Price transparency – a game changer for customer engagement

Retail

Retail

James Stewart, National Retail Practice Leader, turns the spotlight on two retailers breaking traditional retail conventions. He details how these digital-first and socially responsible retailers are driving a shift in customers’ expectations based on price and product sourcing transparency.

We recently discovered US retailer Everlane which is changing the game on price and product transparency. This six-year-old retail business is rapidly becoming the epitome of a new age retailer successfully winning the hearts of customers with its offering of high-quality affordable clothes, savvy online channels, socially responsible values, and a level of price transparency that is truly a ‘wow’ moment.

Exhibit A

Everlane Exhibit A

Founded in 2010, Everlane sells men’s and women’s modern clothing basics and boasts “radical transparency” to customers through its mantra: Know your factories. Know your costs. Always ask why. [see exhibit B]

Exhibit B

Everlane Exhibit B

This mantra has made Everlane famous and a potential retail star.

Everlane’s team of employees cut their teeth at places like Google, American Apparel, GAP, Marc Jacobs and Goldman Sachs. They’re pushing boundaries and challenging retail conventions. Founder, Michael Preysman, has envisioned Everlane as “the look of Céline and the ethics of Patagonia”.

For each of Everlane’s stocked items of sweaters, t-shirts, pants, coats, shoes and bags, customers can view the production costs broken down by materials, hardware, labour, duties and transport. The Everlane retail price (production cost plus mark-up) is also compared to the retail price of a ‘traditional retailer’ [see exhibit C].

Exhibit C

Everlane Exhibit C

A great example of this transparency in action was a recent move to reduce the price of cashmere products when the price of raw fibres dropped. A cashmere sweater that cost USD$125 in November 2012, now costs USD$100. It was a move widely applauded by customers, who are growing a strong affinity for the honesty of the Everlane brand.

Everlane has also broken traditional retail conventions with the openness in which they talk about their factories around the world. Details such as location, owner, products made, materials used and employee conditions are shared online and made visible through photos of the factory and staff in action. Many retailers source ethical factories, but few broadcast the importance and integrity like Everlane do.

Everlane is not alone in this movement of digital-first, high-quality, socially responsible retailers.

DSTLD, a Los Angeles-based denim brand promotes its “moral fibre” with no sweat shops, eco-friendly fabrics and ethical pricing. For each item, they also show the retail price next to a retail price that a designer brand might charge. Once again, their focus is on clothing staples, not passing trends.

Can this transparent and socially responsible approach result in sustainable profitability?

Everlane and DSTLD are brilliantly connecting with customers by building trust and brand integrity through a whole new level of transparency. Both brands have built their business based on inherent beliefs of product quality, social good and brand honesty.

Everlane and DSTLD reflect a structural shift occurring whereby informed customers, largely driven by millennials, want to know where their product is coming from and what the actual cost is. According to Nielsen (2015):

  •  66 per cent of global consumers say they’re willing to pay more for sustainable brands – up 55 per cent from 2014.
  • 73 per cent of global millennials are willing to pay extra for sustainable offerings – up from 50 percent in 2014.

We believe the focus on transparency and social responsibility will translate to sustainable profitability provided the DNA of each brand remains true to the business model. What Everlane and DSTLD are doing is driving a shift in customers’ expectations to a new norm. For traditional retailers, it’s now a matter of how will they respond, especially where millennials are involved…

In the interest of radical transparency, I’ve got a cashmere sweater on order!

How can we help?

Our retail team has a track record of providing retailers and consumer brands with pragmatic strategic advice, meaningful performance improvement initiatives and customer insights based on data analytics.

If you would like to have a further discussion, please contact one of our retail specialists listed below.

SOURCE: Consumer-goods' brands that demonstrate commitment to sustainability outperform those that don't (Nielsen)

 

 

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