Do retailers only care about margins?

Nobody wants to feel like they’re paying over the odds for things, not least a retailer who’s looking to turn a profit on the product they’re buying. As the seller, of course you want to build relationships with retailers and make a bit of money yourself so, does that mean you should offer your product at the lowest possible cost price to make sure that you get the sale?
 
Well, it depends how you want your brand and product to be positioned: do you want to be the Lamborghini or the Lada of your market or, somewhere in the middle? If you’re happy to be the Lada (now largely extinct in the UK, as a side note) you’ll probably concentrate on making sure that your parts, production and packaging along with other business costs are kept to a minimum, to keep your landed costs as low as you feasibly can.

If you don’t want to be the Lada but you’re not quite ready to be the Lambo just yet, you might prefer to position yourself as, what Forbes calls, ‘premium’[1]. Just to be clear, being premium is how Starbucks can charge £4 for a coffee and Apple can command the best part of £800 for a phone and nobody seems to bat an eye.
 
Of course, being ‘premium’ comes with a raft of things you need to consider. Research by PwC[2]found that price and quality are key drivers in customers’ decision-making processes, and warns that ‘experience is everything’ so, giving serious consideration to investment in product research, development and testing, company ethos and values, branding and marketing as well as top-notch customer experience both pre- and post-purchase, will be vital in addressing these important elements of customers’ decision-making if you’re upping your price.

Customer experience is an absolutely key investment for your brand. In the same study, PwC found that 73% of all people point to customer experience as an important factor in their purchasing decisions and would pay more for good customer experience which encompasses having well-operating tech. Investing in a well-designed website and a user-friendly mobile app will push your costs up but customers value these aspects of their experience with a brand and are willing to pay a price premium for this superior customer experience.

When it comes to your branding, think about why you’re doing what you’re doing. Think about your company’s mission and embed it so that it’s pervasive in everything you do. Think about what meaning your product brings to someone’s life and then shout about it.

In terms of companies doing this well, trainer-brand Veja makes no secret of the fact that in order to produce its ethically-sourced, vegan or sustainable leather trainers, there are significant costs involved. Ethical production (probably combined with the effect of Meghan Markle sporting a pair on an outing with Prince Harry) means that a pair of women’s Veja trainers retails from around £115 for a vegan ‘leather’ pair - higher than competition from Adidas or Nike. The slightly elevated price tag didn’t stop the brand’s V-10 trainer taking third place in the ‘Hottest women’s products on the web’ ranking on Lyst in the final quarter of 2018[3], holding their own amongst designer brands including Gucci, Fendi and Balenciaga[4].

It seems that by:

1.   investing in ensuring a good customer experience;
2.   being clear about your company’s mission and brand identity;
3.   supplying information about the journey to arrive at your end product - like Veja have done, or other companies before them such as Toms, Freedom Food or Audi;
4.   sharing how your product impacts customers and the world around them; and
5.   fulfilling needs and adding value to the customer

We think you’re able to justify that slightly higher price tag. Phew!

Sources
[1]https://www.forbes.com/sites/williamvanderbloemen/2016/12/22/3-ways-to-win-by-competing-on-quality-not-price/
[2]https://www.pwc.com/future-of-cx
[3]https://www.lyst.co.uk/the-lyst-index/2018/q4/
[4]https://footwearnews.com/2019/business/retail/veja-sneakers-popularity-sustainability-meghan-markle-1202739428/