No Discount? No Thanks!



In a recent story from Bloomberg news, Michael Kors (MK) is heading down the path of no longer being a growing brand name in the fashion industry. The luxury goods maker missed its projections for the third quarter and is now losing its stakeholders. In a Bloomberg article, the CEO of MK, “John Idol said in August that profitability would decline this year because an experiment to bring in fall products earlier in the year didn’t work.” Another reason Michael Kors isn’t doing so well is because other retail stores are competing on discounts. (Bloomberg)

From the book we learn that in order “to increase sales, many companies offer quantity discounts to their customers. A quantity discount is simply a reduced price for an item when it is purchased in larger quantities.” (Heizer) Michael Kors doesn’t seem to want to play along with this idea. In the Businessweek article, MK says they won’t be reducing prices this holiday season, “just so everyone can have find a python-fringe tote or fur trimmed parka under the tree.” But with the decline in profits, wouldn’t you want to sell at a discount and get your inventory out the door? And missing their projections means they have more inventories in store than they should have and MK ends up having an over supply of inventory.

If Michael Kors continues to miss its projections and if they don’t do as well as they expect for the holiday season then their inventory will continue to grow and a brand like Michael Kors cannot risk missing projections because of the costs of the goods and the cost of holding it as inventory. As we know holding costs, “the costs associated with holding or “carrying” inventory over time” (Heizer), also come along with more costs such as storage and interest on storage.

Michael Kors states that they will not reduce their prices for the holiday season even though they are seeing a fall in sales. What do you recommend for the brand to do in order to boost up sales? Do you think sales will pick up because of the holidays?


Heizer, Jay, Render, Barry. Principles of Operations Management: Sustainability and Supply Chain Management 9 ed. Boston: Pearson, 2014. Print.

8 thoughts on “No Discount? No Thanks!

  1. Great Post!! I think in order for Michael Kors to continue to be successful, they need to adapt to the changes in the industry. Like you said in your blog, many other brands are offering to retailers in order to carry their brand. I know that every CEO wants to think that their brand is the best but today, anybody can have a Michael Kors bag or wallet or jacket. I also think that the brand is heading toward the decline stage of the product life cycle, and I think without them being willing to offer better deals to distributors many of their items will become obsolete.

  2. Great post! To answer the first question, I think their sales will increase during the holiday season for sure. Personally, my mom already hinted she wanted a MK bag for Christmas. This situation is really tricky, though. MK is a premium brand, so offering discounts might potentially make the product lose value and become just another handbag and accessory company. If I were MK, I’d wait till after the holiday season before I started making any drastic decisions.

  3. I have noticed recently that MK has been decreasing in value. They seem to be all over the place in Marshall’s and Ross, and that is most likely due to the fact that they do have a surplus of inventory that is not selling. You don’t see brands such as LV selling at discount stores, because they don’t want to lower their brand value. I think that since they already started selling their products in discount stores people will be less likely to pay full price for the brand.

  4. Interesting, I’m sure sales will pick up during the holiday season because sales for most gift products do, but probably not enough. It is too easy to find MK products in discount stores like Nordstrom Rack, that there is not much reason to buy a new, full price MK bag. If they want to boost sales they might have to do a lot of advertising, but seeing as they are not doing so well now, they might not have the budget for that.

  5. Sales will definitely increase during the holidays, but they might not be as high as other designer brands that are offering holiday sales. I understand the concept of not wanting to sell a designer brand at a discount, because places like TJ Maxx and Marshall’s already does that. However, I think MK needs to change something. Whether that be a buy one get one free deal or something that will help them lower inventory and encourage shoppers to buy MK products.

  6. I think holiday sales will only give a small boost to help the year-end numbers, but in my mind Michael Kors is a mid-range designer. If the trend continues, they may consider refocusing their brand elsewhere, like Rock & Republic did a couple of years ago. They filed for chapter 11 and then took their designer jeans line from a $200-$300/pair brand, and signed an exclusive deal with Kohl’s. This brought their prices down to $88 on the high end, and seemingly reinvigorated their brand and targeted the consumer who can’t afford the $200-$300 dollar jeans, but still want a higher-end (or so they say) product than the usual suspects at the department stores such as Levi’s.

  7. Interesting to see how MK does business. They probably do not want to reduce prices because it might diminish their brand value. It is a designer brand so maybe they want to keep public opinions high by not making it seem they are desperate to sell bags. I think sales will increase during the holidays like they do every year, but without a sale or extra incentive to purchase I doubt they will sell their excess inventory. As a result they will continue to have inventory back up and possible lose revenue.

  8. Hi. rockie. Good article. In py a opinion, if there is more discount, the more i do not want to buy the MK. because i feel like it is not a luxury brand. The price of MK is not expensive all the time, it not and luxury brand. The costumers will not purchase it until its price down usually. If MK do not do the discount, their demand maybe decrease because costumers will feel like that is not cost-effective. They dont do the discount which means they increase the price. This will change MK’ imagine. Customer maybe cannot accept this change.

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