Huge consumer thirst for discounts, and the growing influence promotional activity has on the purchasing process, are changing the pricing landscape for the fashion industry.
We now live in a world where shoppers expect discounts as the norm. Blue Yonder recently ran a global research survey with Retail Week Connect, which found that 43% of clothing purchases are driven by money-off deals, while a quarter of consumers globally never buy clothes at full price.
Shoppers have driven retailers into a corner when it comes to their pricing strategies, as they now demand the best deals whenever they choose to make a purchase.
The research, which surveyed 4,000 UK, US, France and Germany consumers, shone a light on the new patterns of spend in the fashion world. While new season ranges can still tempt shoppers to spend, a significant 42% of customers wait until the end-of-season sales to make a fashion purchase.
In fact, for 37% of global consumers, getting a price reduction is more important than a low starting price in the first place.
Businesses used to dictate shopping patterns, but the advent of price comparison websites, sophisticated ecommerce platforms, and smartphones enabling on-the-go purchases have put consumers fully in control of the relationship. For instance, 36% of shoppers check a price of an item online when in store to see if it is cheaper elsewhere.
As a result, seasonal shopping does not follow the pattern it once did, and changing consumer behavior – combined with customer expectations for discounts – is causing some serious profitability and margin erosion challenges, which can no longer be ignored.
Fashion retail requires an ultra-modern approach
The current approach of keeping prices low to meet consumer demand could have catastrophic consequences for retailers – just look at the number of mid-range clothing companies that have fallen by the wayside in recent months, underlining the impact of getting pricing wrong.
Many fashion players find they need to set even greater mark-downs on high volumes of leftover stock at the end of the season, and this approach can lead to a dangerous discounting cycle. Jaeger and Joy are both examples of retailers that have collapsed into administration in 2017, despite offering seemingly attractive deals for the consumer.
A more flexible approach to demand forecasting, and better methods for analyzing real-time shopping patterns, are required. Fast-changing fashion trends and discerning consumer behavior mean long lead times for buying in items no longer make sense. In fact, traditional buying cycles are dead, and the old ways of predicting consumer demand for products are failing to generate profitable results.
Artificial Intelligence (AI) can help fashion retailers match customer demand to the most relevant price points for all items, and allow them to sell more at the price which yields the highest profit.
Pricing influences brand equity, so it is crucial fashion retailers do everything they can to get it right. Most global consumers tend to be tempted by price reductions rather than the opportunity to make huge savings, while frequent discounting by the same retailer is viewed as a real turn-off for shoppers.
These are the new fashion retail norms, and it will take a more scientific approach to successfully navigate the changing landscape. By embracing AI – which can optimize pricing strategy across a retailer’s cycle, from procurement to customer fulfilment – fashion brands can build long-term, sustainable strategies based on the relationship between price changes, consumer demand and commercial goals.
For further insight, download Blue Yonder’s new report with Retail Week Connect