women’s consignment pricing
Women’s Consignment Pricing-What We’ve Learned
Many consignment shop owners believe that a location with a wealthy clientele will bear higher prices than a less affluent location. The store owners participating in the development and piloting of NextGen’s Women’s Consignment Pricing System, questioned NextGen’s insistence that a pricing system could fit all markets. We expressed some pride in our ability to know what our markets would bear.
NextGen pointed out that resale franchises have for years employed largely brand-driven pricing models, with prices that worked across markets. They explained the obvious—that the retail prices of women’s accessories and apparel for a given item and brand are the same irrespective of the market in which they’re sold.
We took a wait and see attitude, pending the results of their multi-store sales analyses. What we learned was that brand was the most important factor in pricing. We found a couple of surprising patterns. One, that exact same items were selling for more in lesser markets and for less in better markets. And, two, that our pricing practices were not consistent.
Everyone knows the real estate mantra, “Location, Location, Location” when shopping for a home. We are now convinced that in pricing women’s consignment, it’s “ Brand, Brand, Brand.” While the NextGen Women’s Consignment Pricing System certainly allows for location as a factor in pricing, it doesn’t carry nearly the weight as the brand.
The NextGen Women’s Fashion Pricing System takes the guesswork and agony out of pricing. More consistent pricing means more money for store owners and their consignors.
Women’s Consignment Pricing – The Importance of Brand
According to Brand Keys the New York-based brand and customer loyalty research firm: since 2008 the importance of brand names has consistently increased, standing in 2012 at 29%–more than tripling in importance over four years. The more considered a purchase, the greater the role a strong brand plays in the decision making process, especially when it comes to fashion. Moreover, it can be expected to continue. According to Brand Keys’ latest Fashion Shopper Survey, the youngest fashion buyers (21-34 year olds) showed the strongest lift in brand importance. What’s more, it’s as true for leisure and casual apparel as for luxury apparel. The Survey shows, Nike and Hilfiger ranking right at the top along with Armani and Chanel in terms of importance in the purchasing decision.
In the 2012 Brand Keys Fashion Brand Index, the top spot goes to Ralph Lauren/Polo, followed by one’s favorite sports team, Armani and Nike with Versace and Chanel, tied for fifth place. I would argue that Brand is even more important to Consignment shoppers who are far more value conscious than the average shopper. Indeed, it is what NextGen has found, ….in spades!
Women’s Consignment Pricing – The Importance of Demand
Brand, i.e. perceived value and original price is, of course, central in setting resale prices. Indeed, along with condition, they’re the only factors mentioned in consignment pricing guides. But of overriding importance is demand.
There are four principal outlets for resale apparel. 1) Individual Garage and online sales, 2) Seasonal Consignment Events, 3) Online Resale Sites and 4) Brick and mortar resale shops. The pricing metrics for the Seasonal Consignment and Online Outlets are only now being established as these ventures are new on the scene. While, Ebay and the like have the metrics, the enormous range in prices for like items renders them useless. In short, We aren’t able to speak to these, nor will the surviving ventures be able to do so for a time.
But the sharp difference in demand between the other two: 1) garage sales and 2) shops serves to clarify demand’s import in pricing. First consider garage sales. The number of shoppers looking for the type and size of resale apparel offered (demand) is typically less than a hundred–generally far less. Contrast this with a typical consignment shop typically showing apparel to 5000 or more shoppers over a period of 90 days.
It explains why guides for garage sale pricing suggest giveaway prices for women’s apparel at $1-3 per item or 10% of original price, while guides for women’s consignment pricing range into the hundreds of dollars and 25-40% or original price.
It explains why the highest prices at which items will sell invariably differs from one outlet type to another, and why a set of prices can only be pegged to one type of outlet and attendant demand. It explains why women’s apparel and accessory prices in NextGen’s Pricing System, are calibrated specifically to women’s consignment shops based on years of sales statistics across multiple stores.
Many NextGen clients are beginning to buy items outright, either selectively or completely. Perhaps this is in responseto an increasing number of women’s resale “Buy Outright” stores or in an effort to improve sales margins.
The most common question about buying outright is, “shouldn’t we lower our prices to be sure they sell?” …and, by extension, shouldn’t NextGen have a set of lower price points for stores buying outright?
The answer to both is, NO!
It all has to do with your “Pay Price” which is how much you pay to have an item for sale.
- The Pay Price for most consignment stores is 40-60% of the selling price paid to their consignors.
- The Pay Price for most buy outright is 20-40% of the selling price paid to the seller of the item.
The lower Pay Price and higher sales margin of buying outright provides for any loss associated with items that don’t sell or sell for less than what the store originally paid for them.
It’s the buying or Pay Price not the selling price that needs to be reduced when buying outright. While the temptation is to lower the selling price to gain the sale, the right strategy is to be more selective in what you choose to buy. Bottom-line, the right price for an item depends on the market for it, not how it was acquired.
Takeaway Tip: Many owners moving from consignment to buying outright often start with selected consignors, customers with items likely to sell within the consignment period.
Note: NextGen Pricing systems are always calibrated to market, variously based on sales history, demographics, competitive landscape and strategy.
The NextGen Pricing System suggests the best price for an item that can be expected to sell within 75 days. Initially, NextGen obtained these data from a limited number of stores around the country. But in the last 2 years, the data base has grown to include stores in most states and provinces in North America. As most of these stores have been in operation for years, their addition to the data base enables Nextgen to better examine pricing strategies relating to area income levels and competition.
