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Price changes in children’s resale occurring at a record rate—Why?

 

 

NextGen currently tracks the pricing on over 4,000 children’s brands in order to keep its suggested resale prices in tune with the children’s retail prices.  This involves the timely identification and valuation of brands—new, old, rising, fading, fallen; and distinguishing the many labels continually introduced to appeal to different markets.  It’s a demanding task in normal times, and especially now as the rate of brand/price change is as high as we’ve seen.

Why?

The significant change we’re seeing in children’s pricing, specifically the growth in the boutique brands at the top, and discount brands at the bottom, reflects the broader shift in income distribution.  To quote Schwartz in his recent New York Times article (2/2/14) entitled The Middle Class Is Steadily Eroding. Just Ask the Business World.

“As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there     really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

The top 5 percent of earners accounted for almost 40 percent of personal consumption expenditures in 2012, up from 27 percent in 1992. Largely driven by this increase, consumption among the top 20 percent grew to more than 60 percent over the same period.”

John Graubard’s graphic observation in the same article sums it up “In a few years the consumer choice will be Neiman Marcus or WalMart.”  

 

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Who sets your Prices?

In retail businesses, it’s safe to say that prices are invariably set by owners be they individuals or corporate, or by managers using pricing conventions provided by the ownership.  This only makes sense as pricing is the revenue side of the bottom line.

When NextGen started working with resale stores, we expected to find the same.  Much to our surprise, pricing in a number of children’s and women’s resale establishments is left largely to employees.

Prices set by employees are rarely optimum when compared to prices obtained by stores in comparable markets; they are most always on the low side.  But as damaging as the profit loss commonly associated with employee under-pricing, is the price inconsistency that comes when employees are left to price largely on their own.  The result is a loss of customer trust.  With inconsistent pricing comes customer uncertainty that the tag price reflects value, and the consequent declination to pay the asking price ( i.e., buy) for items with unfamiliar labels.  Translation > lost sales.

Owners need to own their pricing.  While some employees who’ve been pricing welcome a company pricing system and the reduced anxiety that comes with it, others resist giving up this control.  Indeed, NextGen has had a number of owners decide against the pricing system for fear of losing valued employees vested in the existing pricing—their pricing.  Even with employee support, if customers are accustomed to employee under-prices, prices cannot be bumped abruptly.  Prices must be adjusted incrementally in order not to sour longstanding customers.  Fortunately, the mixed price/value association characteristic of most employee pricing practices, can effectively mask modest price changes.

The time is always right to take control of your pricing, … to take control of your business.

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Auto-Pricing: a Resale Point of Sale (POS) System MUST

“A Resale POS system without auto-pricing waddles like a duck on land, with auto-pricing it streams like a duck in water” NextGen Knowledge Base

POS Auto-Pricing is a must-have tool for resale businesses today.  It instantly suggests the resale price based on brand, condition, currency, features, composition, … . It dramatically cuts the time required to price.  It assures that prices are correct and consistent.  It adds considerably to a store’s bottom line.  It frees owners and significant others to tend to sales, customer service and other areas important to the success of the business.

The challenges facing the buyer of resale merchandise, whether buying outright or on consignment, are far greater than those facing buyers of new.  To arrive at an item’s selling price, the resale buyer must assess the currency, quality and condition of hundreds of types of merchandise (apparel, footwear, accessories, toys, equipment, each carrying one of thousands of possible brands / labels– numbers of a magnitude dwarfing those faced by even the largest retail buyers. What’s more the resale buyer must examine these items and determine the selling price one by one, each in a matter of seconds.

Little surprise that owners quickly find themselves and others in their employ spending an inordinate amount of time buying.  It’s the black hole of many if not most resale operations.

It is no surprise that the POS system of virtually every resale franchise or chain has auto-pricing built-in.  What is a surprise is that ResaleWorld’s Liberty 4 is the only POS system today with built-in auto-pricing available to independent Resale owners.

In the Retail industry, the gain in productivity realized with the move from cash registers to POS systems has been significant.  In the Resale industry, the gain in productivity realized with the move to POS systems w/auto-pricing is proving no less significant.

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It’s never too late to start pricing right, but far better to price right from the start.

 

The NextGen Pricing System suggests the best price for an item that can be expected to sell within 75 days. Initially, NextGen obtained these data from a limited number of stores around the country. But in the last 2 years, the data base has grown to include stores in most states and provinces in North America. As most of these stores have been in operation for years, their addition to the data base enables Nextgen to better examine pricing strategies relating to area income levels and competition.

