First Insight has released “Decoding Price Elasticity to Unlock Revenue and Minimize Risk,” a report centered on price elasticity within the fashion apparel category. Due to shifting consumer priorities, the report discovered several areas that are erratic and conversely, segments that have leveled.
“Fast-moving industry trends such as aging Baby Boomers, growth in Millennial spending power and migration to online shopping are having an impact on pricing and demand,” said Greg Petro, chief executive officer of First Insight. “This shift is creating a disconnect for retailers and brands between what they’re charging, and what consumers would actually spend.”
To finalize results, First Insight reviewed pricing and elasticity shifts of approximately 90,000 items. The company deployed InsightSuite, its predictive analytics software that enables users to accurately price, market and buy new items that are absent of sales history. In addition to supplementary proprietary sources, data was analyzed between September 2015 and August 2017.
Price elasticity within the women’s wear vertical is decreasing, the research found. Outerwear, accessories and tops are posting the most elasticity due to high purchase frequency, the report said. The report authors pointed to the conservative spending of Baby Boomers and frugal Millennials who are drawn to fast-fashion options for these results.
Retailers have navigated the men’s wear category well — price and elasticity has been balanced, the research discovered. Underwear poses an opportunity to retailers and brands to increase cost due to dropping elasticity. Alternatively bottoms have undergone a surge in elasticity. The report warned against overstocks in this area.
The research found that elasticity within the kid’s segment is lowering, causing brands and retailers to see major growth. The authors suggested considering price increases within the sleepwear category, but to be wary of over-pricing bottoms — elasticity and pricing has increased, resulting in shoppers’ faded willingness to pay higher prices.
“Offering the right product at the right price is a key determinant of the success or failure of retailers and brands in today’s shopping environment,” Petro said. “Retailers able to meet shoppers at the intersection of price and elasticity have the greatest opportunity to increase sales and revenues with the least amount of risk.”
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