As apparel retailers find themselves under increasing pressure from penny-pinching consumers to cut their prices, the question is: how low can they go?
“We’ve already educated our consumers about the concept and the idea that value is related to price,” said Greg Petro, founder of retail predictive analytics firm First Insight, speaking recently at a “Breakfast With the Disruptors” discussion, co-hosted by Project New York and Fung Global Retail & Technology.
Basically, brands and retailers helped create the markdown monster in their urgency to compete with one another, and while discounting boosted business for a while, it also weighed heavy on margins, as consumers learned to wait for low prices.
That being said, it’s not too late to change their minds.
“It’s very easy to get caught up in the pricing side but lose the emotional connection,” Scott Lux, vice president of digital and e-commerce at John Varvatos, said. “I think there’s an opportunity for brands to recapture that emotional connection because once you have that and you can provide that value and representation online, then you can start to mitigate some of the ‘race to the bottom’ because consumers want to have value, they want to feel good in what they’re purchasing.”
Joe Ferrara, co-founder and chief executive of venture operating company Resonance, agreed, pointing out that though menswear prices have declined 27.8% over the last three years, men’s underwear prices have bucked that trend.
“If you have the right product and it is differentiated, and you connect with customers in a meaningful way, you can outperform the marketplace. You can command a premium price. You can deliver product that is superior to others and do it in a demonstrative way,” Ferrara said.
And don’t just offer the same old, same old, he warned.
“If you think of men’s underwear, it’s white, it’s black, it’s navy, it’s beige. We need stars and stripes, we need polka dots, we need some other reasons to buy. We need new fabrications. We need new performance requirements. We need to be able to explain and educate to consumers that wicking in certain areas of the body is really a premium offering,” he continued. “So doing all of that and doing it well, and demonstrating at moments and times scarcity so that you can retain that premium price, all of that’s important.”
That’s where data can chime in and help the decision-making process, so brands can not only figure out what consumers will pay more for, but also avoid stockouts and supply chain disruption.
As Petro put it, “If you don’t get the right products in front of your consumer segment, a whole lot of supply chain efficiencies are going to be out of whack anyway. The products that you bring to market have got to resonate with the consumers. If you don’t, it’s game over.”
He should know: First Insight, a platform for testing new product designs at various stages in the design and manufacturing process, found that roughly 63 percent of new entrants to the menswear market fail. Womenswear is worse and footwear is the hardest category to get right.
“Keep in mind though, analytics and data are only a component to the decision-making process. You still have to be authentic to your brand, to your company and what you’re trying to represent to your consumer,” Petro said. “But at the end of the day, any piece of data that is ultimately providing you an informational look or forward look to how those products that you are going to take a risk on resonate with the consumer, in advance, can help you make a good commercial decision.”