Why Fashion Retailers Should Use Real-Time Data to Strengthen Profits
The fashion industry has a love hate relationship with discounts. Brands and retailers are frequently tangled into an endless discount cycle, constantly pushing markdowns to stay ahead of competition.
In addition, staying at the sidelines and choosing not to participate when the rest of the market depends on discounts is difficult, so brands and retailers blindly follow to keep up. This scenario manifested itself more than ever when Covid-19 hit the globe, as fashion players from H&M to Zara to small boutiques resorted to deep discounts in a bid to lift consumer purchases.
Retailers should be aware discounting is a double-edged sword. While markdowns are inevitable, it doesn’t mean they have to amount to a huge loss.
February Sales May No Longer Entice
Year-round discounts have become commonplace in retail since the 2008 Global Financial Crisis (GFC), removing the need for seasonal promotional periods and sparking markdown addiction and fatigue. This was even more apparent in 2020, where Omnilytics confirmed the average discount for Black Friday deployed was deeper in 2020 at 42% vs. 38% in 2019 to cope with the pandemic’s economic fallout.
With 2021 kicking off, many retailers communicated a “back to square one” and advertised new products to serve as a much-needed palate cleanser from months of red sales messaging.
In January 2021, retailers seem to be balancing their communication strategy by pushing through new products. Analyzing newsletters from over 400 retailers spanning the US, UK, Australia, Hong Kong and Singapore through the Omnilytics Visual Merchandising function reveals the word “new” was used 10% more than the word “sale” for the month of January.*
Newness Strikes Back
Despite an aggressive approach in creative marketing campaigns, the shadow of 2020 still lingers over retailers as they use this time to clear stale merchandise piled up from last year. There are fewer products reduced for the first time this January than previous years across both markets, revealing most of what retailers promote in their 2021 sales is the same stock reduced on Boxing Day.
All that said, there is even less newness in the market now. Newness still is a crucial strategy in fast fashion. Even in a retail downturn, a healthy newness level is effective at engaging and attracting consumers. Demand is the leading force in the consumer-driven retail landscape we are currently in. As consumer preferences shifted as the coronavirus pandemic situation progressed, so did new and unique trends. This is where newness comes in to meet the new set of needs. Read more on how to validate your spring trends idea here.
Maximising ROI Using Real-Time Data
Those who rely solely on social media to promote their business may be at a slight disadvantage but nevertheless, they can still capitalise on their competitors. How?
By utilising the power of analytical data businesses can expect to maximise profit returns by determining:
- What products to stock up on
- How to price products
- Who your competitors are
Knowing the overall pricing architecture and strategy of market competitors would help in deciding on an appropriate product price, such as:
- Deciding on what is a good standard price markup for products based on the industry average.
- Understanding a product’s market rate and speculating if a higher price range could work.
- Strategising discounts based on how other competitors are pricing their products.
- Understanding the price points at which customers are willing to pay for a particular product.
Knowing the average pricing range for clothing categories in the market at any given timeline will assist in pricing decisions, and this could potentially increase profit margins.
The chart above shows on average the dresses sold in H&M and Zara that were priced below USD 25 are 61% and 62% percent of their total items respectively. It is also important to note that the analysis shown above included sell out rates for you to analyse how well these two retailers are stacking up in each pricing category compared to one another.
Although both retailers carry lower to mid-priced products, Zara’s sell out rate is definitely higher.
Shelley E. Kohan, assistant professor Fashion Institute of Technology in New York, recently shared an analysis of Zara on their adoption of the 4Es marketing concept. Over the years, Zara has adopted the new 4Es of marketing strategy—Experience replaces Product; Evangelism is now Promotion; and Every Place is a new Place and most of all Exchange is new Price —that puts the customer at the center around which the company and brand revolve. That may well be the reason why Zara is achieving such encouraging result in the past months.
Competitor Research: An Essential Part of Pricing
Omnilytics is able to provide data on the performance of market competitors, including:
- Number of product SKUs that are being stocked
- Sell-out rates
- Pricing strategy for all products
- Percentage of replenished products
- Percentage of discounted products
- Most common discount range
- Most popular clothing colours
Contact us for more info to learn about how real time data can help your company here.
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