High-End Stores Maintain High Prices

With the holiday shopping season pretty much upon us at this point, shoppers everywhere will be searching for bargains. The economy, being in its rough shape, has prompted numerous merchants to slash prices on items in order to lure customers into their stores. Apparently, bargain hunting will not be that difficult this holiday season. However, it will all depend on what type of shopping you are doing.

According to the QMI Agency’s Stefania Moretti in an article posted in the Toronto Sun today, luxury brand names are not expected to drop their prices at all. High-end stores are looking to present the notion that their products are still worth top dollar even during a recession. This may not be such great news for holiday shoppers looking to spend money on the shiny stuff.

Companies such as Tiffany & Co., an upscale jewelry shop, have reported larger-than-expected profits in the third quarter of this year. As Moretti reveals, Tiffany’s stock increased by almost 6 per cent thanks to strong overseas sales and improving sales in the United States.

Said Tiffany CEO Michael Kowalski: “We were pleased to see that the rate of sales decline in the U.S. lessened as the year progressed…At the same time, many countries in Asia-Pacific and Europe achieved considerably better-than-expected sales.”

Moretti also reports that U.S. handbag giant Coach Inc. also achieved strong sales and now have increased their growth projections for the year.

So how is it that these companies are able to survive the recession without slashing their prices? Large department store chains and supermarkets including Loblaws, Sears and Wal-Mart have all had to lower their prices in a battle for customers.

“Luxury brands, however, have done quite the opposite,” writes Morreti. They have opted instead to lessen their inventory levels. Tiffany, for example, decreased inventory by 6 per cent from last year.

John Torella, a senior partner at J.C. Williams Group Limited retail consulting firm explains that the slashing of prices can often jeopardize a brand’s image as opposed to helping it. High-end retailers tend to lower operating costs and inventory instead of prices to present a consistent shopping experience. Maintaining price points helps to convey the idea that the brand is not struggling and that the product has not declined in worth.

Says Torella: “As you get deeper into the Christmas season…you run the risk they’re not going to have inventory…But there’s a fine line because you also give up, to a certain degree, some sales opportunities.”