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Price sensitivity falling across retail categories: study

Oct '19
Pic: Shutterstock
Pic: Shutterstock
A study by US firm First Insight found elasticity and price sensitivity are falling in every category, including apparel for women, men and kids and home goods, compared to its 2017 study, unveiling many opportunities for retailers to leverage through higher pricing. It examined data between September 2017 and April 2019, along with other proprietary sources.

“Over the past two years, we have experienced a strong labour market, growth in disposable personal income particularly among millennials and elevated consumer confidence which is creating an environment where shoppers are less sensitive to pricing across many retail categories and subcategories,” company chief executive officer Greg Petro said.

“This shift is creating many opportunities for retailers and brands, but there is still a disconnect in several subcategories between what they’re charging, and what consumers would actually spend,” he said in a press release.

The study examined pricing and price elasticity trends on hundreds of thousands of items processed through InsightSuite, the company’s predictive analytics platform, which enables retailers and manufacturers to effectively select, price, market and buy new products with no sales history.

Other findings show new opportunities in womenswear will increase prices in dresses, sleepwear, outerwear, bottoms, tops and lingerie. Womenswear is seeing continued fall in elasticity overall and represents opportunities for retailers to maintain or increase prices.

While in subcategories including handbags, swimwear, footwear and jewelry, retailers have been increasing prices in line with demand, opportunities for price increases exist in sleepwear, outerwear, bottoms, tops, lingerie and dresses, where retailers have been lowering prices.

These trends are reflective of the growing spending power of millennials as they mature into higher-income positions based on a strong economy and overtake baby boomers as the largest generation of shoppers in history.

Menswear shows opportunities for price increases in outerwear and accessories, but may need to reduce pricing in men’s tops. Apparel for kids are relatively well-managed by retailers, but show opportunities to increase pricing on tops.

Footwear, which shows a significant rise in price elasticity when compared to the previous report, is also well managed as retailers have been responding with lower prices. The one poorly-managed exception is in children’s tops where pricing elasticity is falling, and retailers are decreasing prices, representing an opportunity for retailers to capture greater revenue.

Fibre2Fashion News Desk (DS)

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