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Women’s Consignment Pricing – What We’ve Learned

Many consignment shop owners believe that a location with a wealthy clientele will bear higher prices than a less affluent location.   The store owners participating in the development and piloting of NextGen’s Women’s Consignment Pricing System, questioned NextGen’s insistence that a pricing system could fit all markets.  We expressed some pride in our ability to know what our markets would bear.

NextGen pointed out that resale franchises have for years employed largely brand-driven pricing models, with prices that worked across markets.  They explained the obvious—that the retail prices of women’s accessories and apparel for a given item and brand are the same irrespective of the market in which they’re sold.

We took a wait and see attitude, pending the results of their multi-store sales analyses.  What we learned was that brand was the most important factor in pricing.  We found a couple of surprising patterns.  One, that exact same items were selling for more in lesser markets and for less in better markets.  And, two, that our pricing practices were not consistent.

Everyone knows the real estate mantra, “Location, Location, Location” when shopping for a home.  We are now convinced that in pricing women’s consignment, it’s “ Brand, Brand, Brand.”  While the NextGen Women’s Consignment  Pricing System certainly allows for location as a factor in pricing, it doesn’t carry nearly the weight as the brand.

The NextGen Women’s Fashion Pricing System takes the guesswork and agony out of pricing.  More consistent pricing means more money for store owners and their consignors.

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Automated Price Markdowns—a losing strategy

A common feature of the more established point of sale systems geared for the consignment and resale industry are automatic price markdowns.  Percentage markdowns can be set at pre-determined intervals (e.g. 30, 60, 90 days).   Markdown Tags indicate both the date of the price reduction and the new price. Then, when an item sold, the sales clerk is not required to change the price at the register as any price markdown is recognized when the price tag is scanned.  This means faster sales transactions and improved accuracy.

It also means slower inventory turnover and thus less sales revenue according to NextGen’s limited data to-date and related reports from NextGen clients having moved from automated markdowns to NextGen Pricing,   This has been born out by studies  in the retail sector.

Whether actively promoted or not, if markdowns are near-continuous, regular shoppers become accustomed to the process. This not only increases off-price demand, but also can decrease full-price sales. As some retailers assume ever more aggressive markdown strategies, the net effect is a serious erosion of price and more importantly margin much earlier in the product’s lifecycle. Promotions are one of the reasons commonly given for Kmart’s near demise. It has been estimated that some retailers actually sell less than ten percent of their products at full price – their customers have been trained well. White Paper: Managing Markdowns: Why Prevention Is Better Than The Optimization Cure