News

The problem with price – what you said

phoebe_soloLast month, regular columnist Phoebes Garland of Garland & Garland Fashion tackled the issue of price in Australia.

In her article, she argued, that “if you don’t understand price points, which offer good turnover in this retailing economy, you may as well not be in the business of fashion. If you can’t be competitive, in a nutshell just don’t do it.”

The article understandably struck a chord with our retailer readership who were mostly in agreeance with Phoebes article, while others were disappointed, or disenfranchised, that price had become such a priority for the new consumer.

Lynne Snare said; “What a shame this article is all about price .. sorry! I have a great fashion boutique .. Australian NZ & international fashion and our customers want this .. I would have closed long ago if I had focused on price. There are so many women who want good quality,some special pieces that will LAST . . and they come back every season and add to the beautiful pieces they have.”

But Phoebe agrees with Lynne; “We urge retailers not to sell on price, but value for money, to look at the quality of workmanship and quality of fabrics, and there is definitely some businesses that have have a niche for this market. What we are referring to is a mass market where the volume sales are and it seems more retailers are chasing this. Perhaps read the last bit where we urge retailers to educate the customer.”

What do you think? Do you agree with Phoebe that price is crucial to sales? Do you agree that the winning price points to allow good turnover of product usually falls in the $79.95, $89.95, $99.95, $129,95, (RRP’s) and say up to $150 for the volume?

shopping-2_2171227b

Here are a few reader comments;

Nicole Jenkins says:

Another great article Phoebes – I often get customers complaining about the prices of various fashion retailers who manufacture in Aus. They just don’t care that local production is more expensive – the price point they consider expensive has fallen a lot in the last thirty years. Also: I love Leona Edminston designs but can’t justify those prices for polyester. I wish she would produce more natural fibres – every time I go shopping for modern clothes, I return to the idea of making my own.

UrbanJin says:

Thanks so much for this very honest article Phoebes. Sometimes we forget that fashion retail is a business and not just about pretty things. I own an independent fashion boutique call UrbanJin. It’s a fairly new business and my aim is to support local emerging brands and I’m finding being competitive is posing a major challenge as locally-designed and made products are price point a lot higher. At the end I’m finding that price always overrides locally made products even if customers say they want to support locally made.

Lisa Simmonds-Webb of Princess Bazaar wrote:Retail_Sales

Hi Phoebes,

I liked your article with regard to price points in Australia.  I agree wholeheartedly – the magic numbers for us are $89.95 for a summer dress, $49.95 for a top, $79.95 to $109.95 for a good pair of pants and it seems that nobody wants to wear skirts anymore.  While we are still getting good dollars for well-known labels, our other previous best-selling labels need to work a lot harder to attract what was once their core customer.

As a retailer, I don’t particularly like the cheaper imports, however, to stay in business we’ve found that we just needed to bite the bullet so to speak and find items that are essentially a good imitation (dare I say it) but also an excellent price proposition.  It has turned our business around. We can still sell beautiful garments (not as frequently as we would like however) because now it is propped up by much more less expensive garments with a much larger turnover.

Our customer is generally women over 45 who want value for money, they are not whimsical  and not likely to make expensive spare of the moment decisions. When they are buying an expensive garment it is usually for an event or an occasion, however they will splurge and buy the $89.95 summer dress just because they like it.

Of course my statements are a broad generalisation and there are exceptions to every rule.  I have also found that by adding the extra `95 cents’ to every item it fattens up the margin nicely.

The other major challenge we have, which drives me insane, is the constant `Sales’ that the bigger retailers seem to have. This has changed the way we buy. I don’t want new stock in December and I don’t want to receive winter coats after March because we have educated our core customer that right at the peak of the season, everything should be on sale.  I am not interested in going on sale – if fact, we avoid it as much as possible.

Our one true saving grace is that most women over 45 don’t like to buy clothes online because sizing is so inconsistent  – there is a God.

dollar-sign-cutKen Novich of Miscellaneum doesn’t want an RRP and believes he should be given the choice to calculate his own margin;

Dear Phoebe,

I have just read your article on recommended retail prices and their importance. I have managed my own retail business for over 20 years and prior to that had careers with D.J’s and Myer.

