in womenswear, price between the planned resistance is ... · in womenswear, price between the...

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OCTOBER26,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

In Womenswear, Price

Resistance Is Increasing

1) FungGlobalRetail&TechnologyandFirstInsightconductedananalysis that found there is a persistent and significant gapbetween the planned manufacturers’ suggested retail prices(MSRPs) ofwomenswear products testedbyFirst Insight andthepricesconsumersarewillingtopayforthem.Onaverage,across all womenswear categories tested between January2013andJune2016,consumerswerewillingtopayonly76%of fullprice.Consumersnot seeing thevalueat fullprice is akeydriverofthemarkdownchallenge thathasbeenplaguingretailersandbrands.

2) Over the three and a half years ended June 2016, testedMSRPs of women’s tops and bottoms fell by 14% and 13%,respectively.Thepricesthatconsumerswerewillingtopay inthesecorewomen’scategoriesalsodeclinedovertheperiod,toonly74%–79%ofplannedMSRPs.

3) Due to thegrowthofathleisurewearand thecasualizationofwomenswear, consumersare showing lessprice resistance insome subcategories. For example, consumerswerewilling topay 82% of planned MSRPs for knit bottoms tested by FirstInsight, even though planned MSRPs increased significantlyovertheperiod.

4) Footwear consumers have been increasingly unwilling to paythehigherpricessetbyretailersandbrands.AsofJune2016,consumers were willing to pay only 74% of retailers’ askingpricesforfootwear.

5) Weexpecttoseecontinuedcategorygrowthinathleisureandfootwear, and an overall emphasis on incorporatingperformancetechnologiesintoworkwearandstreetwear.

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FungGlobal Retail& Technology and First Insight partnered to analyze adata set from tests performed on women’s apparel and accessoriesproducts. First Insight performed the consumer tests between January2013andJune2016in11countries:theUS,France,Italy,Germany,GreatBritain,Spain,Poland,Mexico,theNetherlands,CanadaandChina.

FirstInsightwasfoundedin2007andisacloud-basedtechnologycompanythat tests products on themarket acrossmany categories. The companyuses predictive analytics to determine which products, price points anddesignattributeswillperforminthemarketandresonatewithconsumers.

FirstInsightandFungGlobalRetail&Technologyanalyzedasetofdataonmorethan57,000women’sapparelandaccessoriesitemsin10categoriesthat had been testedwith consumers. Our analysis revealed thatMSRPsare trending downward in core womenswear categories, but upward innoncorecategories.

We found that there is a persistent and significant gap between theplannedMSRPs tested and the prices consumers arewilling to pay, thatconsumersaremorewilling toacceptpricegrowth inathleisurewearandactivewear than inother categories, and that consumersareunwilling topaytopdollarforfootwear.

BetweenJanuary2013andJune2016,FirstInsighttestedconsumers’reactionsin11countriestomorethan57,000apparelandaccessoriesitemsin10womenswearcategories.

Source:Shutterstock

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OCTOBER26,2016


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Loungewearand

Sleepwear

Swimwear Boeoms Lingerie Tops Dresses Outerwear Accessories Footwear WorkoutApparel

2013 2016

1.GapBetweenPlannedMSRPsandPricesConsumersWereWillingtoPayWidenedinSevenof10CategoriesTested

FromJanuary2013throughJune2016,thepricesconsumerswerewillingtopaywerelowerthantheplannedretailticketprice(MSRP)acrossthe10womenswearcategoriesinFirstInsight’stestingportfolio.

First Insight’s predictive analytics yields a forecasted average unit retail(AUR)pricefor lifecycleofeachitemtested,which,whencomparedwiththeplannedMSRP,providesapredictorofproductsuccessinthemarket.Thispredictor ishighlycorrelatedtoactualsellingprices.A lowpredictedAUR price relative to planned MSRP indicates decreased consumeracceptanceoftheplannedsellingprice.

In simple terms, First Insight data reveals that retailers’ proposed sellingprices decreased in sevenout of 10womenswear categories testedoverthepastthreeandahalfyears.

Whentested, theprices thatconsumerswerewillingtopaywere65%to93%ofretailers’askingprices,onaverage,acrossallcategoriestested.Thegap between MSRPs and the prices consumers were willing to paynarrowed in loungeandsleepwear,swimwearandbottoms,butwidenedintheothersevencategories.Thisoveralltrendalignswiththeincreasinglypromotionalnatureof retail, the impactofmulti-channel selling,andoff-priceretailandfast-fashionretail.

Figure1.PercentageofRetailers’AskingPriceConsumersWereWillingtoPayin10MajorCategories,2013vs.1H16

Source:FirstInsight

ThegapbetweenplannedMSRPandpredictedAURwidenedinsevenoutof10categoriestested.Overall,consumerswerewillingtopayonly76%ofplannedMSRPsin2016testing.

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2.PlannedMSRPsandPricesConsumersWereWillingtoPayTrendedDownwardinCoreCategoriesofTopsandBottoms

BetweenJanuary2013andJune2016,testedMSRPsofwomen’stopsandbottomsinFirstInsight’stestsetfellby14%and13%,respectively.Inthecoretopsandbottomscategories,thetestpricesdeclinedalongwiththepricesthatconsumerswerewillingtopay.

