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  Value Store Brands: High-end Taste for Low Spender   Value Store Brands: High-end Taste for Low Spender  Barry Silverstein  
         
 
Value Store Brands: High-end Taste for Low Spender Arguably, the king of cheap chic is US retailer Target. Faced with intense retail competition years ago, Target chose “to reposition itself as a mass merchandiser of affordable chic goods,” according to professors Patrick Barwise and Sean Meehan, co-authors of the book Simply Better (Harvard Business School Press). While Kmart was approaching bankruptcy and Wal-Mart was dominating the retail market with low prices, Target “successfully associated its name with a younger, hipper, edgier, and more fun image than its competitors. Target is often pronounced in faux French, ‘Tar-zhay,’ to connote its trendy sensibility.”

Target achieved differentiation, Barwise and Meehan say, through “upscale discounting, a concept associating style, quality of products, and price competitiveness. This ‘cheap chic’ strategy enabled Target to become a major brand… Target entered high-profile design partnerships, from apparel to kitchenware to food.”

 
Target’s strong sales results over the past several years prove that the strategy has paid off. In recent months, however, Target has experienced the universal slowdown of most retailers. In August 2008, the retail chain saw comparable store sales drop more than 2 percent, compared to August 2007.

Still, the chain is doing better than many of its competitors, buffered by well-regarded store brands, clever advertising, and novel merchandising.

In September 2008, Target tested “Target Bullseye Bodegas” in New York City. It opened four locations for four days only, featuring 22 designers in home, fashion, accessories, and beauty. The average price of items sold at the stores was US$ 25. According to Target, the “pop-up” stores were designed to capitalize on the weak economy: “…we want to remind budget-conscious shoppers that they can find great deals, and the quality they crave, all under one roof at Target.”

One reason Target’s brands have achieved cheap chic status is Target’s emphasis on design. Fashion designers such as Mossimo, Isaac Mizrahi, Philippe Starck, and Sigerson Morrison have developed exclusive lines for Target, as has designer/architect Michael Graves in kitchen and housewares. These collections have the cachet of name-brand designer merchandise, but at a price point far less than the typical designer-driven brands sold at more expensive retailers.

Other value stores use this strategy. Kmart, for example, sells Jaclyn Smith-branded fashion and Martha Stewart-branded housewares. Sears is currently featuring the exclusive LL Cool Jay Collection. Retailer Kohls has joined in, exclusively marketing Simply Vera Vera Wang, a premium fashion and lifestyle brand, and a Food Network-branded line of kitchen and home goods.

Price-cutting giant Wal-Mart has tried its hand at designer brands as well. In 2005, Wal-Mart created its own fashion brand, Metro 7, and in 2007 it created a women’s clothing line, z.b.d., to be sold exclusively online. Sixteen years ago, the UK’s ASDA, a Wal-Mart subsidiary, launched clothing brand GEORGE, named for George Davies. In 2006, Wal-Mart extended the GEORGE brand in the US with “GEORGE ME,” created by US clothing designer Mark Eisen. GEORGE is now being sold in six countries.

Despite these efforts, however, Wal-Mart has not seen significant financial gains from its designer clothing—nor has Wal-Mart been able to match Target’s trendiness. Most experts agree the Wal-Mart image is simply cheap, not chic. “Wal-Mart is not cool. It’s impossible for Wal-Mart to be cool because they would have to discredit their entire business to do that,” commented retail consultant Howard Davidowitz in a report by CNNMoney.com.

Target has exerted its cheap chic strategy in another area: upscale foods. Target markets a premium brand called Archer Farms, offering, Target says, “superior-quality, unique product offerings including a wide variety of gourmet groceries, appetizers and European-style baked goods.” Archer Farms uses upscale packaging, often depicting full-color product photography on elegant boxes, bottles and jars. As with Target’s other upscale brands, however, the prices are unusually affordable.

Value-priced upscale food is a growing market in its own right. Chains such as US-based Trader Joe's supermarkets , owned by the German family that started international supermarket chain ALDI, trade on the consumer’s desire for affordable gourmet products. Trader Joe’s unique differentiator is that it sources and packages as much as 80 percent of its products, so most of the items on its shelves are actually its own store brands. These products are largely specialty items priced considerably below gourmet food stores. As a result, the consumer can purchase exotic delicacies, often with an international flair, at everyday prices. With a fanatical fan base that will drive hours to reach the nearest store, Trader Joe’s is one of the more successful chains when it comes to cheap chic food.

 
There is already a fair amount of evidence that store brands, chic or not, are seeing a significant uptick in sales because of the economy. In September 2008, Kroger, one of the largest US supermarket chains, reported that its own store brands accounted for a record 26 percent of its fiscal second quarter sales, according to The Wall Street Journal. Quoted in The Journal, Kroger CEO David Dillon said: “In this economy, customers are much more willing to try a private-label item, and we're seeing signs that this is happening more and more as the year progresses.”

Whether it’s fashion, food, or any other product category, cheap chic is clearly a global trend. ALDI supermarkets, with 7,000 stores across three continents, won the 2007 Quality Food Award for eight of its gourmet store products, with ALDI’s Stone Baked Romagna Pizza getting the top award. European design house Moschino features a line of clothing, accessories, and perfumes under the brand name “Cheap and Chic.” India’s Tata Group has extended cheap chic to its line of Ginger hotels. Now at fourteen Indian locations, Ginger hotels are based on a concept known as SmartBasics—hotels that feature “simplicity, convenience, informality, style, warmth, modernity and affordability.”

Global economic conditions are likely to keep the interest in cheap chic brands high. While the average consumer likes trendy merchandise at bargain prices, the wealthy shopper may find cheap chic increasingly attractive as luxury goods become too pricey. Once the well-heeled consumer discovers the value of cheap chic, it puts a new demographic spin on the concept. In fact, it could mean cheap chic brands will reach a wider level of acceptance.

Retailers like Target, who already know how to create and market cheap chic brands, stand to benefit the most. But adopting a cheap chic strategy could help many other retailers insulate themselves from an economic downturn. That would be a welcome development for consumers who don’t want to sacrifice quality design for price.     

[29-Sep-2008]

 
  
  

Barry Silverstein has been a frequent brandchannel contributor since 2007. He has thirty years of advertising and marketing experience and is currently a freelance writer and marketing consultant. He founded and ran his own direct marketing agency and held executive positions with Epsilon, a leading database marketing firm and Arnold, a major ad agency. Silverstein is the author of three marketing books, including the McGraw-Hill book, The Breakaway Brand, which he co-authored with Arnold CEO Fran Kelly.

     
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Value Store Brands: High-end Taste for Low Spenders
 
 but, how can it truly be a quality design and quality product at a cheap price, unless it's through the exploitation of the developing world? 
- September 29, 2008
 
 "Target tested “Target Bullseye Bodegas” in New York City. It opened four locations for four days only, ..."

seems alot like commes de garcon,
guerilla tactics,uber coolness combined with much afforadable prices, Target have struck gold.

The challenge is to maintain the chic factor amongst mass acceptance in the market. 
Raziel, branding enthusiast/corporate sales executive - October 1, 2008
 
 There are few strategies to keep prices affordable and the TJ's people know it - cut out the middleman, accept normal profit margin instead of charging for "premium", etc.

I like the whole cheaper chic trend since the US has to catch up with Europe on fashion. 
Diana, Graphics Designer - October 6, 2008
 
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