Would you please clarify why a whole segment of suppliers and wholesalers regard it as their right and duty to actually specify a RRP? Many go as far as to show it on their website for the world to see.

I have never had any difficulty calculating just what margin I need to apply to the wholesale price to be able to cover my overheads and still make a profit.

Do wholesalers have some miraculous insight as to how much money I need to make to keep the doors open? Are we to assume that if retailers follow the RRP they will be prosperous and not have a problem? This sort of retailer probably hands over their invoices to their accountant on 1st July to find out if they have made any money last year.

What sort of a reaction would I receive if I insisted that the wholesaler make no more than a 40% GP on the cost of their goods before they wholesale them? I’m sure I would be told to get lost and mind my own business. So, I would like you to pass the word to all wholesalers with whom you have contact to ”mind their own business”. Do not quote recommended retail prices either to their retail clients or via their websites, to the retailer’s potential customers.

Yes, I can hear you stating that it is only a `recommended’ price but have you ever had to explain to a customer that has seen a RRP online that you are going to charge them an extra $10 so that you can continue to stay in business?

The fact that the usually low, unrealistic RRP’s quoted by some suppliers are obviously in their interests, since the lower the retail price… the more will be sold. Some obviously see the healthy margin they achieve selling direct from their websites and use this to establish their RRP.

This selling price for bricks and mortar retailers will almost certainly produce an insufficient margin to cover expenses. The often heard phrase from these people is “Oh but we hardly sell anything from the website”. If this is the case, by all means produce a beautiful, catalogue style website complete with a list of stockists. But leave the pricing to those who have to pay the bills and let retailers retail.

What a pity we have to pay rent, wages, insurances, superannuation, power, telephones, freight and maintenance. Without these ‘trivial’ items we might be able to lower our margins too.

I am hoping you see my point and thank you for your time.

227ccaa8-b1ee-11e2-b557-a0a7309c6515_38bc80a9fd1078233671-37584084_2--646x363And Phoebe’s response:

Hi Ken,

I wrote the piece and thank you for writing. As fashion agents we agree with you whole heartedly. On several of our labels we have always suggested to our labels not to put the RRP so retailers can get as much margin as possible. In some instances,  some retailers have requested it (I guess the more inexperienced ones like to use it as a guide to not be out priced or mark a garment up too much).

In this retailing market retailers need as much margin as possible.

Thanks again foryour instant feedback.

LET US KNOW WHAT YOU THINK ABOUT PRICE IN AUSTRALIAN RETAIL IN THE COMMENTS BELOW.

4 thoughts on “The problem with price – what you said

  1. Pingback: The future of retail | Exposed online

  2. i have always treated RRP as a bench mark in regard to the quality a brand feels they represent. in regard to being competitive, instead of competing with other shops on price and taking a beating, make them compete with you on quality and service. customer service is sometimes saying “no that does not suit you or does not fit”. dont be afraid to tell them no. and if you are open 12 hours a day for the consumer then you come accross as deperate and weak. be strong and get back to the principles that made you want to be in business. you felt as though you can make a difference. then be different. dont compete with the others. we open 930 to 430 and our shop is booming. a dog is not the alpha always because of its size but its attitude.

  3. Pingback: Guide to garment manufacturing overseas – The Do’s and Don’ts | Exposed online

  4. I agree with Phoebes about the price point which is very important in the retail business these days. I work for the garment manufacturer company in Pakistan and we are working for major retail chains of Europe and every season they tend to reduce price because their customers are becoming very price concious. Lowering the price doesn’t mean that they are buying cheap quality, actually they look out for value for money stuff for e.g the fabric from Turkey is expensive but you can find the same or relitively close quality in Pakistan or China in the reasonable price which can bring down your buying price to 3 to 4 USD. In my opinion to be a smart retailer you should know how to play your cards i.e. to select a right origin for your desired product,

    Thanks and best regards.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s