The real price for a pair of shoes

Paco Underhill, an environmental psychologist, market researcher and author of books such as Why We Buy: The Science of Shopping, says the effect of recession for retailers and shoppers can be felt through such simple things as buying good quality shoes.

The recession has lowered costs for premium items as demand lessens, but does it mean these items are really worth less? Does quality cost less in a recession? And were we paying the right price then, or are we now?

Underhill made some interesting points about recession when he spoke at the National Association for Merchandising Services conference in the US last month.

Danish shoe manufacturer Ecco has a reputation for designing and producing a very comfortable shoe. So comfortable that the maker retailed them for – and the purchaser was willing to pay – the princely sum of $US179 for a pair two years ago.

When a year later, in the midst of the recession, the satisfied shopper finds a pair on sale for US$79, imagine his pleasant surprise at finding such a bargain. But this response quickly changes to disappointment and confusion when, a year later again, and deeper into a recession, the same shoes sell for US$23.

Make no mistake; the efficacy of the product hasn’t diminished with the price. Ecco shoes are still a fantastic product, but what’s the right price for a new pair really?

Let’s move from Underhill’s experience of shoe shopping to applying the same principles to a rather more expensive purchase.

One of my senior managers just bought a high performance Audi S3 demonstrator. Not a new car – as it’s bad manners to buy a new high performance car in a recession. The Audi’s list price was close to $100,000 but my colleague paid less than $70,000. Again, it’s no slower and no less sexy that it was before, but what’s the real price for a new car?

In every shopper’s mind, each time this happens we have an initial feeling of elation that we’ve found a bargain, followed by uncertainty about what the actual price of the item should be. We know what it cost – because we paid for it – but what is its real value? Are we still paying too much, at a time when we’re more nervous about our jobs? And next time we buy, how will we know if we’re paying the right price?

As we’ve entered the recession, many – no, most – of the price/quality equations we’ve naturally absorbed through our previous shopping experiences are being seriously challenged. That’s great news when we believe that we’ve found a bargain, but followed by confusion for future purchases.

One thing is assured – through the price confusion we face, it will be many years before shoppers pay that “full” price again.

Retailers and manufacturers now need to look for ways to lock in this new lower price in order to retain their customers and loyal consumers.

To keep prices down, retailers and manufacturers will need to find innovative ways to drive productivity through the supply chain, production environment, sales and marketing structure, and within general overheads.

Then to start raising prices back up again in the future, they’ll also need to create innovation in new products, or in the way new products are presented. That will be the key to success in the recovered economy.

This recession is certainly challenging businesses and retailers, just as it is helping shoppers!

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.

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