShoeDazzle executives and investors. The subscription angle certainly garnered the company signup-fueling coverage when it first opened its doors back in March 2009 (as did the fact that cofounder Kim Kardashian was helping curate the company's selection of proprietary footgear).
But ShoeDazzle's real insight, CEO Bill Strauss tells Fast Company, and the thing executives say will send it zooming ahead of its competitors, is something that has gotten a little less play: the site's personalization and pampering strategy that is perhaps the real key to the company's astronomic growth. Over the last year, the site's number of "members" has tripled from 3 million to 10 million.
(The company doesn't release revenue figures, but Strauss says the growth in those numbers is "following in a similar growth pattern" to the surge in users.)
Every month, the ShoeDazzle system culls its new inventory and drops a curated selection into each user's personal "Showroom." The curations are based, initially, on a survey the user fills out to establish their taste profile. Over time, the recommendation algorithm gets more sophisticated as it takes into account the user's actual purchases. The result is a collection of items users feel have been handpicked just for them.
Strauss calls this experience akin to one you'd receive at a high-end boutique, where salespeople know your name and your tastes. "If you walk into a boutique, and they say, 'These new shoes just came in, and they fit your style and personality,' you feel good about that, and you're more likely to buy," Strauss says.
Therein lies ShoeDazzle's real innovation. If Zappos got us all used to shopping online as easily as we would our local department store (with a wide selection of items and a free-returns policy that lets shoppers try items on risk-free), then ShoeDazzle believes consumers are ready for the more intimate shopping experience they get at real-world boutiques.
In fact, the idea for ShoeDazzle came out of an exchange between cofounder Brian Lee (a tax attorney who previously cofounded LegalZoom with O.J. Simpson attorney Robert Shapiro) and his wife. "She came home one day from the expensive showrooms in Beverly Hills, and he asked her, 'Why do you buy these expensive shoes? Why don't you go to Payless or DSW?'" Strauss says. "She replied, 'Brian, you don't understand. When women shop, they want to feel beautiful and pampered.'"
ShoeDazzle's stab at simulating the boutique experience doesn't end with the website. Its customer service agents are rigorously trained to answer customers' fashion and styling questions, as well as more prosaic inquiries about shipping and returns.
"Customers will call in and say, 'Look at these dresses. Which one do you think goes with those shoes?" Strauss says.
Questions like these have led to another decision ShoeDazzle is announcing today: It's expanding its inventory to lingerie and dresses. "Our customers want us to dress them from head to toe," Strauss says.
As with just about every successful consumer startup these days, ShoeDazzle has spawned a passel of imitators and competitors. Executives and investors say they're not worried. "It's relatively easy to get an e-commerce company to $15 or $20 million in revenue," Andreessen Horowitz partner John Farrell tells Fast Company. "But it's the ability to execute at a large scale that gets you to hundreds of millions of dollars."
Last year, Andreessen led a $40 million Series C round of investment in the company. It also helped lead the search for a replacement for Lee, who had declared his intention to step down from the CEO slot in order to start yet a third venture (The Honest Company, cofounded with actress Jessica Alba, which sells chemical-free baby products).
Strauss, the cofounder and former CEO of ProFlowers, was tapped for the top slot at ShoeDazzle because of his experience retaining high levels of customer satisfaction at a booming consumer Internet company. "He's very heads-down and focused on operational execution and delighting the customer at a large scale," Farrell says.
The decision to jettison the subscription model was one of Strauss's first major strategy decisions. The subscriptions were a clever way to get the company off the ground, but it turns out they don't match customers' real-world purchasing preferences. "Some people liked the model," Strauss says, "but a lot of customers told us they'd like to buy two or three times in one month and then maybe not for a few more months."
Opening up the purchasing model will allow the company to "capture as much of that demand as possible," Strauss says.
The practice of using celebrity stylists--of which Kardashian is just one (actress Denise Richards recently signed on to "create" a pair of high heels)--will persist. In an era where Hollywood stylists have become celebrities in their own right and the number of magazines and websites showcasing the latest trends has exploded, consumers are hungrier than ever before for a trusted, gilded source to guide them through the fashion wilderness.
But the key to busting out of the pack remains execution, Farrell and Strauss say--the ability to retain the "high touch" experience even as the company grows to tens of millions of customers. "Celebrities and subscription models are great ways to get a business going," Farrell says. "But what will differentiate ShoeDazzle in the next phase is building the company out to a gigantic scale."

Advertisers Adjust to Market Luxury in a Recession

When marketing a Lexus, high-end appliance, or luxe cosmetic, advertisers are promising bargains to the cash-strapped rich

By Burt Helm

Nowadays, even affluent Americans are thinking twice before hitting the mall. A recent Gallup survey showed that 49% of people making $90,000 or more a year rated economic conditions as "poor," a 23-point increase since early September.

That has companies scrambling to tweak their marketing messages. Forget the usual talk of indulgent luxury. Instead, companies from General Electric (GE) to Lexus (TM) are employing sober, left-brain pitches—special deals, useful features, long-term savings. "There are plenty of high-end brands that sell themselves on the 'I-buy-it-because-I-can' idea," says Hayes Roth of brand consultant Landor. "They'll have to temper that."

Imagine trying to sell half an ounce of anti-aging eye cream for $145 a pop. That's the challenge facing La Prairie, the luxury Swiss skin-care company. Paul Wilmot, who handles public relations for La Prairie and other tony brands, has been pitching the editors of fashion and beauty magazines in the hopes of working the luxe potion into the gift guides that appear in December issues. His spin: The cream contains ingredients usually available only in pricey prescription ointments. "No one wants to look like an idiot who just bought something because it's expensive," says Wilmot. "So La Prairie makes an intellectual case."

Last month, GE began selling its new Profile washer-and-dryer set, which costs a very plush $3,500. The ads feature the stylish machines in eye-catching cherry red, an appeal to what GE marketer Paul Klein calls the style-conscious "iPhone (AAPL) consumer." But the ads focus more on down-to-earth practicality—specifically, technology that doles out the optimal amount of soap and water per load. "We know electricity costs are going up," says Klein. "And we know water scarcity is a problem." GE is also encouraging retailers to explain how the machines will save customers money by being gentle on their clothes, extending the life of their garments.

"TIME TO BE MORE RATIONAL"

For years, Toyota Motor's (TM) luxury brand has run pre-Christmas "December to Remember" commercials featuring a loving spouse giving his or her significant other a new Lexus wrapped in a big red bow. The company assumes there are still enough people out there with sufficient loot to put such pricey baubles under the tree, so you will see those ads this year, too. But Lexus is also hedging its bets. In mid- September it began running ads with the tagline "Lowest Cost of Ownership." That's a reference to Lexus' decent fuel economy, durability, and resale value. "It's definitely a time to be more rational," says Dave Nordstrom, Lexus' North American marketing chief.

A couple of years ago, discount brands got into the luxury game, too. Even Hyundai Motor, Korean king of the econo box, aspired to move upscale. Now the automaker is trying to sell entry-level luxury in the worst car-selling environment in memory.

Hyundai's response: Depict more snooty rivals as over-priced. In its ads, Hyundai is taking pains to note that its new Genesis sedan ($33,000) has the same sound system as a Rolls-Royce Phantom ($300,000-plus). "If you'd rather have money than a hood ornament," goes the ad, the Genesis may "look even better than a Rolls-Royce."