Former Vans Global Brand President Doug Palladini didn’t mince words earlier this week in his critique of the aggressive markdowns running rampant in fashion and retail.
He recounted to his followers on LinkedIn this week his experience over the past weekend with a series of promotional emails from an apparel brand, offering escalating discounts one day after the next.
“New spring ’23 merchandise should be selling at full price,” Palladini wrote. “The post-holiday clearance sales should be well over by now, along with plenty of quiet space to allow consumers a breather before jumping back into the fray of a new season. But they aren’t. In fact, many of the brands that went on sale before Thanksgiving to get through their holiday inventories are still at it.”
While Palladini acknowledged markdowns can work when “managed judiciously,” he said the current landscape is “something else entirely.”
While the supply chain crisis brought on by the pandemic has been dubbed to be “over” with the decline in freight rates and ocean shipping times, some apparel companies will spend much of this year working through excess inventory. They built up stockpiles in response to the shortages during the height of Covid. Economic sentiment has since turned, driven by inflationary pressures and talk of a recession.
Even still, Palladini’s words offer sound warning in an operating environment where life cycles—and relevance—of brands can be taken away as quickly as a post going viral.
“The sales volume these short-term thinking brands are generating will not be magically anniversaried the following year by full-priced sales,” Palladini wrote. “In fact, this heavy discount, BOGO madness will be required again and again, most likely at steeper levels.”
Palladini ended his sobering note calling the tactics a reach for the “lowest common denominator” and “race to the bottom.”
Brands Based on Coupons
Although, there is an inventory headwind at play, promotional tactics to clear through the glut are reframing consumer expectations, as Palladini pointed out.
Bed Bath & Beyond’s filing for Chapter 11 bankruptcy on Sunday is a good example.
The retailer’s Chief Restructuring Officer and Chief Financial Officer Holly Etlin blamed the company’s decision to not partake in e-commerce early as one of the main factors leading up to its bankruptcy, according to court filings.
The retailer created “what has been heralded as one of the greatest retail coupons of all time,” Etlin said in her declaration with the court. She said the coupons that could always be found on the back of the Bed Bath & Beyond mailers, with no expiration, are one of the reasons for its success over the years.
Those coupons also came to define what consumers expected from Bed Bath & Beyond over the years: a discount. If one wasn’t to be had immediately, they could always wait for the next coupon.
Sales had been baked into the JCPenney brand for years, until former Apple senior vice president of retail Ron Johnson attempted to lead a turnaround by attracting a new consumer when he was appointed the retailer’s CEO in 2012.
The about-face on the discounting (in addition to concepts such as shop-in-shops) confused the existing consumer base. Johnson’s successor, Mike Ullman brought the sales back a year later when he took up the top spot at the department store.
Each company’s challenges are nuanced, but, to Palladini’s point, the discounting eventually becomes a part of the brand DNA and the business by training consumers to think, “only fools pay full price.”
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