OuranalysisidentifiedapersistentgapbetweentheaveragetestpriceandpredictedAURpriceincoretopsandbottomscategories,withconsumerswilling to pay only 74%–79% of the planned MSRP over the period, asshowninthegraphbelow.ThismeansthataFirstInsightconsumerwouldbewilling topayonly$22–$24 fora toppricedat$30, forexample.Thisgapisevidencedbythecontinuedmarkdownchallengesthatretailersandbrandsface.ThepredictiveanalysisfromthisFirstInsightdatasetsuggeststhatiftheretailerwenttomarketwiththetoppricedat$30,thattopmayhaveahigherlikelihoodofbeingmarkeddownduetoincreasedconsumerpriceresistance.

Figure2.PercentageofRetailers’AskingPricesConsumersWereWillingtoPayinTopsandBottoms,Jan2013–Jun2016

Source:FirstInsight

InaJuly2016Euromonitor Internationalsurvey,74%ofAmericanspolledsaid that they loved to find bargains,which is not surprising. Consumersare increasingly seeking value in every aspect of their lives. As shownbelow, over the past five years, seven of the 20 fastest-growing brandsacrossallretailchannelsarevalue-orientedbrands.

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2013 2014 2015 2016

Boeoms Tops

BothplannedMSRPsandpredictedAURpricesaretrendingdownwardforcoretopsandbottomscategories,withconsumerswillingtopayonly74%–79%oftheplannedaskingprices.

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Figure3.Sevenofthe20Fastest-GrowingBrandsAccordingtoSalesGrowth,2010–2015

Brand %Change

WalmartNeighborhoodMarket 236%

NordstromRack 111%

HomeGoods 82%

AshleyFurniture 70%

rue21 70%

DollarGeneral 58%

Forever21 56%

Source:EuromonitorInternational

3. AcceptanceofPricingGrowthinBottomsDrivenbyAthleisure

Although pricing is trending down in the bottoms category, withconsumers willing to pay only 76% of the asking price on average,athleisurewearisastandoutsubcategorythathasshownstronggrowthinbothplannedMSRPandconsumers’willingness topay.Knitbottomsandleggings were the two strongest categories of price accceptance withinbottoms.Customerswerewillingtopay74%oftheMSRPforleggingsasofJune2016,anincreaseof12%fromJanuary2013.Andtheywerewillingtopay82%ofMSRPforknitbottoms,a9%increaseovertheperiod.Theknitbottoms subcategory (largely made up of athleisure/athleticwear) sawsignificant price increases over the period included in the data set, andconsumerswerewillingtopaytheincreasedprices.

As shown below, four out of seven key subcategories—leggings, knitbottoms, pants and shorts—saw increased MSRP acceptance over theperiod. Consumers’ willingness to pay full price for items in the threeremainingsubcategories—croppedpants,jeansandskirts—trendedflattoslightlydown.

Figure4.PercentageofRetailers’AskingPricesConsumersWereWillingtoPayinBottomsSubcategories,2013vs.1H16

Source:FirstInsight

Consumerswerewillingtopayhigherpricesforathleisureoverthetestperiod;theywerewillingtopay82%ofaskingpriceforknitbottomsand74%ofaskingpriceforleggings.

Knitbottoms,largelycomposedofathleisure/athleticwear,experiencedincreasesinbothMSRPsandconsumers’willingnesstopaythoseprices.

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Leggings KnitBoeoms

Pants Shorts CroppedPants

Jeans Skirts

2013 2016

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ASliceIntelligencereportfoundthatonlinepurchasesofleggingswereup41%in2016comparedwitha3%increaseinordersofjeans.AccordingtoEuromonitor, the rise of athleisure has helped to support the growth ofwomenswearsales,andwomen’s leggingsrecordedthestrongestcurrentsalesgrowth,of9%,in2015.LululemonAthleticagrewsalesby369%andAthletagrewsalesby95%overthe2010–2015period.SportswearbrandsNike,AdidasandUnderArmourallsawdouble-digitsalesgrowthin2015.

Even non-sports apparel brands are showing an interest in thewomen’ssportswear category, with fast-fashion brands H&M and Forever 21launchingsportsclothingandfootwear.TopshopannouncedapartnershipwithBeyoncétolaunchasportswearline,andluxurybrandsincludingToryBurch, Cynthia Rowley and Rebecca Minkoff launched sportswearcollections in2015.Euromonitorforecaststhattheglobalsportswearandcomfortable-dressing trends will continue to influence consumers’purchasingdecisions. The firmexpects sportsapparel and footwear salestogrowby$63billionby2020.

