One big indicator: The upscale retailer Bloomingdale’s, which long held off in entering this slice of the market, last year opened four outlet stores and now has plans for at least three more.
“The idea is to serve a customer that has a Bloomingdale’s sensibility but with a heightened value proposition,” Jim Sluzewski, a spokesman for the Macy’s Inc.-owned chain, told the Los Angeles Times, which earlier this week analyzed the outlet trend. “Customers don’t shop in neat categories—they go where the merchandise and value is right.”
Peter Drucker stressed that customers are generally mysterious creatures and that notions of “value,” the term used by Sluzewski, are highly susceptible to change. “There is the most difficult question: What does the customer consider value? What does he look for when he buys the product?” Drucker wrote in The Practice of Management.
A decade or two ago, many consumers viewed the quality-to-price ratio of the products offered by expensive retailers such as Bloomingdale’s as high enough to be a good value. Now, preferences have shifted, along with the value proposition.
Drucker noted that companies have to be alert to these changes or risk an outcome such as that of Coty, a leading French cosmetics producer, which was caught by surprise as the market segmented into high and low. “Coty could not make up it mind whether to try to become one of the mass marketers in cosmetics or one of the luxury producers,” Drucker noted in Innovation and Entrepreneurship. “It tried to stay in a market that no longer existed, and has been drifting ever since.”
In the end, said Drucker, a company must keep asking itself: “What changes in market structure are to be expected as the result of economic developments, changes in fashion or taste, or moves by competition?” And rather than analyze these things from behind one’s desk, the smart executive seeks out the answers from those actually making the purchases.
“What the customer considers value is so complicated that it can only be answered by the customer himself,” Drucker wrote. “Management should not even try to guess at it—it should always go to the customer in a systematic quest for the answer.”
Is Bloomingdale’s taking the right path to meet what the customer values?