Leatherette and leather in one store: for good or for loss?

Our new reader from Buzuluk opened his first shoe store six months ago and decided to check in his own business whether shoes from different price categories can be mixed in one store. Now he has questions, and our experts will find answers.

Nikolai, a reader of Shoes Report magazine, asks: "Six months ago, we opened our first shoe store, a 42-square-meter space, in a shopping center in Buzuluk, a town of about 100,000 people in the Orenburg region. It's a good, well-established location—it used to house another shoe store, the owners of which were retired businessmen. Centrobuv and Kari are located in roughly the same area, and O'Stin and Sportmaster are nearby. The shopping center where our store is located doesn't have any major chains, but it does have a well-known toy store. When we made our first purchase six months ago, we bought several lots of good, expensive leather shoes with a final price of 5,500 rubles on average, as well as a dozen boxes of imitation leather shoes, averaging 2700 rubles per pair. As a result, leather shoes aren't selling well, and by mid-January, they were at least 60% out of stock, while faux leather sold quite well, and the stock is now small. This is strange, because potential customers are quite wealthy. When they come into our store, they ask for leather shoes, but then they see faux leather shoes and either buy them or leave. Other stores in the mall also sell leather shoes, but they're cheaper—the salespeople mark them up less. We heard somewhere that it's absolutely forbidden to sell shoes made of natural and synthetic materials in the same store, but we didn't believe it at the time. Could you tell me, is our leather shoe outflow problem really related to "competition" from faux leather? How can we sell leather shoes and recoup our investment? And what should we do with our inventory going forward?

Answers Maria Gerasimenko, CEO of Clever Fashion marketing company:

The problem clearly does not lie in the competition of materials, but in the mixture of two price segments: medium low, which is represented by leatherette shoes, and medium (medium high). There is a very expensive and high-quality shoes made of artificial materials, which is sold in some stores with leather shoes, and none of these categories interferes with the sales of the other, since both of them are from the same price segment. Unfortunately, in your situation, serious loss of profit is inevitable, so focus on eliminating unsold goods. Otherwise, an overstock awaits you. Make an action with emphasis on the fact that it is leather shoes that are being sold, and underline on the price tags the fact of a price reduction. At the same time, remember that the psychological threshold of the discount is 50%, to which the stock can be submitted as a sale without scaring off the buyer. Further price reduction is already similar to liquidation, and should be formalized accordingly.

Recommendations for the future are as follows: to carefully examine which stores are located in the neighborhood, what products and price segment they work with, what people go there. Only after that form a new assortment. Obviously, if you open a mid-high-priced store next door to Kari and Centro, you won’t make anything. Do not mix shoes of different price segments in one store. Such a representation of shoes is a difficult trick that is not recommended to be performed without the help of professionals. If you imagine shoes made of different materials, do zoning of the store relative to the materials of the goods presented.

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Answers Julia Veshnyakova, General Director of the consulting company Academy of Retail Technologies:

It seems that before opening the store, you did not sufficiently study your target audience, and therefore tried to please both the status and poor client at the same time. Judging by the average prices for your shoes, the price step turned out to be too large - almost 50%, while the difference between the cost of shoes from different categories should not exceed 25%. The store, which previously occupied this place, did you a disservice: it is possible that people who cannot afford leather shoes went and continue to walk by inertia. Most likely, this is why leatherette shoes you sell better than leather.

To get rid of leftovers, first try selling on b2b channels. First, offer leather shoes to your competitors who work in the more expensive price segment. Secondly, contact your supplier: it is possible that other customers of the manufacturer will buy the goods from you. And only when these paths have already been tested, start a discount campaign. Divide all the remaining shoes into the 3 categories: illiquid stock - for example, incomplete size ranges, - low liquid stock - actual goods that will be sold during the season, but not as fast as we would like, and liquid stock, sales of which do not have a pronounced seasonality. The discount share should be extended to the first two categories, but not to the last, since the liquid stock can be sold in the spring with a small markdown. An order for the next season should be made taking into account the remaining liquid runoff.

For successful development in the future, it is necessary to study the contingent of visitors to the shopping center and understand what price segment you want to convert your store into: more expensive or cheaper. The practice of your sales has shown that most buyers prefer budget shoes made of leatherette. Maybe you should try buying cheap leather models. You can mix materials in an assortment, the main thing is to do it correctly, creating a competent assortment matrix.