Last week, whilst on a trip to London, I nipped into the Reiss sample sale, it was advertised aggressively and ran for several days. As a consumer I left very happy, after picking up two t-shirts, a jumper and a shirt and all for £75 - compared to their starting value of £230.
But it got me thinking - what has led Reiss to hold an extraordinary six day, cut price sale at a central London location? Can all the items really be samples or are they preferring to slash prices and shift overstock away from their traditional stores and customer base?
Founded 46 years ago by David Reiss, Reiss has carved out a strong aesthetic and USP - offering luxury high street clothing with a focus on classy fashionable tailoring - it’s a favourite go to destination for wedding and black tie outfits as well as workwear. I must admit a significant percentage of my wardrobe comes from them. The price point has always been at the high end of high street though - comparable with brands such as Ted Baker and Whistles.
The latest financials published last week highlight that while sales have been increasing profits have dropped. Sales increased 4.6% to £172.2m for the year to Feb 2018 whereas EBITDA fell 26% to £14.2m with Chief Executive Christos Angelides attributing the drop in profits to product availability issues, the weakness of sterling and investment in the website.
Ok, so the issues facing sterling are outwith individual retailers control and investment in the website is a one-off infrastructure expense which will hopefully pay dividends in the near future…….but product issues - these sit at the very heart of retail fundamentals and whilst I’m very happy with my bargains I’d hate to see Reiss become the next casualty of the profitability epidemic currently killing retailers. Therefore I thought it time to explore what the data says, using the Mallzee Insights data bank which has of millions of customer opinions on Reiss products.
Firstly, this graph illustrates how Reiss products have performed with consumers since 2016 compared with the average performance of retailers in the UK market, using the Mallzee Performance Score (MPS) which is the percentage of total positive interactions on a product, compared with the average performance of retailers in the UK market.
As we can see there has been quite the turnaround, with Reiss products performing poorly with consumers throughout 2016 and early 2017 and then enjoying a dramatic improvement in the final quarter of 2017 - no doubt bolstered by the seasonality of their range. The popularity of their 2017 partywear enabled Reiss to outperform the market in the all important pre Christmas period. Whilst it can be seen that they are experiencing a slight dip at present, Reiss products have managed to maintain their above average popularity throughout 2018.
So far so good - it seems that the appointment in March 2017, of CEO Christos Angelides, renowned in the industry as a fashion product expert has paid off and his focus on product has ensured Reiss outperforms the market in terms of consumer popularity.
This improving product popularity supports the increasing sales reported in the latest financial report but desirable products aren’t the whole story. Retailers have to offer the right product, at the right time, at the right price to the right consumer in order to maximise profits and while Reiss sales are up they are also reporting falling profits and holding extraordinary discount sales - why?
Looking deeper at the Mallzee Insights data we can see that there has been a disconnect between the product popularity and the pricing architecture for Reiss. As highlighted in the graph above Reiss products have surged in popularity since the end of 2017 and if we look at the data shown in the graphs below this corresponds with Reiss adopting a much more aggressive discounting strategy compared to the rest of the industry.
The graphs above outline the average markdown levels and the percentage of stock on discount at Reiss over the last two years, compared to the industry averages.
Is the surge in popularity of Reiss products linked to the fact that a much higher proportion of them are discounted, over 90% of Reiss products were marked down at the end of 2017?
Well, definitely price is a determining factor, when making a judgement on any product it is human nature to take into account the value of the item and its perceived worth to a consumer. The question then is whether Reiss products are priced correctly in the first place and whether they could have improved product margins (and thus profits) by discounting less deeply and across less of their product range - instead of starting their pricing at a level that attracted consumers from the off?
From the data, we can see that in the last year not only has Reiss offered more of its product range at a discounted price compared to the marketplace but they have also offered larger discounts. This broad brush discounting strategy works to drive sales in the short term but longer term it impacts consumers perceived value of a brand.
Reiss have products that outperform the market in terms of consumer popularity but in order to improve their profitability in line with this and their sales performance, they should look to capitalise on the profitability of every item in the range - discounting only when reaching the end of the popularity lifecycle.
And if not - then there are bargains to be had for all of us. So long as we’re willing to wait and take advantage of their deep and wide discounting strategy.
Mallzee Insights helps retailers test the popularity of new product ranges prior to bringing them to market informing decisions such as; which stock to go deep on, which to avoid, what price to set and then once products are live - tracking the lifecycle of each product to optimise its profitability.