Marie Antoinette On Retailing In A Recession

Let them eat cake. Scholars debate the origin of this phrase. Many believe it was Marie Antoinette's response to the news that her people were suffering famine due to a shortage of bread flour.

Historians also debate the translation and historical meaning of the word cake. At issue is whether cake meant the batter sludge that built up in the pans and ovens of bakeries (which would have been thrown out) or a fancy pastry (which peasants would not have means to afford). Was this a cold response of indifference to a people's suffering? Or was it a humanitarian plea for purveyors of baked goods to sell their finest pastries, normally afforded by only the wealthy, at the price of a common loaf? In either case, we can draw on the phrase for direction in our own turbulent time.

Don't Water Down Your Brand
Perhaps Antoinette, or whoever uttered these words in the aforementioned context, meant Let those who can afford pastries, eat pastries. Let those who cannot, eat 'oven sludge.' That's supply and demand in its simplest form. Did you notice that in 2008, as we approached the brink of recession and started to see many of our retail peers disappear, luxury retailers were not among those plunging over the edge into bankruptcy? The lesson here is blatant. Know your audience, and sell to it. If you sell to the affluent, don't immediately water down your brand by discounting for the masses because times are getting tough. Doing so might result in your inability to compete on price when midmarket consumers feel the pinch and move to discount, and it might do long-term damage to the highbrow brand image that's worked for you. A few luxury brands have plied these uncharted discount waters in recent months. Saks borrowed from the now lowly GM's handbook when it offered 0% financing during the holidays. In January, Coach announced a Wal-Mart-style 'rollback' when it slashed handbag prices by 10% to 15% across the board. This brought its average price point down by about 50 bucks in an effort to better align with consumer spending. I don't think moves like these will broaden these retailers' target demographics as intended. Worse, I wonder about the stigma associated with these decisions and the impact that stigma will have on these retailers' haughty clientele.

Let Them Eat Cake
Stores that serve middle-to-low income consumers have far less 'reputation repercussion' to fear, because product and promotion adjustments are significantly less sensitive an issue. For instance, I grew up in a suburb of Buffalo, NY, called Hamburg. Both of these towns take credit for their ingenuity with food. The chicken's wings, small bones with little meat, were tossed aside as scrap until Frank and Teressa of Anchor Bar fame put some hot sauce on them and invented Buffalo Wings. A few miles south in Hamburg, legend has it that a carnival vendor ground up scraps of beef, made patties out of them, threw them on a grill and called them hamburgers. The point is that if it's spiced up and packaged correctly, there's a market for oven sludge. But you won't find oven sludge, nor hamburgers and chicken wings for that matter, on the menu at Spago.

Read more about the price and promotion commotion at ismretail.com/jp/7345.

If your customer is affluent, I understand that you must carefully consider whether she is affluent enough to continue spending with you though times may get even tougher. But if you seek to appeal to the masses, are you prepared to compete fiercely on price? Can you continue to mark your prices down through what promises to be a 'worse before it gets better' scenario? And if you do, are you aware of the repercussions to your brand?