Position correctly

E-mails from our growing readership continue to pour in. Here is one that seeks advice on what to do, given today’s market realities. This person intends to formally enter the game by setting up his first retail store this year.

Greeting. I read your weekly columns with much anticipation. Please advice me on how to go about my planned business venture.

I would like to open my high-end clothing boutique(s) catering to the more discerning crowd. But everyday, I discover and realize more and more "ugly" truths about the present economic crunch and the current marketing trends that’s very, very obvious in the malls.

Cheap selling price is the main staying point of fashion boutiques. The majority of the market doesn’t care about quality, design or substance anymore. Most boutiques nowadays sell stuff under P1,000 and even under P200!

The bad joke is that it seems that the peso has indeed recouped its value. Before the market flooding of these cheap stuff from China, the "ukay-ukays" from overseas Filipino workers and the export overruns found in factory outlets/surplus shops, my P200 couldn’t buy me a decent pair of jeans or even a locally-brand T-shirt!

I would have had my own line of t-shirts as early as 1998 but the total overhead cost before mark-up was already hitting P255 and I was left wondering how much more my selling price ought to be. Today, for P199, one can already get either a pair of jeans or two t-shirts and the latter can be bought for P99 each.

Please help me as I am still bent on opening that first store of mine this year.

Here’s my reply.

Your observation is correct. The market is flooded with cheap stuff. Some of them are imitations or fakes. But this is the point that I have always stressed to entrepreneurs. If there is no differentiation in the quality and delivery, price will be the only basis of competitiveness.

This is the game you have observed. This is not your game nor the game you want to play. Understand your desired customers better. Understand them intimately. You want to serve the more discerning crowd.

Let me provide you inputs for the game you want to play. The high-end clothing boutique store you are thinking about should be different from what you see in the market place. Do not be discouraged by the way other people play the game. Analyze your market segment well.

In the retail game, you can segment the market into four quadrants. The first axis refers to price sensitivity. The second axis refers to the item being purchased. Is it being bought for use or is it being bought as a gift for someone?

If you look at the market in this manner, your high-end boutique should be positioned for the less price-sensitive buyer who will use it themselves and/or give it as a gift. What you see and do not like to compete against are those who are serving the price-sensitive market.

Understand the market you want to service. Ask the fundamental question: What is the differentiation that will make your clothes command a higher value to the customer? Is this differentiation the same if the clothes were purchased for use? Or as a gift?

There are many anecdotes I can share on this issue. On the one hand, there are many people who will never buy an item for themselves because it is expensive but will buy the same item for someone as a gift. On the other hand, there are people who will buy things for themselves and never look at the price.

A close friend of mine bought the most expensive pen money could buy. He gave it to a doctor who did not charge professional fees. My friend will never buy an expensive pen for his daily use. But the doctor who did not charge him professional fees had a fancy for expensive pens. You can imagine how embarrassing it would have been if he had given his doctor one of those ordinary writing instruments.

Moreover, I am almost sure that, even if he could afford to do so, the doctor would not buy the same pen for himself. Rather, he would be more appreciative if the same pen were received as a gift. What is clear here is that there is that segment of the market that is price insensitive because of the buyer’s keen desire to differentiate a gift that is intended to please its recipient.

And what differentiates a gift? It is when it is not ordinarily available or that is too expensive to be bought by its end-user. You can position your high-end clothing boutique as the place to buy gifts that their recipients would appreciate because they are not ordinarily available. Your clothes are the items that your gift recipients would have been looking for but could not find or never considered buying due to its price.

There are also people who will buy items because they want to be different. The worst thing these people want to be in is in a room with another person wearing the same outfit. They want to be wearing outfits "galing sa Paris at walang kaparis." These are people who say: "Ano ako? Poor? Of course, I can afford that outfit!" These people go for uniqueness that they appreciate. They want to look differentiated. You can position your high-end clothing boutique as the place to buy the latest and the common.

Once you decide on the position, everything else must follow. For example, the location of your store must be consistent with the position. The products and design you carry must meet the needs and desires of the target market. The type of sales people in the store should reflect the product being sold. The display must make the target customer desire to come in and look for what else is available.

Avoid things that would inconsistent with the positioning.

I’m sure that the same people who buy clothes at bargain prices also buy expensive gifts and expensive clothes for special occasions.

Keep this analogy in mind. You are not selling school uniforms, you are selling clothes that will given as gifts to the teacher or principal. You may also be selling clothes that will be worn to the school prom. Make sure to keep this frame of mind.

(Alejandrino Ferreria is the associate dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph)