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?