Figure5.ForecastApparelandFootwearCategoryGrowth(YoY%Change),2016–2020

2016 2017 2018 2019 2020

PerformanceFootwear 8% 8% 7% 7% 7%

Sport-inspiredFootwear 7% 7% 6% 6% 6%

Woman’sFootwear 4% 5% 5% 5% 5%

PerformanceApparel 5% 5% 5% 5% 5%

Men’sFootwear 5% 5% 4% 4% 4%

Children’sFootwear 5% 5% 5% 5% 5%

Childrenswear 5% 5% 5% 5% 5%

Sport-inspiredApparel 5% 5% 5% 5% 5%

OutdoorFootwear 5% 5% 5% 5% 5%

Womenswear 3% 3% 3% 3% 3%

OutdoorApparel 4% 5% 4% 4% 4%

Menswear 3% 3% 3% 3% 3%

ApparelAccessories 3% 3% 3% 3% 3%

Hosiery 2% 2% 2% 2% 1%

Year-on-YearGrowth


Salesgrowthinperformancefootwear,performanceapparelandsports-inspiredapparelisexpectedtooutpacegrowthinwomenswearoverallthrough2020.

Theriseofathleisurehashelpedsupportthegrowthofwomenswearsales.In2015,women’sleggingsrecordedthestrongestcurrentvaluegrowth,of9%.

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First Insight and Fung Global Retail & Technology predict that women’sactivewearwill continue todriveapparel sales, particularly as companiesare investing in fabrics and technologies that are multifunctional. Thedistinction between workwear and leisurewear is blurring, and there isopportunity to continue to grow category sales by integratingworkwearandstreetwear.

4. FootwearPricesWereUp,butConsumersWereUnwillingtoPayTopDollar

The average price of footwear in First Insight’s test portfolio increasedsignificantlybetween January2013and June2016, but, as shownbelow,consumers’willingnesstopaytheproposedpricesdeclinedsteeply.

Figure6.PercentageofRetailers’AskingPricesConsumersWereWillingtoPayinFootwear,2013–2016

Source:FirstInsight

In 2013, consumers were willing to pay 82% of planned MSRPs forfootwear. Thisdeclined to74%by June2016, suggesting that consumersare not willing to pay the higher prices that footwear retailers areproposing.

The proportion of footwear items in this First Insight data set increasedsignificantly from January 2013 through June 2016. The cost of creatingshoe prototypes and samples is extremely high, so obtaining consumerfeedbackonthefrontendisincreasinglyapriorityforfootweardesignersandmanufacturers.Digital propotyping anddigital design technology arepositively impactingthe footwear industrybyreducingthecosts requiredto produce samples, including the associated labor and materials costs.Companies such as Nike, Adidas and Under Armour are implementingdigital protoytping and, so, dramatically shortening the shoe designprocess. Footwear wholesalers are also increasingly seeking consumer-drivendatatoinformtheirlinerecommendationstokeyretailers.

The increase in footwear testing seen by First Insight is consistent withEuromonitor’s data. As shown below, US footwear sales growth isoutpacing apparel sales growth and is expected to continue to do sothrough2020.In2015,footwearsalestotaled$76.1billionandaccounted

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2013 2014 2015 2016

Wholesalecompaniesareincreasinglyseekingconsumerinputonthefrontendastheylooktoreducethecostsassociatedwithcreatingshoesamples.

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for 25% of total apparel sales. In 2020, Euromonitor expects footwear’sshareofapparelsalestoincreaseto30%,andreach$92.9billion.

Figure7.ApparelandFootwearSales,YoY%Change(USDMil.)


FromJanuary2013throughJune2016,thefootwearpriceincreasesinFirstInsight’sdatasetwereacceptedbyconsumersintheslippersandsneakerssubcategories,butconsumerswereresistant to theprice increases in thefive other footwear subcategories: boots, heels, sandals, booties andwedges. The biggest growth in price resistance was seen in wedges andbooties,up22%and21%,respectively.

Figure8.PercentageofRetailers’AskingPriceConsumersWereWillingtoPayinFootwearSubcategories,Jan2013vs.Jun2016

Source:FirstInsight

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TotalApparelandFootwearGrowth

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Footwearsalesgrowthhasoutpacedapparelsalesgrowthinrecentyears,andEuromonitorInternationalexpectsfootweartocontinuetogrowat4%onaveragethrough2020.

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Themarket forpremium-priced footwear is competitive, and theathleticand comfort footwear market is growing. According to Euromonitor, in2015,global footwearsalesgrewby6%,whileapparel salesgrewby4%.Thefootwearmarketcontinuestobeinfluencedbyathleisure,ascomfortis taking precedence. We expect footwear growth to continue to beinfluencedbyperformancebrandsandconsumers’desireforcomfort.

ConclusionAn analysis of First Insight product test data shows that consumers’willingness to pay full price is decreasing overall and in seven out of 10womenswearcategories.Thepricesthatconsumerswerewillingtopayinwomen’s tops and bottoms declined from January 2013 through June2016, with consumers willing to pay only 74%–79% of planned MSRPsacross the period. Due to the growth of athleisurewear and thecasualization of womenswear, prices and price acceptance in somesubcategorieswithinbottomshaveincreased.

The footwear category grew over the past three years; wholesalers aregaining customer feedback early in the process. We expect to seecontinued category growth in athleisure and footwear, and an overallemphasis on incorporating performance technologies intoworkwear andstreetwear,withafocusoncomfort.

Source:Shutterstock

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comErinSchmidtResearchAssociate

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