August 29, 2008
99 Cents Only Faces Name Crisis
What’s in a name? Quite a bit it seems when the name of retail chain actually describes its business practices. Of course, what happens when the business changes and the name no longer makes sense?
Case in point is the 99 Cents Only chain. Looking to set itself apart from dollar store competitors, the company went one penny better and it has been offering products at that top price point for 26 years, according to a Los Angeles Times report. Now, however, inflation has made sticking to 99 cents nearly impossible. The choice is load up on products that consumers won’t buy even for 99 cents or raise prices. And, if the chain raises prices, what about the store banner?
“There’s no question we’re going to need to do something,” 99 Cents Only CEO Eric Schiffer told analysts recently. “When you are part of a family that comes up with a concept, sometimes you’re the last to admit that it needs to be changed.”
Not surprisingly, many of 99 Cents Only’s customers are not enthusiastic about a change in the company’s pricing practices.
“That’s just crazy. Maybe they should start calling it the 99 Cents and Up store,” Kleshia Pittmon told the LA Times. “I would not shop here anymore.”
While 99 Cents Only has stuck to its pricing guns, competitors in the dollar store channel have broken the buck barrier. Some such as Family Dollar never intended to limit itself to selling items priced at $1 or less, according to Josh Braverman, a company spokesperson.
“We try to keep our prices as low as possible,” he said. But “it’s hard to imagine getting anything for a dollar.”
Keeping to a 99 cents maximum has hurt the 99 Cents Only as it has posted losses in the last two quarters. Analysts are hopeful that the chain can right itself once it breaks out of its self-made pricing box.
When the price of eggs began to rise, 99 Cents cut back from offering cartons with a dozen eggs to ones with six. It reduced the sizes of milk and other products it sells to stick to 99 cents.
“What’s the point — why not sell a standard size and price it accordingly?,” asked Joan Storms, an analyst with Wedbush Morgan Securities.
“Some relief on the 99-cent price point will provide more stability for their business,” Ms. Storms added.
Moving to a dollar or more is a big deal for the chain with a website that boasts, “Still nothing over 99 cents, ever!”
“The number 99 is a magic number — deviating from that is something we absolutely are not taking lightly,” Jeff Gold, president and COO of 99 Cents Only, told the Times. “I find significant discomfort emotionally about considering making the change.”
Still, price changes may be necessary.
“I think people realize that times are changing,” Mr. Gold said. “As long as we continue to provide great value in a good shopping environment, I think that we’ll be doing right by our customers.”
99 Cents Only has not decided if a banner change will accompany any decision to raise the price of goods sold in its stores.
Discussion Questions: How should 99 Cents Only handle raising prices if that is what is needed? Will it need to change its name?
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Seriously, it’s not like the 99 Cents Only store will cease offering value. Any shopper that believes otherwise deserves to pay more. Many excellent approaches to the chain’s naming conundrum have been offered during this discussion, but the basic underlying principle is that consumers get good deals in their stores regardless of the name. Here in the West, primarily in California, our 98 Cents Stores changed their name to 98 Cents Plus. No biggie. Business as usual.
How about Euro Only? The Euro will be worth 10 of our dollars soon, anyway.
Reality bites. Selling products that customers want as long as they are still good value for money is the essence of survival. Raising prices along with customer service is the way to go. It is a tough time and customers have to and will realise that prices have to go up and cannot keep going down year after year indefinitely. Everyone is in the same boat and as long as the sourcing is the best it can be, then the competitive edge will be there. Some customers may say they are going to go somewhere else but, where will they go?
Ah, the dollar store conundrum. That is a tough price point to match these days. Back in the 90s, I was involved with a little operation called 99 Cent World located in Poway, CA which is considered middle to upper middle class. We were able to mix in 1.50 to 2 dollar items on the shelves. These items were larger and offered exceptional value over the local supermarkets offering.
That said, sounds like there may be no choice. Here in Canada, the focus has gone away from 99 or a dollar and we are seeing chain names like Dollarama, Dollar Plus and Dollar ‘n Up. If 99 Cents can offer a majority of products at that price point, I don’t see why they can’t raise the price on others. Margins are slim in this arena anyways so an upward move may be necessary for survival. Customers have to be eased into it though. Any price increase must be communicated to the customer clearly.
It’s not like they are protecting a powerful brand name here. The consumer doesn’t care if they change to “99 Cents” (probably a good idea, to stop people from mocking the “Only”). She just wants stuff cheap. Through testing, 99 Cents can figure out which items are better off in standard size at $1.49 and which sell better in reduced sizes at 99 cents. I doubt there is one answer across all categories.
The 99 Cents store shopper will continue to shop there even if they raise the price on some of the items. It is still a better buy than they are going to find anywhere else. My vote is, stay with the name and raise the price of the items you need to.
Just make sure to continue to provide great value.
