With coronavirus continuing to disrupt employment and hinder consumer confidence, retail pricing needs to be elastic to avoid dramatic discounting, damaging margins and credibility in the long run.
Key takeaways
- Luxury handbags are getting more expensive as prices are raised to pad out margins amidst the pandemic. In contrast, designer footwear prices are slowly dropping in the US.
- Hoodies, sweatshorts and bathrobes have seen an increased price tag across the mass market as demand for comfort continues to grow. On the flipside, as the loungewear market becomes saturated, women’s sweatpants are becoming more affordable.
- Despite the home workout boom, pricing for sports bras and leggings have remained stable while men’s performance sneakers have seen a slight price decrease.
It’s more essential now than ever before to understand how your pricing strategies stack up against the wider market. Harnessing the power of market intelligence, we investigate how prices for market sectors and key categories have shifted, removing the guesswork from benchmarking your assortments.
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The current state of spending
According to Track The Recovery, employment rates declined by 6.8% compared to January in the US as of June 27th. Total spending in this region decreased by 8% compared to January with apparel down nearly 11% as of August 2nd.
The UK has recently entered its first recession in 11 years. It’s been reported by the Office of National Statistics (ONS) around 650,000 workers in this region have lost their job during the pandemic. Even with stores reopening, more than half of retail sales are taking place online as high street traffic continues to slump with consumers reluctant to shop in store due to the recent heatwave and concerns surrounding further outbreaks according to the British Retail Consortium.
With these stats in mind, let’s take a look at how pricing has evolved in the luxury and mass market using the EDITED pricing tool.
The luxury market
Brands such as Gucci and Louis Vuitton announced pricing amendments for handbags within Europe, the UK and China to offset raw material costs and combat first-half losses due to COVID-19. Relying on the loyalty of their wealthy consumer demographic to survive the pandemic, the average price of luxury bags market-wide has sat mainly higher than in 2019. In July alone, the average prices on US and UK sites saw a 12% and 18% hike, respectively.
On the other end of the scale, luxury footwear is starting to dip. Last month, the average price dropped 2% in the US and 0.8% in the UK.
Analyzing footwear currently available online in the US, styles seeing the most notable pricing decline YoY are women’s sandals (-5%), men’s boots (-4%) and both men’s and women’s sneakers (-3%.)
Currently, Gucci stands out with the most significant YoY decrease with an average price point of $773.50 vs. $885.74 in 2019 on the US site and £733.62 vs. £811.33 for the UK.
The mass market
Analyzing the shift of average prices for men’s and women’s apparel online at mass market retailers show two different stories across the US and UK.
On average, the US has maintained a higher price point for full price goods YoY throughout the pandemic, with July average prices 8% higher than 2019. In the UK, retailers have tried to regulate their price points to last year and show very little discrepancy.
Taking a deeper dive into the US market, we break down the pricing shifts for three key areas that have been thrust into the spotlight since the pandemic broke out in February.
Does your business operate in the UK? With this region recently entering its first recession in 11 years, check out our trading playbook and reach out for a demo to see how EDITED can help.
Pricing for sleepwear has gone up 7%
Consumers prioritizing comfort and self-care throughout lockdown aided the success of this category last season, giving retailers the confidence to elevate their price points. Moving forward, the continued demand for comfortable clothing and working from home as the norm will help this market reach its forecasted global value of over $18 million by 2027 by Allied Market Research, making it an area of investment.
Opportunities to evolve price points have been noted in women’s bathrobes, which saw the most significant increase since before the outbreak as retailers backed cozy, luxurious fabrics warranting a higher cost. Prices for pajama sets have risen for both men and women – as Christmas approaches demand will soar for these items across the whole family and gifting.
Activewear is becoming more accessible
Rounding up the top five activewear categories at major US sports retailers show an average price decline of 3% compared to six months earlier. Separately, all products currently online are cheaper or the same as before COVID-19, except for tank tops where the seamless trend bears some responsibility for the higher price tag.
The price of performance sneakers for men, which sold well during the peak of the first outbreak, has lowered along with technical sporting jackets, which are eclipsed by the success of more purse-friendly hoodies and sweatshirts. It’s interesting to note, leggings and sports bras have held the same price point since February despite the increase in demand due to home workouts.
So, where does that leave loungewear?
The rise of loungewear was already set in motion pre-COVID. However, the global pandemic has caused demand to skyrocket and prices to evolve. Currently available online, sweatshorts have seen the most significant increase compared to six months prior as popularity and social media exposure surges.
While lower prices were noted for men’s hoodies and sweatshirts in spring, pricing for these items market-wide is starting to rise as retailers deliver FW20 lines. With the market becoming saturated, prices for women’s sweatpants have become more competitive, noting a 5% decline.
As COVID remains prevalent, retailers need to be vigilant about the changing market and maintain flexibility around their pricing models.
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