Most people enter the retailing business because of their love and knowledge of a particular product, or their notice of a gap in the value chain for that project.

A love of sports and fitness led to the creation of one of the largest companies in the world: Nike. But the climb to the top wasn't easy, for Nike's unique sneaker offerings was once a niche market.

Luckily, its merchandising abilities allowed it to become what it is today.

The problem with selling unique items is finding the limited potential market that will not only share your appreciation for your products, but will also pay for them.

So what merchandising and pricing strategies can you adopt to convince these customers to make purchases on your site?

Anonymous online retailer, meet Nike. Nike, meet anonymous online retailer.

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What makes Nike so successful?

Nike may seem like a lofty comparison; it is a global brand with more than $20bn in annual revenue and celebrity sponsors. It would be nice to grab a Lebron James or Michael Jordan to sponsor your webstore, but unless you are an immediate family member, chances are unlikely.

That does not mean that you can not emulate the sports giant’s strategies. 

Nike is synonymous with sneakers, specifically basketball sneakers named after all-star players. Through solid marketing and word-of-mouth, Nike’s customers build anticipation for releases to levels usually reserved for techies and Twilight fans.

Also similar to techies and Twilight fans, Nike apostles are often the first in line for the release of a new sneaker. They devoutly believe in the importance of each new release and will give up an arm and a leg to be the first with the latest pair.

Take, for example, the Michael Jordan and Roger Federer crossover shoe that debuted on the tennis great’s feet during the first round of this past US Open. Unveiled during Federer’s first round match, the shoes sold out before it ended.

This frenzy could have been started by the television crew that repeatedly highlighted Michael Jordan’s presence at the match or by those appreciating the combination of elite athletes in different sports.

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More likely than both of those theories though is that sneakerheads knew buying these shoes for $200 would be a great investment, given the limited production run.

And right sneakerheads were; the shoes can be found on eBay with a price tag of more than $600. What Nike has done is increase customers’ willingness-to-pay for any given pair of shoes by encouraging these sales on multiple marketplaces.

 

Just price it

Just how good is Nike with its pricing? Good enough to be a point of contention among those who don’t properly understand the dynamics of supply and demand or the for-profit model of businesses.

Upon the release of the Lebron X’s in late 2012, thousands of consumers submitted complaints to various organizations citing the unfairly high price, some even resorting to rioting at malls.

At $180, the shoes commanded a premium, but then again, that is Nike’s entire business model. In order to remain a premium brand, Nike must charge a premium, even if that only allows a select number of customers to afford the sneakers. 

Again, you may think this is not applicable in practice for smaller retailers; but while customers won’t riot at your high prices, they will demand some form of value-adding differentiation. Exclusivity and limited releases don’t mean anything if the customer does not think they are receiving a truly unique product. 

How other shoe e-tailers measure up

If you are selling an undifferentiated product, consider adding a differentiating service to capture sales. Zappos does this perfectly by differentiating itself with significantly better customer service than competitors, which helps solidify its top-of-mind positioning for online shoe shopping.

Even if you just sell Nike sneakers through your webstore, there are merchandising strategies you can adopt to increase sales.

The retailer Flight Club prides itself on being the #1 sneaker market, holding an impressive selection of Nikes and other brands. Because of the rarity of some shoes the website offers, there may only be one or two in stock. This may not seem like a very successful business model but the wide selection causes sneakerheads to check Flight Club first when looking for a rare pair. 

Flight Club also makes up for the scarcity of itsprimary inventory by offering a smart selection of secondary products that will catch the eye of sneakerheads and increase average order value.

It sells all types of streetwear including hats, sunglasses, graphic tees, and hoodies. It even goes through the effort of sorting their hats and apparel by city represented.

Additionally, Flight Club’s website layout complements the exclusive merchandise very well. The design is simple but allows for shoppers to simultaneously view dozens of sneakers in hopes that one pair catches their eye and pulls the sale.

Flight Club’s deep knowledge of what its customers want makes it possible to design the site and plan its merchandising perfectly.

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Whether you are a small retailer or part of the IR 500, you can use similar pricing and merchandising strategies to drive sales. If you offer a product at a premium price, be prepared to explain the extra value that they receive.

After planning the navigation and layout of your site to fit the behavior of your target shopper, be sure to offer products that complement your focus. Think peanut butter and jelly, skinny ties and vests, or dynamic pricing and online retailing.

If you can think of a better combination of pricing and merchandising strategies, let’s hear it in the comments!

Contributing Writer: Jack Symington

Ari Shpanya

Published 27 October, 2014 by Ari Shpanya

Ari is the co-founder of HomeShare and Zent , Graduate of the GSB Stanford Ignite program, and a contributor to Econsultancy.

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