We have a passion for fashion in this week’s Power to the Pricing People episode, looking into the fabulous world of fashion pricing practices and how they’re impacting consumers, retailers and apparel manufacturers alike.
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Inventory Issues in Retail
It’s been a volatile year for fashion retailers with economic factors placing a strain on consumer spending. This led to unsold inventory piling up in warehouses and stockrooms to the tune of $740 billion in the United States alone.
Steep discounts have been key for brands clearing build-ups, with most retailers including Nike, Asos and Urban Outfitters relying heavily on sales and promotions throughout the year to reduce excess stock.
High Fashion, Higher Prices
Even in the face of shaky consumer spending, luxury fashion brands haven’t slowed down their price increases. According to the data company EDITED, average luxury prices are up by 25 percent since 2019. Luxury brands often bank on the ultra-rich clientele to drive sales, with one analyst estimating that the top five percent of luxury clients now account for more than 40 percent of sales for most luxury goods brands. However, even with this approach, both LVMH and Gucci have reported sluggish sales and declining stock prices in the last six months, indicating this pricing strategy along with the luxury sales boom are going out of fashion.
Adapting to Rising Costs
Looking at the manufacturing end of the supply chain, global brands including H&M and Gap have committed to raising purchase prices for Bangladesh-made clothing to help offset rising wages in the world’s second-largest exporter of ready-made garments. H&M has said it will absorb the cost increase, but according to analysts, it’s also passed on more price increases than peers over the last year, so this may lead to more price rises down the track.
With unpredictable demand and rising costs rippling across the fashion industry, getting pricing right is more crucial than ever, and it all starts with real-time accurate margin visibility.
Talk to us today if you’re interested in how Flintfox can help you optimize your margins.
