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Price change in women’s fashion is at record high—Why?

NextGen currently tracks the pricing on over 5,000 women’s brands in order to keep its suggested resale prices in tune with the retail prices in women’s fashion.  This involves the timely identification and valuation of brands—new, old, rising, fading, fallen; and distinguishing the many labels introduced by designers 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 women’s fashion pricing, specifically the growth in the designer 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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Buy Outright Pricing versus Consignment Pricing

Many NextGen clients are beginning to buy items outright, either selectively or completely.  Perhaps this is in responseto an increasing number of women’s resale “Buy Outright” stores or in an effort to improve sales margins.

The most common question about buying outright is, “shouldn’t we lower our prices to be sure they sell?” …and, by extension, shouldn’t NextGen have a set of lower price points for stores buying outright?

The answer to both is, NO!

It all has to do with your “Pay Price” which is how much you pay to have an item for sale.

  • The Pay Price for most consignment stores is 40-60% of the selling price paid to their consignors.
  • The Pay Price for most buy outright is 20-40% of the selling price paid to the seller of the item.

The lower Pay Price and higher sales margin of buying outright provides for any loss associated with items that don’t sell or sell for less than what the store originally paid for them.

It’s the buying or Pay Price not the selling price that needs to be reduced when buying outright.  While the temptation is to lower the selling price to gain the sale, the right strategy is to be more selective in what you choose to buy.   Bottom-line, the right price for an item depends on the market for it, not how it was acquired.

Takeaway Tip:  Many owners moving from consignment to buying outright often start with selected consignors, customers with items likely to sell within the consignment period.

Note:  NextGen Pricing systems are always calibrated to market, variously based on sales history, demographics, competitive landscape and strategy.