\n
Matt Pavich<\/p>\n
Senior Director of Retail Innovation, Revionics<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
Consumers, especially younger ones, are paying attention to the quality of goods and services when it comes to spending their money, Popovich also said.<\/p>\n
\u201cGen Z and millennials in particular are more focused on product reviews and influencers and getting information from online social media sources about whether this purchase would be worth it,\u201d she said. \u201cThey would be very focused on, \u2018Has somebody else bought this product? What did they think about it? Did they think it was worth the money?\u2019 And that’s going to really drive their purchase decisions, more so than older consumers.\u201d<\/p>\n
Retailers like Abercrombie & Fitch with strong merchandising are likely to win over such customers, according to GlobalData Managing Director Neil Saunders.<\/p>\n
\u201cThe small things Abercrombie & Fitch has changed, like better buttons, softer fabrics and little design embellishments, all make its proposition more defensible in a crowded and competitive marketplace,\u201d he said by email. \u201cThey also represent added value which gives people a reason to spend a bit more on the products rather than trade down to cheaper alternatives \u2014\u00a0of which there are many.\u201d<\/p>\n
Even trading down can mean a search for a higher quality, according to Pavich. For example, Starbucks last week said a \u201ccautious consumer environment\u201d contributed to worse-than-expected Q3 sales and traffic. But some of their customers may be switching to premium coffee and expensive brewing equipment for use at home in order to save money in the long run, Pavich said.<\/p>\n
\u201cPeople are making really informed choices. They’re not always going to the bottom,\u201d he said. \u201cWe’ve seen some great growth at the discounters, but I do think if you’re offering a really good value proposition, you’re seeing those retailers do well as well.\u201d<\/p>\n
What is \u2018quality\u2019?<\/h3>\n
For some, quality may found in some combination of meaningful details, durability, design or brand name. For others, it could be that employees are paid well or manufacturing is sustainable. Still others may prize convenience, excellent customer service or liberal return policies.<\/p>\n
\u201cIt varies by customer and by retail segment. But I do think value is the major story right now. And the goal is to offer value to consumers even more so than price,\u201d Pavich said. \u201cThere are certain categories \u2014 like you really can’t afford to wear cheap shoes, because they’ll fall apart, right? You’re better off paying more to get a pair that will last longer. That’s definitely happening in the market.\u201d<\/p>\n\nA report from consulting firm AlixPartners and the Footwear Distributors and Retailers of America, released Tuesday, backs that up. This back-to-school season, 67% of parents looking to buy shoes for their children are prioritizing quality and comfort compared to 42% who are prioritizing price, according to that research.<\/p>\n
\u201cWe\u2019re seeing a shift in how parents view footwear products and prices,\u201d said Bryan Eshelman, partner and managing director at AlixPartners. \u201cWhile inflation has been an obsession among shoppers around cost \u2014 recently raising the importance of discounts to drive traffic \u2014 the deal alone isn\u2019t what\u2019s converting sales of kids\u2019 shoes today. Consumers, in fact, are more focused on value for their spend.\u201d<\/p>\n
For higher-end companies like Tapestry, attributes like \u201cquality of craftsmanship and innovation\u201d have helped boost average selling prices, according to a June research note from TD Cowen analysts led by Oliver Chen.<\/p>\n
\u201cWhile discretionary spending is under pressure, shoppers are drawn to newness and strong brands,\u201d he said.<\/p>\n
Retailers in the DTC space or those developing private labels are successful when they take quality concerns into account, per that report, which is based in part on discussions with several retail executives.<\/p>\n
Warby Parker offers \u201cstylish lenses for significantly less without sacrificing on the shopping experience,\u201d for example, Chen said. And Macy\u2019s is taking not just price but also fit and style into consideration as it overhauls its private labels, per the note.<\/p>\n
\u201cMultiple CEOs emphasized how the consumer perceives value and isn’t always shopping for the lowest price,\u201d he said.<\/p>\n\nThe calculations for retailers<\/h3>\n
Determining pricing is a multilayered consideration in an environment where consumers are conscious of both price and quality \u2014 and define quality in often idiosyncratic ways.<\/p>\n
\u201cThere’s always an art and science. At a very basic level, you as a retailer have to understand your business and how your consumers shop,\u201d Pavich said.<\/p>\n
Customers tend to expect higher prices on brand names and organic ingredients, and lower prices on private labels or volume purchases. Yet there are many permutations, as when private labels are made with premium materials. Demographics, geographies and points in time are also often factors in consumer preferences and expectations, according to Revionics data. A retailer may be wise to cut the price of a particular item if a competitor down the road is having a sale, for example.<\/p>\n
Loyalty programs can help retailers glean data about what their customers are interested in and how they respond to marketing and promotions.<\/p>\n
\u201cIt’s really about knowing the market, knowing what’s competitive for that market, knowing why it’s competitive,\u201d Pavich said. \u201cConsumers vote with their wallet, and then you have a data point and you understand what is worth it to them. Is it that slightly higher-quality product, is that organic product, is that local product, is it a women-owned business, is it gluten-free? Whatever is making them care more about that product.\u201d<\/p>\n<\/p><\/div>\n
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