This is a well established chain with a very loyal following. The positioning of their name is not the reason why they were successful in the past, but it was the value of the products that they offered. They can continue to offer their customers the same value, by altering their name slightly (especially the nothing over $.99 portion) to read “$.99 Stores.” Their customers shop at these stores because of their offerings, not because of their name.
What’s in a name now that the economy has made “Only” lonely?
They could keep “99 Cents” and drop “only” and do their thing. Or they might name themselves “99 to 199 cents only.” Or maybe they could consider “Five and Dime and 99.”
Growing up in the 60s and 70s, my small town had a “Five and Dime” store. Well that was a name left over from the Depression. There wasn’t much in there for a nickel or dime but the store did a brisk business. FW Woolworth dropped the five and dime and continued to operate for decades.
It’s not the name of the store, it’s how well the store is run. If the store changes its name, it will just lose the same amount of money, but with a different name.
I see a lot of correlations between today and the Depression. Going to smaller sizes is one of them. The company does need to make some web, name, advertising, and pricing adjustments. When I read comments like “Jeff Gold, president and COO of 99 Cents Only, told the Times. “I find significant discomfort emotionally about considering making the change,” this concerns me. Mr. Gold needs to grow up and get over emotional discomfort and start making some decisions. A CEO who can’t make a decision because of emotional discomfort is a company on the fast track to bankruptcy.
I think the “dollar” or “$.99” store is a concept, not necessarily a price point. Years ago, there were “5 and dime” stores, but they certainly could not always sell at those prices.
Ultimately, the consumer is looking for value and they will accept that the price point concept is not taken literally if they still feel they get a good value.
I saw another article posted just today on the Consumerist blog about a store that used to be “Everything 99c or Less” and now is called “99c Dreams,” with very small typeface underneath that says “Everything $1 and Up.” So that at least is how one store dealt with this issue.
It seems some of these topics we have seen lately shout out how long I have been around. In the town I grew up in there were two “Five and Tens.” A few years later when I was just starting my career, the issue of having the price in the name was “hot” for the many chains of “Five and Tens,” because few products were being sold for anything near 5¢ or 10¢ any more.
The strategy that the retailers took then was to drop the “Five and Ten” from their banner and to shorten the banner from “Woolworth’s Five and Ten” to “Woolworth’s.” In the trade they then called themselves variety stores, but did not change their business practices or strategies. All the names are very familiar to me: Ben Franklin, Grant’s, Kresge’s, Kress, Newberry’s, Neisner’s, and of course Woolworth. We do know where they went. But, I also remember that a guy named Sam Walton started in business with a Ben Franklin store. We know where he went, also.
The answer is that there are more dynamics going on than just the moniker. The moniker is clearly a problem, but the offering/value proposition may also be.
They don’t have to completely change their name but they could add value. Like 99 cents and more! Value is the key. They need to add value and bring value into the shopping experience.
Create a new section in the stores that’s focuses on “value” (items above 99 cents that are still a fantastic value) and fill bins with those small-and-still-shrinking sizes of 99 cent items. Place the bins around the periphery. Providing visual context will smooth the transition.
I think that would be an exciting marketing challenge. Using the 99 Cents Only name as a tagline, the agency who takes this challenge could have some fun with it…maybe even poking fun at themselves for expecting with variations in the economy that they could continue to sell items for only 99 cents.
Try the Jack in the Box technique of a spokesman who has fun with the concept of price, and value.
If the stores were honest about costs, maybe split the size of items to still come in at prices way under the competition, or bundle other products to make a case for spending more than 99 cents, they could have a successful campaign, rather than a potential marketing nightmare.
It ain’t the name, honey, it’s the value. Low end shoppers don’t care about company names. If Walmart changed their name tomorrow to Big Stores Everywhere or Target changed their name to Big Red Stores or H-E-B changed their name to Your Favorite Supermarket all their shoppers would know in a week, and sales volume wouldn’t be any different.
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Seriously, it’s not like the 99 Cents Only store will cease offering value. Any shopper that believes otherwise deserves to pay more. Many excellent approaches to the chain’s naming conundrum have been offered during this discussion, but the basic underlying principle is that consumers get good deals in their stores regardless of the name. Here in the West, primarily in California, our 98 Cents Stores changed their name to 98 Cents Plus. No biggie. Business as usual.
How about Euro Only? The Euro will be worth 10 of our dollars soon, anyway.
Reality bites. Selling products that customers want as long as they are still good value for money is the essence of survival. Raising prices along with customer service is the way to go. It is a tough time and customers have to and will realise that prices have to go up and cannot keep going down year after year indefinitely. Everyone is in the same boat and as long as the sourcing is the best it can be, then the competitive edge will be there. Some customers may say they are going to go somewhere else but, where will they go?
Ah, the dollar store conundrum. That is a tough price point to match these days. Back in the 90s, I was involved with a little operation called 99 Cent World located in Poway, CA which is considered middle to upper middle class. We were able to mix in 1.50 to 2 dollar items on the shelves. These items were larger and offered exceptional value over the local supermarkets offering.
