daco price war

The decline in consumers’ purchasing power of consumers and their increasing ability to compare prices, thanks to the e-commerce boom, have pushed distributors to be always more competitive on prices. The price of mass-market products has also dropped -1.45% over the past year, according to the IRI survey institute.

There is a shift in paradigms within the textile industry, where rules are no longer dictated by brands but by the consumer himself. In addition, following their desire to consume less to better manage their budget, consumers want more: more experience, more quality, more transparency, more interaction and more exchanges with brands” explains Marie Dupin, Director of the Fashion practice at NellyRodi.

The price war has thus reached a plateau. This is the end of the classical discounter model: offering the lowest prices is no longer enough, retailers must now be able to offer quality products and a different brand content. In this article, we will show you how some distributors can do their best by combining an attractive value proposition with unbeatable prices.

 

Lidl, the favorite retail channel of the French for 4 years

For many years, being a discounter often meant offering an austere store concept, disappointing customer experience and low-end offerings. This idea now belongs to the past, thanks to the new positioning of Lidl.

The traditional discounter has answered key wishes of consumers: offering the best prices on the market is certainly good, offering them on quality products is even better. With its new concept inaugurated in Montauban in 2015, Lidl relies on a pleasant customer experience (wide aisles, no false ceiling, refined linear shelves) but above all, on a selected and accessible assortment. By offering only 1,600 references, 90% of which are private-labelled, Lidl has been able to combine offering quality and affordable positioning.

daco Lidl - EN

 

An experience worthy of the big luxury houses, with price affordability on top

This trend isn’t only observed within the supermarket retail sector, often known as one of the most competitive retail markets. Cosmetics are also experiencing the same revolution. In a market long dominated by large luxury homes like Chanel and Dior, new brands are emerging, both on makeup (MAC, Benefit, Bobbi Brown) and on care (Aesop, Rituals).

All these new brands adopt the same strategy: strong brand content, a take on the codes of luxury and a price positioning often more competitive than bigger houses. Luxury standards are not only found in the store concepts but also in the product packaging. Mostly specialized on a single axis (make-up, care or perfume), these brands capitalize on their “expert” positioning, offering a unique customer experience on the market.

This is the case of MAC Cosmetics where “customers are advised only by make-up artists from the largest make-up schools” rather than vendors, as Agnès de Villiers, director of the brand for France, explains to Les Echos.

These emerging brands show double-digit growth rates. The big groups have understood it well since Estée Lauder finalized the acquisition of Too Faced for $ 1.45 billion last December – as for L’Oréal the latter had already acquired Urban Decay, Khiels and Atelier Cologne in the same year.

daco MAC - EN

 

Fast Fashion, targeting mass market brands more than ever

The RTW (ready-to-wear) market is next on the list. Actors like Zara or Primark are about to change the situation, pushing the fashion retail market to evolve. After having transformed the standards of creation of collection, they are now setting the new rules of the fashion market :”differentiating style and low price”.

Being competitive on basic products is still essential, but not enough anymore: fashion retailers must now be able to offer a differentiating style for entry-level prices. Zara has become a master in this matter by directly competing with mass-market distributors on “entry level” segments, for instance with ballerinas for 19.95€ or boots for 29.99€.

Zara’s success is based on three key pillars: style, renewal and low prices. Zara offers an exclusive offer to their customers, inspired by the Fashion Week fashion shows, renewed every week in stores, with a price positioning that is as competitive as some discounters“, according to Marie Dupin.

daco Zara - EN

As you can see, the price war is gradually turning into a war of style and content. To deal with this fundamental trend, distributors will have to increase their efforts, differentiating themselves more and more from their competitors, not only on price but also on offer and customer experience.

(Article published on Jan. 30th, 2017 on LSA Conso)