In the article, Augustín changed Emilia’s pricing model from one that relied heavily on discounts and sales to get people into the store and buying clothes, to a model that relies on no discounts at all. This new model relies on constantly low prices and a catchphrase “Hablar claro”, which basically meant that Emilia was cutting out all of the bullshit and telling customers exactly what each item would cost. However, he runs into some problems, the biggest one being that Emilia’s competitors start ramping up their discounts and sales, leading customers to complain that Emilia was not offering good value for their clothing, when on average, a piece of clothing cost less at Emilia than it does at these other competitors.
The biggest thing that Augustín missed out on doing before changing the pricing model is conducting more market research on the behavior of retail clothing customers. He was coming from a background of a home design company, and a fast-fashion company, so he probably assumed that much would be the same in another clothing retail store. However, by missing out on doing market research, he missed the idea that many people buy clothes not on a regular basis, but because they see a large discount or sale, and then impulsively decide to buy that piece of clothing, as mentioned in the first expert responds by Shari Rudolph. While Augustín might have been driving the company in the right direction, by attempting to modernize – revamping the website and renovating the in-store experience, he probably went too far in his complete no discount model.
If I was to advise Augustín, I would definitely tell him to not completely get rid of discounts. I think that he is doing a good job in modernizing the company – the sales in the first quarter after he had implemented his new vision were “outstanding”, according to the article. However, as the competitors began to adjust to this revamped Emilia, they were able to claw back those sales, while Emilia stayed stagnant in its pricing model and began to lose those new customers, and some of their old ones. I would recommend that Augustín bring back sales, but only on regular intervals, such as holidays or end-of-year sales, like mentioned in Shari’s expert testimony. This way, he can still claim to be mostly no bullshit, but retain some of the customers that enjoy shopping discounted items.