That said, sounds like there may be no choice. Here in Canada, the focus has gone away from 99 or a dollar and we are seeing chain names like Dollarama, Dollar Plus and Dollar ‘n Up. If 99 Cents can offer a majority of products at that price point, I don’t see why they can’t raise the price on others. Margins are slim in this arena anyways so an upward move may be necessary for survival. Customers have to be eased into it though. Any price increase must be communicated to the customer clearly.
It’s not like they are protecting a powerful brand name here. The consumer doesn’t care if they change to “99 Cents” (probably a good idea, to stop people from mocking the “Only”). She just wants stuff cheap. Through testing, 99 Cents can figure out which items are better off in standard size at $1.49 and which sell better in reduced sizes at 99 cents. I doubt there is one answer across all categories.
The 99 Cents store shopper will continue to shop there even if they raise the price on some of the items. It is still a better buy than they are going to find anywhere else. My vote is, stay with the name and raise the price of the items you need to.
Just make sure to continue to provide great value.
This is a well established chain with a very loyal following. The positioning of their name is not the reason why they were successful in the past, but it was the value of the products that they offered. They can continue to offer their customers the same value, by altering their name slightly (especially the nothing over $.99 portion) to read “$.99 Stores.” Their customers shop at these stores because of their offerings, not because of their name.
What’s in a name now that the economy has made “Only” lonely?
They could keep “99 Cents” and drop “only” and do their thing. Or they might name themselves “99 to 199 cents only.” Or maybe they could consider “Five and Dime and 99.”
Growing up in the 60s and 70s, my small town had a “Five and Dime” store. Well that was a name left over from the Depression. There wasn’t much in there for a nickel or dime but the store did a brisk business. FW Woolworth dropped the five and dime and continued to operate for decades.
It’s not the name of the store, it’s how well the store is run. If the store changes its name, it will just lose the same amount of money, but with a different name.
I see a lot of correlations between today and the Depression. Going to smaller sizes is one of them. The company does need to make some web, name, advertising, and pricing adjustments. When I read comments like “Jeff Gold, president and COO of 99 Cents Only, told the Times. “I find significant discomfort emotionally about considering making the change,” this concerns me. Mr. Gold needs to grow up and get over emotional discomfort and start making some decisions. A CEO who can’t make a decision because of emotional discomfort is a company on the fast track to bankruptcy.
I think the “dollar” or “$.99” store is a concept, not necessarily a price point. Years ago, there were “5 and dime” stores, but they certainly could not always sell at those prices.
Ultimately, the consumer is looking for value and they will accept that the price point concept is not taken literally if they still feel they get a good value.
I saw another article posted just today on the Consumerist blog about a store that used to be “Everything 99c or Less” and now is called “99c Dreams,” with very small typeface underneath that says “Everything $1 and Up.” So that at least is how one store dealt with this issue.
It seems some of these topics we have seen lately shout out how long I have been around. In the town I grew up in there were two “Five and Tens.” A few years later when I was just starting my career, the issue of having the price in the name was “hot” for the many chains of “Five and Tens,” because few products were being sold for anything near 5¢ or 10¢ any more.
The strategy that the retailers took then was to drop the “Five and Ten” from their banner and to shorten the banner from “Woolworth’s Five and Ten” to “Woolworth’s.” In the trade they then called themselves variety stores, but did not change their business practices or strategies. All the names are very familiar to me: Ben Franklin, Grant’s, Kresge’s, Kress, Newberry’s, Neisner’s, and of course Woolworth. We do know where they went. But, I also remember that a guy named Sam Walton started in business with a Ben Franklin store. We know where he went, also.
The answer is that there are more dynamics going on than just the moniker. The moniker is clearly a problem, but the offering/value proposition may also be.
They don’t have to completely change their name but they could add value. Like 99 cents and more! Value is the key. They need to add value and bring value into the shopping experience.
Create a new section in the stores that’s focuses on “value” (items above 99 cents that are still a fantastic value) and fill bins with those small-and-still-shrinking sizes of 99 cent items. Place the bins around the periphery. Providing visual context will smooth the transition.
I think that would be an exciting marketing challenge. Using the 99 Cents Only name as a tagline, the agency who takes this challenge could have some fun with it…maybe even poking fun at themselves for expecting with variations in the economy that they could continue to sell items for only 99 cents.
Try the Jack in the Box technique of a spokesman who has fun with the concept of price, and value.
If the stores were honest about costs, maybe split the size of items to still come in at prices way under the competition, or bundle other products to make a case for spending more than 99 cents, they could have a successful campaign, rather than a potential marketing nightmare.
It ain’t the name, honey, it’s the value. Low end shoppers don’t care about company names. If Walmart changed their name tomorrow to Big Stores Everywhere or Target changed their name to Big Red Stores or H-E-B changed their name to Your Favorite Supermarket all their shoppers would know in a week, and sales volume wouldn’t be any different.