During his presentation, Greg Petro, chief executive officer and founder of First Insight, addressed the role of pricing within the fashion apparel and accessory categories — and how retailers and brands can optimize their strategies to maintain low elasticity, or cost fluctuation, while remaining less vulnerable to market shifts.
As the retail landscape continues to become more crowded and unstable, devising steady and predictable costs is growing in importance. “A lot of companies are lowering prices when they should be increasing them,” Petro said. This necessitates the question of why brands are taking such a drastic and detrimental approach such as slashing costs. Perhaps namely, the lack of statistics and necessary calculations to cast insight into appropriate strategies has motivated poor business decisions — the obstacle that First Insight aims to surmount for its customers.
Brands and department stores aren’t closing hundreds of locations because they’re doing well. “Product differentiation is key to maintain price points to reduce sensitivity,” Petro said.
In line with one of First Insights most recent reports, “Decoding Price Elasticity to Unlock Revenue and Minimize Risk,” Petro discussed the categories that have the highest elasticity — and risk — and conversely areas that have price increase opportunities. As part of the research for the report, millions of consumer interactions with brands and retailers were analyzed over a two-year period.
Sneakerhead culture is moving the needle within the men’s wear vertical, Petro suggested. “Men’s wear is a product category that’s been growing over time, around 6.4 percent growth year-over-year it’s been reported, and in specific areas there are opportunities,” he said. “We look at footwear and we think about the sneaker trend that’s been going on and how men’s companies have responded to the entire opportunity. It continues to be less elastic, which means that you have the opportunity to raise those prices. The consumer is valuing sneakers.”
For women’s and kid’s companies, accessories presented the high amounts of occasion for increases. “Women’s jewelry and handbags — we think there’s money being left on the table. It is product dependent, so you need to figure out how to measure this. Women’s dresses as a product category are a very risky set, it’s also true in children’s [dresses],” Petro said.
In order for retailers and brands to navigate toward survival, and ultimately success, deploying deep analytics and calculation tools to devise strategies for merchandising, executive, development and design teams will be instrumental in bringing to market the most appealing product to ensure limited price cuts and decreased revenue.
More from WWD: