December 25, 2019

New Items, Higher Prices

It's one of the common themes of 2019. The CFO is fed up with low margins and wants something to be done about it. So the merchants respond, new items will be more expensive.

In this example, new items maintained synergy with existing items until the past year, when new items were introduced at a price point considerably higher than the overall average.

It might be necessary to do this ... but it is a dangerous strategy. See, when new items are fundamentally out of line with the rest of the brand, customers frequently skew to the less expensive existing items. This causes new items to not sell well, which causes marketers to offer blanket 40% off promotions which causes all items to artificially deflate in price. In other words, you destroy pricing integrity across the board.

Analyze your 2020 assortment ... what are your merchants doing that you need to pay attention to?

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