For more than 30 years, Chico’s FAS has built its business by cultivating beautiful apparel that puts the needs of its fashion-savvy customers first. However, as a specialty retailer with diverse brands including Chico’s, White House Black Market and Soma, understanding the different products in an assortment and how to price them is critical to compete.
Chico’s announced a partnership with First Insight last June which enables the company to more quickly and accurately make design, buying and pricing decisions on the apparel, shoes, accessories and jewelry it offers to its consumers both in stores and online. During a panel at NRF’s Retail BIG show moderated by Greg Petro, CEO of First Insight, “Retail Disruption: The Science Of Pricing And Competitive Differentiation," Richard Flaks, SVP International and Strategy at Chico’s FAS discussed the role predictive platforms play in selecting the right items and determining the optimal pricing strategies for each.
According to Mr. Flaks, Chico’s is not a price player like the value retailers whose positive business results have been touted in the press of late. For Chico’s, which offers a range of products, an everyday low price won’t work, and one size can’t fit all when it comes to its pricing strategy.
“We have to understand the role of different products in the assortment, and therefore how we price them and differentiate the price,” he explained during the panel discussion. “It doesn’t make sense to just lower the price on fashion. We buy a whole lot of fashion product. We don’t know definitively which items will sell or not sell. If we price them all lower we are going to lose margins and revenue on those items.”
In some cases, he explains, a “high/low” strategy makes sense, which would price the fashion higher, watch the performance, and lower prices on items that need to be liquidated. He notes that “customers will pay for what they want.”
However, Mr. Flaks cautioned that price can also be a proxy for quality. For example, as a private label vertical retailer, if Chico’s lowers the initial price of a $60 garment to $30, customers think they’re getting a $30 garment for $30 – not a good deal. A low price can be misinterpreted as low quality.
There are also instances where you have to lower price, for example, when items in an assortment are comparable to other retail in terms of product attributes. In those cases, pricing higher but discounting it makes sense.
The challenge comes in deciding which pricing strategy makes sense for each item. “You have to make decisions on which items should be high/low, which should be everyday low price and how to price them. Figuring out pricing isn’t simple,” Mr. Flaks explained.
According to Mr. Flaks, analytics tools like First Insight are helping Chico’s make these decisions with a better understanding of pricing and consumer appetite, and which pricing strategies should be implemented on which products. One main component is to leverage Chico’s rich customer data with First Insight’s customer engagement and analytics to more precisely deliver what consumers want, lowering markdowns and expanding sales.
More recently, Todd Vogensen, CFO of Chico’s FAS, Inc. spoke on a panel at the Telsey Advisory Group Consumer Conference about the company’s use of AI and First Insight to optimize their pricing efforts. Mr. Vogensen said, “We used our machine learning, our advanced analytics and predictive analytics to understand how often our customers shop and how often they expect new goods. We figured out that we could be much less frequent in our deliveries.
“We created a strategic target to move from 14 floor sets a year down to 10. What that means for the merchants is that they have to understand our customer well enough that at a choice count level, those choice counts can work extra hard. That’s where First Insight came in for us. We could use First Insight to get an even better understanding of what those SKUs could do for us and what could be more productive.”
In the release announcing Chico’s partnership with First Insight, Shelley Broader, CEO and President of Chico’s FAS, Inc. said, “One of our key strategic initiatives is to leverage actionable retail science to improve our operational performance. Our rich customer data combined with First Insight’s online customer engagement and analytics should help us to identify top performing product as much as 12 months pre-season. We expect this partnership will enhance our ability to consistently deliver the uniquely original merchandise our customers want, resulting in stronger sales for our company.”
Let’s discuss how First Insight can help with your product and pricing decisions. Contact us here.