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Pundit's Mailbag — Is Costco Repeating Wal-Mart’s Mistake? Of Engagement Rings, Wedding Dresses And Knowing One’s Customer

We recently received this note commenting on a piece we wrote about Wal-Mart’s efforts to go back to the basics:

This excellent piece on Wal-Mart, titled “Wal-Mart’s Efforts To Go Back To Days Of Sam Walton May Only Position The Company In Between Deeper Discounters And More Upscale Venues — portraying Wal-Mart’s foray into high fashion — is especially relevant as Costco recently announced it will be building bridal boutiques within its warehouses. (“Where did you say you got that gown?!”)…. Is Costco taking the same risk here?

We have blogged extensively on the different directions taken by Wal-Mart to keep up with the marketplace. Losing sight of the original EDLP strategy and attempting to “Targetize” themselves have only confused customers. As marketers, we are constantly telling clients to stay on strategy: to pick a positioning and maximize it. Or, if you are making a major change, do so with gusto and glory! You just can’t have your cake and eat it too…

— Veronica Kraushaar
VIVA Global Marketing, LLC
Nogales, Arizona

Veronica was kind enough to quote the Pundit piece in her own marketing blog ”Here comes the (Costco) bride…” and we appreciate that.

To be clear, Costco is not actually opening permanent bridal boutiques. Instead, what it is doing is opening pop-up bridal boutiques initially as a test in a few stores in California. If the test is successful, the boutiques will probably only appear in Costco stores during peak wedding season, a period roughly from January to June.

This effort follows a successful effort last year as a Costco store in Issaquah, Washington, called Magical Weddings featuring Disney-themed bridal gowns based on the Disney Princesses: Ariel, Belle, Cinderella, Jasmine, Sleeping Beauty and Snow White designed by Kirstie Kelly. Ms. Kelly is the same designer who Costco is featuring in its pop-up boutiques.

We think Veronica’s note points to how subtle differences in clientele and image can be and how important it is for businesses to really understand both.

There is a common joke in retailing in which it is said that if you take a selection of Ralph Lauren Purple Label men’s shirts — typically sold at $395 and up — and put them in Costco for $195, they fly off the shelves and the customers can’t believe the bargain. Take the same item and put it out on the shelves at Sam’s Club and the customers wonder what kind of crazy people pay $195 for a shirt!

Costco, because of its treasure hunt merchandising philosophy and high-end private label program, is famous for having really good quality goods at discounted prices.

Now there are limits and surely those who were thinking of dropping by the Monique Lhuillier boutique and picking up a $20,000 dress are not going to go buy their dress at Costco. Still most people buy bridal dresses at places such as David’s Bridal, where there are beautiful dresses for less than $500. It is not obvious that one gets much prestige out of one’s friends knowing one’s bridal gown was purchased at David’s Bridal.

So part of the difference is the reputation of Wal-Mart vs Costco, but we would also point out a big difference is that in our story we were speaking of engagement rings, which are, traditionally, bought as a gift from the groom to the bride. Wedding gowns are bought by the bride herself or her family. So if a bride can buy a wedding gown at Costco at a bargain price, she is being smart and frugal. If a guy is buying an engagement ring at Wal-Mart, he might just come across as cheap.

The real question about Costco’s efforts in this area are three-fold:

  1. Will Costco be able to ultimately secure the brands it wants? There is a limited audience for one designer’s gowns. If Costco can actually sell the exact same gowns being sold in bridal boutiques and department stores for less, it will find plenty of customers.
  2. Can it create the experience brides want? With so many second and third marriages, this might not be as big a deal as it once was, but the classic first-time bride goes out to shop for the wedding gown with her mother, perhaps her sister or bridesmaids. Trying on lots of dresses and parading them is part of the fun of getting married. If Mom can’t participate at Costco and she is paying for the dress, she might just take the whole process elsewhere.
  3. Perhaps the biggest issue is whether selling the dresses cheap won’t undermine Costco’s reputation for quality. Right now, Costco educates its consumers to believe it can sell cheap because it sells in bulk. In other words, it gives its customers a rationalization for why it is able to operate cheaper and thus sell cheaper. Presumably, though, it won’t require the purchase of a three-pack when buying a wedding dress, which means consumers will be suspicious about the value proposition.

Many thanks to Veronica Kraushaar and Viva Global Marketing for sending along this note.



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