Tuesday, February 15, 2011

Exclusive Lines at Retailers: It's the Experience, Stupid!

The New York Times has an article written by Stephanie Clifford today about how many department stores and other retailers are offering exclusive lines of products as a means of trying to differentiate from the competition. According to the article, "In an effort to stave off rounds of price-slashing with competitors over the same brands, stores are increasingly relying on merchandise that can be found nowhere else. Retailers can mark these exclusive lines down at their own pace, with a far more profitable outcome than with a national brand."

Interestingly, many of the examples in the article relate to exclusive product lines tied to a particular celebrity. The stars include Selena Gomez, Jennifer Lopez, Tony Hawk, and Sean Combs. What's the risk of this strategy? By promoting these celebrity product lines, the retailers tie their brand to these stars. What if these stars engage in some inappropriate or unlawful action? How might they damage the retailer's brand? Will the retailer be stuck with a line that suddenly becomes very unpopular?

The notion of exclusivity deserves attention. Retailers do need to differentiate. However, I think retailers need to think beyond celebrities, and they must find other ways to offer exclusive products that are appealing and that draw customers to their store. Beyond that, retailers need to think about the shopping experience. Customers don't simply choose retailers because of the products they sell. They choose an environment and an experience. In some ways, a truly differentiated experience can be much harder to imitate than product moves are. In the end, creating an inimitable experience will be one of the most substantial ways to create and defend competitive advantage.

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