As market competition, production costs, and consumer choices change, pricing strategies need to adjust to achieve an equilibrium between customer retention and profit margin maximization. The apparel sector is also confronted with special challenges like rapid fashion change, changing costs of materials, and global supply chain disruptions, driving pricing decisions.
As a result, it is imperative for apparel businesses to keep a close eye on pricing trends. New factors like AI & personalized pricing and traditional factors such as price skimming & competitive pricing influence pricing trends in the apparel industry. Businesses must conduct thorough competitive analysis to get a wind of the market’s stance regarding pricing.
Below we expound on how pricing trends affect profitability in the apparel industry.
What are the Pricing Trends in the Apparel Industry?
- Personalized and Customized Pricing: Brands often use dynamic pricing, changing the price based on the geographic location, the season, and many other factors. This is particularly the case with online selling.
- Fast Fashion: Many apparel brands are concentrated on delivering fashion fast and cheap to their customers. Fast fashion is generally available cheaper than traditional clothes.
- Impact of Sustainability: Due to sustainability concerns, the manufacture of eco-friendly apparel has blossomed. However, these sustainable clothes are usually available only at a pretty penny, considerably higher than traditional clothes.
- Clerance Events: Apparel prices take a nosedive in clearance sales. Off-season is the prime time for these clearance sales, when apparel companies start offering considerable discounts on their products.
- AI-influenced Pricing: Brands are starting to leverage AI tools to determine pricing.
How Can Pricing Trends Negatively Impact Profitability?
- Improper Discounting: By relying too much on discounts, offers, or flash sales, brands can cut long-term profit margins. In pursuit of short-term profits, brands may miss the forest for the trees and struggle to sell apparel that is not discounted.
- Unfair Pricing: While implementing personalized or dynamic pricing, brands may charge exorbitant prices for customers from a particular region or shopping at the peak season. This has the potential to alienate customers and lead to decreasing sales, and thus profits.
- Fast Fashion: For apparel brands, producing and selling fast fashion can often be akin to a high wire balancing act. Fast fashion involves razor-thin margins, and disruptions in any one aspect of the supply chain may lead to major losses. In addition, increasing regulatory pressure against fast fashion can also curtail sales and lead to losses.
- Technological Mishaps: Brands may rely too much on AI programs to determine prices. These AI programs can churn out outlandish prices and if these are not checked before final display, can lead to huge losses.
How Can Pricing Trends Increase Profitability?
Keeping Prices Dynamic to Maximize Profit
By studying price trends, apparel businesses can implement different pricing strategies for different regions or class of customers. Hence, prices become personalized and more palatable for price-conscious consumers. On the other hand, revenue from luxury segments is also maximized.
A prevalent example of dynamic pricing is Amazon. It is estimated that Amazon changes its product prices more than 2 million times daily. This has helped the retail giant’s profitability immensely.
Capitalizing on Eco-Wear Demand
Though priced more expensively, sustainable clothes are still rising in demand among consumers. Apparel companies are also understanding the importance of sustainability in textile production and increasing the production of eco-friendly clothes.
Sustainable brands like Lycra and Patagonia lead the way, generating revenue through their customers’ green inclinations. Fashion giants like Levi’s and Adidas are following suit, closely following the pricing trends of other eco-focused brands.
Utilizing AI to Optimize Pricing
Brands can use AI to position themselves for maximum profit. It considers various considerations, such as consumer behavior, the makeup of potential consumers, previous successes & failures, and much more.
AI is also not influenced by human bias in determining prices and frees manpower to do other jobs. Fashion retailers like Flipkart and Farfetch are leveraging AI while determining prices.
Conclusion
As can be seen from the above, pricing trends are a double-edged sword. Not studying them properly and implementing them blindly can lead to significant losses. On the other hand, utilizing price trends can also lead to enhanced profits.
For this purpose, proper market research is needed. One premier tool businesses can use is Fibre2Fashion’s custom research. Concentrated on the textile and apparel industries, our custom research can help you examine pricing trends closely.
Our deep field of researchers come up with pricing insights that are invaluable in pricing strategies. This can help businesses with dynamic pricing, seasonal pricing, luxury pricing, and more. Hence, Fibre2Fashion custom market research can help you craft prices that maximize profitability.