04 April 2023, Mumbai
As new pricing leaders seize market share, the garment industry's competitive environment is fast changing. Never before has the fight for value been so fierce. Under pressure from Amazon's entry into the garment market, fast-fashion stores, flash discounts, and the advent of ultra-value businesses, the idea of value is altering swiftly.
Only the value segment of the retail garment market, includes off-price competitors.
Promotions have increased in this setting, and prices have been subject to significant downward pressure. The garment industry is adopting more advertising to combat a drop in client traffic.
Several players have slashed their sourcing expenses and merchandising calendars to reduce product lead times and recoup profits. However, these benefits seldom affect the bottom line due to weak price discipline and reactionary fluctuations in business performance.
Can discounts drag customers?
Apparel shops need help to keep up with savvy, always-online customers. Today's consumers are more educated and digitally aware, making it difficult to foresee and much harder to please them.
They believe that costs will decrease as their needs and expectations increase. Consumers in the US buy at discount merchants, including off-price, outlet, and discount stores, at about 90%.
The fact that over two-thirds of these value, shoppers are purchasing more on sale now than five years ago is more troubling. A few clothing sellers use advanced analytics and fuse science and intuition to reclaim control and set prices more intelligently.
For some businesses, doing so has resulted in a three to six-percentage-point increase in profit and revenue. Understanding where customers place value and having the flexibility to react to rival actions while fully comprehending the impact on financial performance is necessary for intelligent pricing.
Strategy of pricing
When selecting the pricing for a new style, merchants frequently consider various criteria, including the appropriate initial markup, recent sales of like types, the price needed to move inventory, and rivals' markups for similar fashions. But, even the finest businesspeople frequently fall into one of two traps.
First, business owners often need to pay more attention to the significance of other factors while paying excessive attention to one. For instance, they could set pricing to meet an internal margin objective but only sometimes, throughout the selling season, look at prices from rivals. Second, retailers frequently need more clarification about the actual drivers of sales.
The most frequent issue is incorrectly estimating how a price adjustment would affect sales; for instance, attributing better outerwear sales to a 10 percent price decrease when a storewide marketing campaign and a cold snap were more likely to be to blame.
Merchants cannot consistently duplicate their performance over thousands of styles, even when they balance all the necessary components and precisely analyze them for a particular style. At-scale analytical skills are required to incorporate this rigor into their marketing practice.
Winners in the garment industry have discovered a scalable method to use a flexible, intelligent pricing discipline that matches their price strategy with their target market's willingness to pay.
Some retailers carefully consider their price and promotion investments and use information from advanced analytics to decide more wisely. This does not imply that businesses should give up on price strategy.
Although other hardline categories have succeeded with automated pricing systems, the seasonality and ever-evolving trends of fashion necessitate a pricing strategy that combines intuition and science.
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