Supply Chains Are in Flux. How to Price Luxury Fashion?

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At a pop-up shop in Los Angeles early in November, Marysia Woroniecka, chief executive of the Zero + Maria Cornejo fashion label, gestures toward a rack of luscious merino wool and cashmere knitwear.

In the months between the design and manufacture of the New York brand's autumn collection, the knitwear range had seen a storm of supply-side pressures that forced her to re-evaluate the label's pricing strategy. There was a 15 per cent import duty left over from the Trump Administration, wild swings in shipping costs, starkly rising prices for yarns, ocean transport delays that forced the brand to ship by air, and inexplicable delays in a South Florida customs warehouse.

Rather than pass those costs along to customers, the brand decided to shrink profit margins on some expected bestsellers, hoping to keep clients loyal. "This whole group should be 20 per cent more expensive," Woroniecka says grimly. "Costs have rocketed up and speed has ratcheted down."

Pricing collections is always a balancing act. This summer and fall, the process became more precious as brands tried to guess at how much consumers might be willing to absorb, factoring in higher manufacturing and shopping costs. Much of the pricing pressure is hitting stores with the autumn collections, and brands are scrambling to determine which factors they must address first as they navigate the tricky production cycle.

...No clear formula is emerging to guide brands as they decide where to raise prices and when to shrink margins. Navigating the new cost frameworks can reward the nimble-footed. Data analytics provider First Insight and the Wharton School of Business recently published a survey that revealed that 98 per cent of retail executives expect supply chain disruptions to negatively affect the holiday shopping season. One-third of the executives suggested that they would absorb increased costs to keep prices steady. Fifty-nine per cent expected to pass higher costs on to consumers.

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Survey Results  Luxury Retail  supply chain challenges  supply chain  Consumer Purchase Behavior  supply chain disruption