Hhgregg has been successful in retailing appliances and electronics by combining
ID: 1206351 • Letter: H
Question
Hhgregg has been successful in retailing appliances and electronics by combining high prices with excellent customer service. In late 2008, Saks Fifth Avenue tried a new strategy in retailing luxury clothing. Saks decided to slash prices on designer clothing by 70 percent just before the beginning of the holiday sales season. According to an article in the Wall Street Journal, “Sakes’s risky price-cut strategy was to be one of the first to discount deeply, rather than one of the last.” According to the article: Saks’s maneuver marked an open abandonment of the longstanding unwritten pact between retailers and designers…those old rules boiled down to this: leave the goods at full price at least two months, and don’t do markdowns until the very end of the season. Is Saks’s strategy of becoming the low-priced luxury clothing retailer likely to succeed? Contrast Saks’s strategy with the strategy of Hhgregg in terms of how likely the two strategies are to be successful over the long run. (Based on Vanessa O’Connell and Rachel Dodes, “Saks upends luxury market with strategy to slash prices,” Wall Street Journal, Fed 9, 2009.)
Explanation / Answer
Textile industry is competitive in nature. If Saks used price cutting strategy to get more demand then it will be a useless attempt, because other retailers of textile industry also would lower price of cloth. Instead of lowering price, saks should develop customer relationship by improving customer service. However comparing to hhgregg, Saks’s strategy in long run is less profitable and successful. Because in electronic industry customer moves on the design, features and quality which is not in clothing industry.