The price is wrong
Price is critical in every retail business. But relative to its significance, it is very often treated as an afterthought. Cost-plus is all too often the approach, marking up bought-in prices to cover costs and allow a slice for profit on top. This has always been a back-to-front way of working and the inevitable consequences of slower stock turns and higher mark downs have been camouflaged somewhat. Most apparel businesses want and need some mark down – customers expect it and managed well, clearance can be profitable. Managing how much is the trick.
We have yet to see what the new normal looks like – right now is the interim version. But one thing is certain in my view. The apparel market going forward will be materially smaller – by perhaps 20%, maybe 25%. So everyone will be jostling for their share of a smaller pie. The wriggle room has disappeared and the need to optimise the entire business will be magnified as never before.
Look at what happens with either UK retailers going to the USA or the reverse. It is a very moot who is the least successful, us or them. There will be many reasons which are peculiar to each company but the one thing that almost all do (UK and US) is get pricing wrong. And both tend to price up, not by a small degree but massively. So a mid-market UK brand becomes a premium/designer brand in the US. Very few can successfully make this transition from a customer perspective – the only perspective that counts.
Pricing should be determined by your market, your competitors and your customers. This intelligence needs to define range architecture and critical price points, and design and sourcing needs to work backwards from there. You need to be trading against your competitor set with consistently competitive prices. Your core customers know your prices in detail, and those of the brands you share them with. They know what to expect. You can no longer afford the price of getting it wrong.
If you want to discuss this content or think a conversation might be helpful, do reach out to Richard.email@example.com