What have we learned? Far more stores under-price than over-price1
Why do stores tend to under-price? The fear that higher prices will turn away buyers
Underlying this fear is the assumption that buyer decisions are based on price more than value. This is to say that buyer decisions are driven more by item-specific price ceilings, i.e., “I would never pay more than ten dollars for a pair of sneakers” than on Value, i.e., I would never pay more than $10 for a pair of Converse” sneakers.” While the former mentality may be common among thrift shop customers, our analysis clearly demonstrates that it is the “Value” mindset that is prevalent in better consignment and resale shops, not the “Price” mindset. Simply put: Customers pay more for better brands than lesser brands.
Give your customers credit. They are value conscious and knowledgeable thanks to Google and other internet shopping and price-comparison sites. Always accessible at the press of a button on their smart phone.
What’s to be gained by raising under-prices? Customers, Sales and Profits
Right pricing is not what the market will bear, but what the market will embrace while maintaining timely sales. Dollar sales will increase. Margins—bottom-line profits—will likewise increase. Item sales may not, but should not decline.
Raising the price of under-priced items allows a corresponding increase in the amounts paid for these items. To get better brands, we must pay for them. The more we pay, the more we get.
Right pricing is Fair pricing, meaning fair to seller/consignor as well as buyer. In the end, it’s a win-win-win. The sellers earns more, we owners earn more, and buyers have access to valued items they would not otherwise see.
The Good news? While under-prices cannot be abruptly changed for fear of alienating longstanding customers, prices can be nudged up (optimized) gradually and imperceptibly over a number of years. Clients use the NextGen Pricing system to manage these changes.
1 Certainly, these data could be skewed. Perhaps the over-pricers are gone, having priced themselves out of business. Or just maybe we’re missing the under-pricers who didn’t have sufficient margins to cover their costs of doing business. Let’s reasonably assume a bit of both.
You have the store, the furnishings, the racks, the signage…and you’re taking in inventory. Are you confident in your ability to price? There are so many factors involved in pricing—it is one of the most important pieces of making your business a success. At the same time, it is the most vague and challenging piece.
If you price too low, people will think that your product is cheap. It’s very tricky–you think low prices will bring in business, and it may, but you will not gain a reputation for having great stuff, just cheap stuff. You are thrift. Shoppers will come to you because you have low prices, but you cannot sustain a business at that level, and your consignors will leave.
If you have wonderful labels, top of the line, but you overprice, they will stay on your rack…forever. Or…you will have to reduce the price, and that sends a different message. Now the customer thinks there may be something wrong with the item, or perhaps start to doubt their taste or knowledge of fine clothing. Not good.
Either way, you are not building a reputation for wonderful clothes at great prices! When business is slow, it’s easy to start to doubt yourself, to second guess everything you’ve done. I’ve been there. It’s hard and scary. The most important thing about your business is pricing. You can have the most beautiful or trendy store–but if the prices are wrong–you’re in trouble. And don’t forget, there is always another store opening to compete with you.
The bottom line is pricing. It can make or break your business. Wouldn’t it be awesome if there was a system out there to help you price? Well– there is. The Women’s Fashion Pricing System is the answer!!! It works. No more stress, no more guessing, no more anxiety. We know the business you’re in, and we can help you make it successful. Just enter the brand and category and we give you the price range. It’s that easy!
Talk to us. Let us help you. You’ll sleep better.
As an owner of four women’s consignment shops, I have a lot of experience in this business. Twelve years ago, when I bought my first shop, I remember how concerned I was about how this all works. How do you price used merchandise at the “right” price? You have to walk a fine line when pricing—you want things to sell, but at the same time, keep your consignors happy.
You can spend long hours researching how to price specific brands and items. You have some knowledge of what the retail prices might be, and you can search the internet, but it’s incredibly time consuming. You can’t always find what you’re looking for–and even then, you’re looking at retail prices. You still have to decide how to use that information to price your merchandise. It’s scary because you know pricing is key! You have to price it right.
The Women’s Fashion Pricing System from NextGen is the answer–absolutely! It will tell you how to price every item you take in by brand–from Gap to Ann Taylor to Armani! This system tracks prices using inventory sales data from a select number of successful consignment shops over a period of two years. Suggested prices are updated at least once a year and include over 4000 brands. This system is designed to suggest the best price at which an item will sell to the mutual benefit of consignor and shop.
It will help you price every item you take in as you are entering it into the Liberty 4 POS program. No extra steps or work…it’s all right there! I’ll be saying this often–I wish this had been available when I started!
More to come.
The Women’s Fashion Pricing System is created to make pricing easy—to take away the anxiety that comes with being unsure of how to go about it.
If you can read the label in a piece of clothing (for example: Ann Taylor, J. Crew, etc), you can price. All you have to do is enter the category in the space provided (blouse, sweater, etc), and then enter the brand!! I’m not kidding! The system will prompt you to fill in the information and then show you the appropriate price range, which you can select or adjust. There are no tricks. It’s very clear cut.
Our price ranges have been selected from information on pricing that we have collected from several successful consignment stores across the country. The suggested prices are prices that these items have sold at…proven sales. We give you a price range for each item is so that you have the ability to adjust the price as needed according to other variables, such as condition, age, locale, and demand. The important thing to remember is that we give you a price range—not just one price. You have the freedom to choose the price that is appropriate for your shop, but with confidence, that this range of prices is the right one.
Your staff can price with the same confidence. All they have to do is enter the category and the brand, follow the prompts for the additional details and the price range will come up. If they are very new to pricing, they can choose the mid point price and it will be a safe option. Of course, you can always enter any price you choose, but if you stay within our price range, you can be sure that you are pricing appropriately.
This is an amazing product! Your entire staff can price after a couple of hours with this system!
Talk to you soon,