To make plopping down money on non-essential goods more palatable for consumers, fashion brands are lowering their prices, for good.
Along with launching pay-later services, running constant promotions and ramping up their loyalty perks, fashion companies are permanently cutting their retail prices to win over shoppers. During the ongoing coronavirus crisis, Americans have become more budget conscious and thoughtful about their purchases, faced with instability, unemployment and more time to reflect on choices. In step, fashion purchases beyond athleisure have fallen by the wayside.
To counter that trend, companies are forfeiting margins and overhauling business models. The goal for brand leaders is not only to retain customers and cash flow, but also to further cement the values on which their businesses were built.
Three-year-old accessories brand Pamela Munson, for example, dropped its prices by 30% on October 20, as part of a shift from a wholesale-focused model to 100% direct-to-consumer. It had previously sold to retailers including Bergdorf Goodman, Neiman Marcus and Shopbop.
To remain competitive at the start of the pandemic, many of the brand’s retail partners launched “fire sales” with marked-down products, said Pamela Munson, founder of her namesake company. For spring, it drove year-over-year sales growth for the brand by a triple-digit percentage. Before, Pamela Munson had only offered friends-and-family sales twice per year.
Seeing the demand for her products at the lower price accelerated Munson’s decision to shift to the DTC model. The move had been planned for 2021.
“I got to a point where I didn’t feel the retail price was reflective of the value of the product, and that didn’t sit well with me,” said Munson. She noted that retailers consistently pressured her to increase the brand’s markups, which ranged from 2.0-2.7, or 100-170% over cost.
Munson communicated the price drop through an Instagram Story on the brand’s account, calling out the new price range of $150-$395. It was also announced in an email to customers and on the homepage of the company’s e-commerce site. Prior to the shift, the brand’s website was shut down for a week, to avoid customers “seeing a bag for $400 one day, $280 the next,” said Munson.
In September, direct-to-consumer fashion brand Cuyana also permanently reduced its prices, including select accessories by 10-20% and apparel pieces by 20-30%. Early in the pandemic, the company didn’t cancel any orders with suppliers, but instead shifted its March buys to high quantities of best-selling styles. With ample inventory available, founders Shilpa Shah and Karla Gallardo decided to offer customers more accessibility by forfeiting margins via a price drop. Before this year, Cuyana had a 90% sell-through rate, without offering promotions. It’s maintained that, holding true to its “fewer, better things” tagline and goal of producing zero waste.
The company communicated the pricing change to customers in emails and its social channels. “We just said, ‘This has been a tough year. And rather than encourage you to buy rapidly and unintentionally — which is not the Cuyana way — we’re going to lower prices across the board,’” said Shah.
This year, Cuyana has seen the common sales trajectory of “better than 2019 sales, then dropping below 2019, then tracking back up again,” said Shah. “It’s an interesting year, because the pressure for growth is there, but not in the same way. We’re allowing ourselves to be more efficient, effective and thoughtful in our approach. It’s just meeting what our consumers’ needs are and trying not to go beyond that.”
Cuyana plans to host a Black Friday sale for the first time this month, offering a discount on its best sellers — but there are no plans to make promotions a habit.
“Other [DTC brands] just keep putting things on sale and trying to justify the sale,” said Shah. “You can do it once, but you’ve got to change your messaging from, ‘We never do this,’ if it’s the 15th sale.”
But dropping prices for the long term isn’t for everyone.
On quarterly earnings calls since March, luxury fashion companies from Capri Holdings to Ralph Lauren have been vocal about their aims to increase average unit retail, or AUR, by increasing product prices. On its November 5 call for the quarter ending on September 30, Capri Holdings CEO John Idol said the company has been “quietly taking price increases” for months within its Michael Kors and Jimmy Choo brands, and will continue to do so for the next 3 to 4 quarters. Depending on the company, it’s a play to bank on of China’s rebound, recover early-2020 losses or strengthen its luxury positioning.
“We’re in a pandemic!” said Munson.”But don’t count on the larger conglomerates to shy away from their pricing strategy.”