Retail

The  modern retail  fashion and  beauty  industry dates  back  to the  19th  century. Begun  from  secondhand clothing stalls, the  ready-made retail market grew from the  slums  into  the  highest echelons of society.  Currently, both beauty  products and clothing are sold in a wide variety of establishments, from grocery and convenience stores  to high-end department stores  and boutiques.

Segmented Market

The  retail store  is the last stop  in a system  that  produces goods  and sells them  to consumers. At the  manufacturing level, the  raw materials are gathered and  the goods  produced. Whether it is clothing or cosmetics, the items must be properly manufactured at the lowest cost possible for the intended level of final sale. Goods that  will be sold at lower-end stores  such  as Kmart,  Walmart, dollar  stores, drugstores, grocery  stores, and the like must be produced with the least expensive  raw materials possible and  a minimal amount of labor  to ensure that  the  price  point will fall within  the accepted range  for those  budget stores. Items  can also be produced at a moderate level for stores  that  are slightly more  upscale, such  as Target, Sears, and many mall stores. Moderately priced  items can either  use slightly more expensive  raw  materials or  take  more  time  and  effort  to  produce. The  highest level of mass  market production is better  and  includes most  anchor or department  stores  such  as Macy’s, Nordstrom, Dillard’s, and Saks. These manufacturers can produce goods  that  are made  from moderate to higher-priced materials and take more  time and effort. Better items are considered to be of the highest quality available  to the  average  consumer. Ready-to-wear, boutique, and  designer items are the  most  expensive  goods  available,  but  the  market for items  of this  quality and price is small.

Production

After the  item  is manufactured, the  cost  of goods  is assessed. The  manufacturer will take  the  cost  of all raw materials and  labor,  add  on  any extra  costs  such  as shipping and  import duty,  and  then add  40–60  percent to cover  overhead costs such  as building maintenance, housekeeping, electricity, phone and Internet service, and so on. This  is the price that  the wholesaler will pay for the item.

At the  wholesale level, the  products are purchased, warehoused, and  shipped to the appropriate location in the quantity that a retail outlet requires. The  wholesaler is the middleman, often  offering  a variety of goods  in general  such  as clothing, cosmetics, accessories, and  furniture, or in a particular area, such  as t-shirts, perfumes, and  costume jewelry, to name  a few examples. The  retailer  is able to purchase required merchandise directly from the wholesaler to be sold to the general public. The  wholesaler will add  40–60  percent to cover  overhead expenses, and this will be the price the retailer  pays.

When the retailer  purchases items  at a wholesale price, the retailer  must mark up  the  price  further before  it is sold  to the  consumer. The  retail  markup is generally higher than the  markups at the  manufacturing and  wholesale level. The retailer  usually  has  a higher rent  to pay and  more  hourly employees. Additional costs  are  incurred by advertising and  marketing, which  are  not  necessary for manufacturers and  wholesalers, in addition to standard costs  such  as electricity, phone and Internet service, and maintenance and housekeeping. In many higher end shopping centers, the mall itself requires a percentage of sales over and above what  the  retailer  pays  to  the  mall  in rent  each  month. These extra  expenses at the  retail level mean  markups of 100 percent and  more.  An item  that  costs  $5 in materials can end  up with a retail price of $22.50 to $45, depending on the price point (budget, moderate, better, or designer).

Youth  Markets

In  general, items  aimed  at  younger markets, especially  tweens  and  juniors,  fall into the budget or moderate category. These items are priced  to meet the needs  of customers with a limited  income. These items  can also be made  of lesser  quality materials, since  they  are fad oriented and  less likely to be worn  for longer  than a few months. Adult  customers have  a larger  disposable income and  generally have  a taste  for more  classic  looks  meant to  last  several  months or  even  years. Adult  customers are  most  likely to  shop  in  the  moderate to  better  categories. Stores  such  as Forever  21 and Charlotte Russe cater to a young, image-conscious female  customer who  is looking to  purchase items  at a low price  to  wear  for a short amount of time. The  garments purchased from  these  types  of stores  have an expectation of trendiness but  not  of lasting  quality.  Contrast this  with  stores like Talbot’s and Brooks  Brothers, which  focus  on the adult  woman shopping for career  wear meant to be investment pieces,  worn  for years in some  cases, which must be able to withstand multiple uses and cleanings. The  styling, construction, and  price  point of these  two types of stores  are markedly different from  one  another, but  each is a necessity to its chosen target  market.