What have we learned? Far more stores under-price than over-price1

Why do stores tend to under-price? The fear that higher prices will turn away buyers

Underlying this fear is the assumption that buyer decisions are based on price more than value. This is to say that buyer decisions are driven more by item-specific price ceilings, i.e., “I would never pay more than ten dollars for a pair of sneakers” than on Value, i.e., I would never pay more than $10 for a pair of Converse” sneakers.” While the former mentality may be common among thrift shop customers, our analysis clearly demonstrates that it is the “Value” mindset that is prevalent in better consignment and resale shops, not the “Price” mindset. Simply put: Customers pay more for better brands than lesser brands.

Give your customers credit. They are value conscious and knowledgeable thanks to Google and other internet shopping and price-comparison sites. Always accessible at the press of a button on their smart phone.

What’s to be gained by raising under-prices? Customers, Sales and Profits

Right pricing is not what the market will bear, but what the market will embrace while maintaining timely sales. Dollar sales will increase. Margins—bottom-line profits—will likewise increase. Item sales may not, but should not decline.

Raising the price of under-priced items allows a corresponding increase in the amounts paid for these items. To get better brands, we must pay for them. The more we pay, the more we get.

Right pricing is Fair pricing, meaning fair to seller/consignor as well as buyer. In the end, it’s a win-win-win. The sellers earns more, we owners earn more, and buyers have access to valued items they would not otherwise see.

The Good news? While under-prices cannot be abruptly changed for fear of alienating longstanding customers, prices can be nudged up (optimized) gradually and imperceptibly over a number of years. Clients use the NextGen Pricing system to manage these changes.

1 Certainly, these data could be skewed. Perhaps the over-pricers are gone, having priced themselves out of business. Or just maybe we’re missing the under-pricers who didn’t have sufficient margins to cover their costs of doing business. Let’s reasonably assume a bit of both.

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Smart resale pricing – are you building customer loyalty?

This blog continues in the spirit of the “operating by guessing” theme that was addressed in an earlier post, and is specifically prompted by the inconsistent pricing found during a recent survey of independent resale/consignment stores.

How is it that nationally recognized jeans in identical style and fabric are featured at 3 different price points in the same size in the same store?  Or how about a beautiful pair of premium brand jeans priced in the bargain basement category?  These are examples of inconsistent pricing that represent a lost opportunity and money left on the table.  Typically one quick tour of the sales floor reveals if pricing is a function of guess work or an organized approach – a system.

The value of a pricing system benefits the bottom line and builds shopper confidence in you and your  prices.  It suggests a pay price based on brand, item type, features, condition, and market demand.  In the case of the NextGen POS, the system also provides instant price check capabilities for owners to determine retail prices, real-time.

A pricing system is a terrific training tool for new buyers…and when dealing with consignors helps to keep subjective assessment to a minimum.  Consistent pricing keeps those hangers turning, and is a boost to the bottom line.

Many retail professionals assert that comfortable shoppers are confident shoppers, and confident shoppers become loyal shoppers.  It all starts with smart resale pricing.  Are you building customer loyalty?

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Pricing–the most challenging part of your business.

You have the store, the furnishings, the racks, the signage…and you’re taking in inventory.  Are you confident in your ability to price?  There are so many factors involved in pricing—it is one of the most important pieces of making your business a success.  At the same time, it is the most vague and challenging piece.

If you price too low, people will think that your product is cheap.  It’s very tricky–you think low prices will bring in business, and it may, but you will not gain a reputation for having great stuff,  just cheap stuff.  You are thrift. Shoppers will come to you because you have low prices, but you cannot sustain a business at that level, and your consignors will leave.

If you have wonderful labels, top of the line, but you overprice, they will stay on your rack…forever.  Or…you will have to reduce the price, and that sends a different message. Now the customer thinks there may be something wrong with the item, or perhaps start to doubt their taste or knowledge of fine clothing.  Not good.

Either way, you are not building a reputation for wonderful clothes at great prices!  When business is slow, it’s easy to start to doubt yourself, to second guess everything you’ve done.  I’ve been there.  It’s hard and scary.  The most important thing about your business is pricing.  You can have the most beautiful or trendy store–but if the prices are wrong–you’re in trouble.  And don’t forget, there is always another store opening to compete with you.

