Apparel companies are getting squeezed between lower consumer confidence and rising supply chain costs, reports McKinsey. There is a growing necessity for a new approach to pricing, merchandising, and supply chain management if brands and retailers are to stay on top of their game despite the pressures of inflation. Even as they seek to respect their price margins, companies also need to avoid stressing consumers, who are currently contending with price increases in everything from groceries to entertainment. How can apparel companies resist in the face of growing competition and reduced consumer confidence?
New Pricing Strategies
Fashion companies cannot afford to simply “pass the buck” of inflation to their customers by raising prices. The advent of companies like Shein, famed for their ultra-low prices, is already putting pressure on established fashion brands to keep prices low, and notable increases could simply push customers in the direction of mass-produced online stores. One way around the conundrum is to base price increases on demand. Cost increases can be limited to secondary and tertiary items that are less price-sensitive, so that prices can be maintained on key value items. Another is to find ways to reduce costs so that prices don’t need to be increased. For instance, companies can source materials from preferred, low-price vendors, minimize the amount of inventory, and reduce the number of stock keeping units. The latter (also known as SKUs) are the specific code given to each product. Sometimes, products can be very similar but have different SKUs—for instance, if they are part of a specific collection or clothing drop. Reducing SKUs allows companies to streamline processes while also reducing costs associated with the manufacture of each variation of products.
Investing in Merch
Fashion companies can boost brand awareness at a small price by giving away branded merch. Currently, brands like Adidas frequently give away branded merch in exchange for product testing and other services. As stated by fashion manufacturers, SpectraUSA, brands relying on expensive materials can reduce the costs of merch by bulk buying blank apparel and using iron-ons, embroidery apliqués, and similar designs to imprint items with their logo. Customers remember brands that have given them free merchandise, and indeed, freebies are a powerful way to boost brand loyalty.
Retailers can reduce the costs of production by manufacturing items in line with customer demand. For instance, Europe’s biggest online clothing, accessory, and shoe store, Zalando, has noticed that lower-cost items have a burgeoning demand. Therefore, they are changing up the content of their store by enticing customers with lower-cost offerings.
Reviving Dead Stock
Recycled and upcycled fashion are all the rage among fashion buyers, who now search for clothes through a more eco-friendly lens. Upcycling dead stock is one way to reduce waste and expense. Smart companies can publicize this effort, providing customers with precise data on the extent to which using dead stock can lower their carbon footprint. New dying techniques, small alterations, and the addition of beads and other small embellishments can completely change an outfit that didn’t “click” with customers the first time around.
To stay ahead in times of inflation, fashion companies need to implement new pricing strategies that limit cost increases to less price-sensitive items and find ways to reduce costs. Investing in branded merchandise can boost brand awareness and loyalty at a relatively low cost. Analyzing customer demand and manufacturing accordingly can help reduce production costs, while reviving dead stock through upcycling and eco-friendly practices can appeal to environmentally conscious buyers while also minimizing waste.