Men’s Market

Private-label apparel  or  direct-to-market manufacturing was  used  primarily  in men’s  wear. This  allowed  a retail store  to own and  control the means of production  and  not  only  create  items  unique to its own  brand, but  increase the  profit margin considerably by  removing the  steps  between manufacturing and  retail sale. The  men’s  market is a niche  market, with individual labels and  stores  catering to a specific target  lifestyle group. This  type of private-label marketing was a necessity, as men  have been  known for their  brand loyalty and  specific  expectations  from  the  brands they  choose. Building  on  the  success in  the  men’s  wear market, private-label retailers  have become the single largest segment of the retail experience, with  stores  like Old  Navy, The  Gap,  Anne  Taylor,  Lane  Bryant,  and most  mall  storefront retailers  that  sell nothing but  their  own  label.  While  this may not  be surprising to 21st-century shoppers, this marks  a change in the retail atmosphere. Most  department stores  will still  carry  multiple brands and  lines, including several in-house labels. This  allows stores  to spread their  profit margin across  several brands.

Sales

Private  labeling  also  creates  an  opportunity for attention-generating sales. With no middleman to pay out  to, a store  can offer deep  discounts when  merchandise goes  on  sale  and  still  make  back  the  initial  investment in  the  item.  Sales  like this have a multitude of positive  effects for the retailer. First, they foster  goodwill among consumers, who  are always pleased  to feel like they  have  gotten a good deal. Second, well-publicized sales of large percentage discounts are a major  draw, bringing more  customers in the door. These sales can help a retailer  divest themselves of extra or unwanted merchandise as well as bring  in a larger than normal crowd  into  the store.  The  sale merchandise is almost  always placed  at the rear of the store,  creating an opportunity for the customer to pass by the new and  regularly priced  merchandise. Sale merchandise can also be placed  directly  beside  the cash  registers for impulse buys.  Customers who  find an item  they were ready  to purchase for regular price on sale are often  willing to take the amount of money they  saved  and  purchase another item. With  markups on  private-label goods  as high  as 500–800 percent over the  cost  of manufacture, this  allows the  retailer  to continue to secure the required profit  margin while still offering  low prices  to its customers.

Various Industries

The  purpose of the  fashion industry is to create  and  sell the  clothes that  a particular  market group desires  in a style they  want  to wear and  at a price  they  are willing to pay. The  adult  woman customer, or missy  customer, accounts for the vast majority of all clothing, shoes, and  accessories sales worldwide, which  totals in the hundreds of billions  of dollars  each year.

The  cosmetics segment of the retail world is not much different. Beauty products  like makeup and  perfumes are a multibillion dollar  business, even  before including profits  for hygiene-based items  such  as lotions, cleansers, and  other necessities. The  segment of the  makeup industry devoted strictly  to  boutique and  department store  sales  alone  makes  up  a  substantial percentage of  that amount. Beauty’s  rise  to  prestige began  after  World  War  I. It did  not  become socially  acceptable for  women to  wear  makeup until  the  1920s,  but  between Hollywood and  relaxing  social  mores, cosmetics became a mainstay for American women.

With  such  a variety  of available  cosmetics choices, makeup companies have resorted to two marketing techniques. The  first of these  is the  establishment of seasonal colors.  These colors  were  not  only  seasonal, with  different shades for spring, summer, fall, or winter, but  they changed annually. Each  cosmetics company  also  had  to  set  their  own  shades apart  from  their  competitors and  did  so with  creative  and  clever names such  as Indian Love Call, Cherries in the  Snow, Jezebel, Fearless, Where’s the Fire?  and  the like. Some  nail polish  companies like OPI  take  this  to an even  more  unique level with  such  titles  as Aphrodite’s Pink Nightie, I’m Not  Really a Waitress, You’re Such  a Kabuki  Queen, My Chihuahua Bites! and Hoodoo Voodoo?! This  marketing technique gives OPI a retail edge by giving them  a singular presence among more  mundane names like Curtain Call Red and Shy Violet.

Gaining Customer Attention

Another great marketing technique is exclusivity.  Even Walmart carries  exclusive colors,  scents, and gift sets not available in other stores. Holiday  time is especially important for this  technique, with  stores  vying for customer dollars.  Christmas and New Year’s celebrations also put an emphasis on makeup with sparkle, giving an extra incentive for women to shop  for something special.

Once in the retail environment, regardless of the type of store,  the customer is subjected to the  art of cosmetic advertising. The  images  and  sales personnel are geared  toward not  just  selling an item  but  selling a story  or an image  that  will in some  way improve the  life of the  customer. Many  department store  cosmetics counters use  video monitors, music, and  hands-on displays  to entice  women to their  specific brand. But regardless of gimmick, once  a woman settles  on a brand, more  often  than not  she is loath  to abandon it. The  idea then becomes to tempt an established customer to buy something new, something that  before  that  moment, she did not  know  she could  not  live without.

In both market segments, the retail world  exists to present a perfected version of the  world,  a story  into  which  the  customers can insert  themselves. Successful brands connect to their  customers on  an  emotional level, creating more  than a great  item  but  an  entire  experience that  surrounds that  item.  Truly  exceptional retail brands are those  that  positively  impact  the consumer’s life beyond the moment  of the sale, whether through exceptional price, quality,  or customer service.

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