The bottom line is pricing.  It can make or break your business. Wouldn’t it be awesome if there was a system out there to help you price?  Well– there is. The Women’s Fashion Pricing System is the answer!!!  It works. No more stress, no more guessing, no more anxiety.  We know the business you’re in, and we can help you make it successful.  Just enter the brand and category and we give you the price range.  It’s that easy!

Talk to us.  Let us help you. You’ll sleep better.

Brenda Stark

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Women’s Consignment Pricing–Are your Prices too high, ..too low?

The prices charged by stores using NextGen’s pricing system vary significantly. Prices for the same brand and category of apparel, accessory or footwear at some stores can be as much as 2.5 times that of others. The primary reasons: 1) demographics or more specifically client disposable income, and 2) competition. Shops serving well-heeled customers with limited competition from large discounters and resale shops are able to charge higher prices than those located in lesser income markets with nearby competition.

The challenge is finding the right level. While pegging prices to a store’s historic sale prices by brand and category makes for consistency, there is no way of knowing whether these prices could and should be higher or lower, i.e. how much is being left on the table.

Herein lies the NextGen advantage. NextGen’s prices are informed by the pricing/sales experience of stores in high to low demographic and high to low competitive markets across North America. In the case of new stores with no sales history of their own, NextGen sets prices based on the new store’s market demographics and competition. In the case of stores with a pricing/sales history, NextGen analyzes their pricing/sales history relative to the histories of stores in like markets in order to identify pricing potentials. Owners generally opt to move to these prices immediately though sometimes gradually so as not to concern longstanding customers.

 

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Consignment Software Review

NextGen Resale and Consignment  is a service bureau providing know-how, software and support to owners of resale and consignment shops.  NextGen has grown from supporting stores selling used children’s apparel, toys and equipment  to stores selling juniors and women’s apparel and accessories.

NextGen clients buy outright and accept items on consignment.  They sell new merchandise and used.  All are brick and mortar operations; a small number sell on-line.  Some have multiple shops, most only one.  All require responsive how-to support as well as technical support.  All utilize NextGen’s pricing system to keep prices current, and save time spent on buying, pricing and related training.  All welcome as many features as they can get.

Initially, NextGen contracted with one of the few POS vendors supporting both consignment and buy-outright operations to customize its offering by building in NextGen’s buying/pricing application.  In the end, the vendor was unable to produce, and NextGen had to forego its investment and renew its search—this time in a more diligent fashion.   After an exhaustive and systematic review, we found Liberty 4, by Resaleworld.  It was, is, and remains the only software that satisfies the essential demands of our varied clients:

  • First and foremost, capable of seamlessly delivering our off-line and on-line women’s, children’s and juniors pricing system
  • Full-featured consignment as well as buy-outright modes—clients are increasingly using both
  • Fully supports the acquisition and sale of new merchandise as well as used
  • Supports on-line as well as off-line sales
  • Available for purchase and installation, or on a monthly subscription basis as an internet service
  • Supports multiple locations via a private network or the cloud.
  • True ‘on-call’ technical support—not  the as-available’ technical support characteristic of the little POS vendors that dot the resale & consignment software landscape.
  • Lots of features—the most of any POS software in the resale industry

NextGen’s configuration of the Liberty 4 POS system by Resaleworld works for NextGen and our clients.

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More About Pricing

I know it seems that we talk a lot about pricing, but that is because it one of the most important parts of growing a successful consignment business.  Next to continuously gathering great consignors, it is probably the most important component of your business.

Your pricing determines if your can pay rent or staff or stay in business.  How you price sends a message to your shoppers and your consignors.

If you price too low, you lose money and can give the impression that your merchandise is somehow not the best, not good quality.  Pricing too low leaves you no room to mark down.

Not knowing the value of your merchandise and pricing it too low can be disasterous. You quickly sell out of the good items and your consignors will not be happy with their share.

On the other hand, if you price too high, your things don’t sell and you are forced to mark them down.  If this is your pattern, you are actually training your shoppers to wait for your markdowns/sales.

So, what are we to do? You can spend all day, every day researching and checking prices and in your spare time run your business, but we all know that that won’t work.

What is needed is something that provides a balanced, real world and reliable approach to pricing.  The good news is that there is such a system.  It’s called the NextGen Women’s Fashion Pricing System.

With the NextGen Women’s Fashion Pricing System, you can be confident that you are pricing at good prices–the right prices, and you are pricing consistantly.

This sends the right message, that you know what you are doing.  Your consignors, shoppers, staff and your bottom line will be very happy.

Talk to us.  Let us help you. You’ll sleep better.

Brenda Stark