Last Friday we started the holiday shopping season with a tremendous blast on Black Friday. For many retailers the day after Thanksgiving is the start of the Christmas season. This traditional discounts day in the United States was initially introduced to get people into the stores on the day after Thanksgiving. In recent years it has become a far broader discounts event for both retailers and online shops alike.
Even across the pond in Europe and Australia I Friday and cyber Monday have to come a true phenomenon. The media reported that over $3 billion in goods we’re sold on Black Friday alone in the United States. This is only a slight increase compared to last year. But a big blow for traditional retailers as most of the profits when to online shops.
Fashionista.com reported: Adobe has been gathering retail data from 22.6 billion visits to retail websites over the Thanksgiving holiday — and we’re breaking records, making history and shopping just a little bit differently than before. On Black Friday, a new record was set with $3.34 billion spent online — that’s $5.27 billion if you include the shopping done on actual Thanksgiving day.
It is canning to see that a traditional off-line event has become such a hype on the Internet. It seems like everyone has joined in this year. There’s no way that you could’ve afforded to stay out as a retailer.
Fashion Retailers and their winter stock
For our customers in fashion at GANDT Ventures, this was a great day to kick off the winter sale season. On mainland Europe winter sales have been slow so far because of the weather. At least the retailers state that the weather is to blame for the poor discounts so far.
Yet, we believe that there seems to be a general trend in the market too somewhat lower price points in the premium Fashion segment. Finding the correct price for your good is quite a challenge at the moment. The mid to high class consumer does not seem to be interested in “overpriced” goods. Company such as Inditex’ ZARA and Massimo Dutti have understood that there is a big market for mid-class to premium priced goods. This segment has become ever stronger in the last few years. This has raised the awareness of the customer that there is a segment shift between cheap, premium and luxury goods.
Conversion rates on premium goods rise steeply at discounts of 20 to 30%
One straightforward example: Consumers are not willing and able to pay up to €400 for premium jeans anymore. As they were about 5-10 years ago. Many premium fashion retailers need to sell off their True Religio, AG-Jeans and Seven for all mankind-jeans at much lower prices. We have seen that the conversion rates on these goods rises steeply at discounts of 20 to 30% (sample across the partner shops that we work with). This shows that there is a general willingness to pay €200-€250 for these premium jeans. However, the average premium consumer is not willing and able to pay 400€ anymore.
Is new not simply better?
This doesn’t mean that this accounts for all fashionistas and first movers that simply want to have the newest collections and the best products available at the market, but from our perspective we feel that the general public has become more conscious of prices. This could be due to a number of factors, to name but a few: (1) the midrange producers have started producing better goods than in the past, (2) the Internet has brought a transparency and pricing to the table that was not there before, (3) the market for mid to premium ranged goods has become significantly bigger.
Retail overstocking has become a huge issue, as fashion retailers do not make use of their data effectively
From our stats, we can see that the market for luxury goods is however still going strong. But it appears that the number of products that are being produced at the moment simply outnumbers the number of actual consumers that are willing and able to pay those prices. Retail overstocking has become a huge issue and the fashion retailers do not use their historical data and the information that is available on the market – or as we do it, using the user statistics on the website – this overstocking problem will become bigger and bigger in the future if marketing, data analyst and the buying teams do not work together as they should and could.
Black Friday will hopefully become a thing of the past
We hope that Black Friday will hopefully become a thing of the past in the next few years. However this is something that needs to start with the retailers and the brands themselves that cannot be driven by higher baskets and top level growth. A saturated market is not good for anyone in the long run. We try to work hard to make the traditional Fashion brands understand that it’s not only about image but we are able to run a profitable business if we listen carefully to the signals and signs that the customer show us and act accordingly in our buying and pricing behavior.
The aftermath of Black Friday is still there and we’re trying to send out all the packages as soon as we can and everyone in the industry is working over hours at the moment. This will give us a little bit of time to breath up until the holiday season and takes a bit of cash flow pressure off of our shoulders to pay for the next round of goods that we have prepared for next season. At least that is what Black Friday is definitely good for.
Longterm impact on Luxury Goods and Fashion
Within luxury goods, and fashion – an industry with highly skilled marketeers and brilliant creative minds – we need to be aware that price reductions ultimately destroy our entire market. Therefore we try to keep our affordables in minds at all times when we work with our partners and brands, using the tools that are out there on the market. We urge all designers and brands to focus on that what they do best – design, create and innovate at the top of your games again. Forget about top level growth, focus on your affordables and read the signs of the market before you produce something that quite possibly not enough people will want, or are able to afford.