The Analyst Team

January 26, 2022

The 5 Categories Impacted So Far By Price Inflation

From fewer discounts to rising supply chain costs, we dive into areas of opportunity for price hikes from sofas to high heels.

An ongoing trend extensively covered by EDITED - inflation has been infiltrating retail. This has led to designer brands using the opportunity to elevate brand perception while mass retailers feel the pressures of rising costs.

Read on for a deep dive into five key product areas in the market already seeing increases and reach out for a demo on how to nail your pricing strategies.

Key takeaways

• Some retailers are combating price increases by opting to discount less. In the US, the discount depth across December remained flat at 40% in both 2020 and 2021. However, the percent of the assortment that was on markdown decreased YoY from 61% to 52%.

• Next reported price increases of its homeware ranges by 3.7%-6% due to surges in costs for shipping, operations and manufacturing.

• Demand for heels is at an all-time high, with searches up 177%, driving the US market to boost the average full price of this style by $10.

• With the demand for faux leather skyrocketing, retailers can justify higher price tags by investing in timeless silhouettes, such as the trench coat, and promoting items as investment pieces.

• As cotton prices hit new highs in 2021, men's T-shirt prices have increased with UK and US retailers now stocking more products priced between £20-£30 and $30-$40 compared to 2020.

• The average price of Nike's sports bras have uplifted 8% YoY, with more options priced between £35-£40.

• Transparency is vital for retailers making price adjustments in order to maintain brand loyalty.


Market Snapshot

Retailers address price increases

Transparency has remained paramount for retailers trying to connect with customers and maintain brand loyalty. That's why beauty company Deciem took to Instagram to inform shoppers it was adjusting its pricing after eight years of consistency. This announcement also allowed customers to purchase products at their current price over the subsequent two weeks before those changes came into effect. IKEA and Dunelm disclosed price increases for products like bed frames and sofas in the homeware market, while the CFO of UNIQLO confirmed price hikes for some products at a recent press conference. Back in December, Dr. Martens reported it would be adding £10 to the price of its classic 1460 boots in the UK from July 2022 due to rising costs.

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Image via @deciem

Discounting less is another route

In the US, the discount depth across December remained flat at 40% in both 2020 and 2021. However, the percentage of the assortment that was on markdown decreased YoY from 61% to 52%. In the UK, the discount depth across December dipped from 40% to 38% YoY, while the proportion on sale decreased from 56% to 50%. Burberry reported full price sales were up 26% compared to two years ago in the three months to December 25th. Marks and Spencer attributed growth for the second successive quarter to clothing and homeware - it reduced the number of products sold on promotion by 66% and stock into sale by 21% compared to the fiscal year 2019-2020. Superdry also plans to curb rising costs by cutting the size of its online sales and stopping discounts in store.

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Burberry Email UK - Jan 13, 2022

The five categories impacted 

1. Sofas

According to the US Census Bureau, furniture and home furnishing sales increased 61% during Q2 from 2019 to 2020. With demand remaining high and supply chain troubles persisting, IKEA, Dunelm and Next have addressed hikes in furniture prices. Next reported price increases of its homeware ranges by 3.7%-6% due to surges in costs for shipping, operations and manufacturing.

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When analyzing the average full price of sofas across a selection of US and UK retailers, prices jumped in six months, from July 18, 2021 to January 18, 2022. The majority of sofas in July fell in the price bracket of $1,400-$1,600, while the bulk in January sat in the $1,800 - $2,000 bracket.

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2. Heels
 
The pandemic forced people indoors, diminishing the necessity to buy and wear high heels - sales dropped by 65% YoY during the second quarter of 2020. However, as vaccines were rolled out and mask mandates were put in place, events were resurrected and searches for high heels on Lyst skyrocketed by 177% YoY in Q3 of 2021. As demand for this style grew, menswear and genderless markets expanded into heeled collections.
To make up for the decline in sales, retailers in both the US and UK have raised prices.

New Look, boohoo and PrettyLittleThing were top stockists of this formal footwear in the UK in 2020 and 2022 - because they increased pricing year over year, the average advertised full price rose from £29.50 to £31.50. The US market experienced a more significant shift in pricing with Steve Madden and Madewell driving the change. The average full price for heeled shoes at Steve Madden increased 7% from 2020 to 2022. Madewell landed several styles made from 100% leather, contributing to the rise in average full price up 29% from 2020.

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3. Leather

While leather remains a timeless classic in consumer wardrobes, mindsets have shifted, with demand skyrocketing for animal-free and more sustainable alternatives. Retailers have responded with in stock faux leather apparel increasing by 67% in the UK and 83% in the US compared to 2020. Luxury brands, including Gucci and Hermès, are also starting to explore alternatives, further cementing its rise in status.

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The market for synthetic leather is expected to reach $42.74mn by 2028 and provides a more affordable alternative to animal leather. Despite this, the global pandemic has impacted the market, with output affected by supply chain disruption and raw material prices increasing. For womenswear, outerwear has seen the largest price rise in the mass market when comparing 2020 to 2022, partly due to retailers stocking more trench coat styles. By buying into more timeless silhouettes, retailers can justify higher price tags and should promote items as investment pieces.

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However, sustainability concerns remain due to the plastic composition of many faux leather materials. According to Boston Consulting Group, consumers are willing to pay up to a 10% premium for more sustainable alternatives to leather. Known for its signature leather jackets, AllSaints is also focusing on sustainability. In January 2022, the retailer increased the price of its Balfern option in "squid ink blue," which now retails for £339 compared to £319 for original black. Its Dalby style in "ivory white" has also newly landed on site at £319, compared to £299 for its original design. Both products stand out on its website as they are labeled as "conscious." The Balfern also features leather manufactured responsibly via the Leather Working Group.

Images: AllSaints Balfern Leather Biker Jackets vs. the Dalby Biker

4. T-Shirts

Cotton prices hit a ten-year high in October 2021 due to several contributing factors, including extreme weather conditions and the impact of COVID-19 closing factories. Menswear T-shirt price buckets have increased across our selected retailers compared to 2020. £10-£20 remains the most popular interval in the UK; however, all four retailers are stocking more tees priced at £20-£30+. Our US retailers are stocking more tees priced at $30-$40.

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Retailers should look to include more sustainable yarns within T-shirts as a way to not only improve their eco-footprint, but to justify higher price points to customers. Look to Zara, who landed a new knit T-shirt design in January 2022 made from 70% ECOVERO™ Viscose and 30% polyamide. Retailing at £22.99/$35.50, the style sits higher than its basics tees, which enter at £9.99/$12.90.

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Multipacks

Marks & Spencer and H&M are stocking 37% and 69% more multipack T-shirt bundles in the UK than in January 2021. An appealing option, retailers can maintain value perception among customers while also increasing basket spend. While five-pack was previously the largest

multipack option available at H&M, the retailer now stocks a ten-pack set for £39.99. Marks & Spencer has also increased its bundle size from three to seven, which retails at £35.

 
Images: Marks & Spencer vs. H&M multipacks

5. Sports bras

All UK retailers inflate their average prices

As examined in our activewear deep dive, rising material costs, sustainable innovation and customer demand have all contributed to sportswear retailers marking up their retail prices. Sports bras in the UK market have seen average prices inflate across all our analyzed retailers. Like the US, PUMA has seen the most notable increase of its average selling price. Gymshark's entry priced Fit Seamless Bra has risen from £20 to £25, while its Apex Sports Bra is now £45 compared to £40 last year. Nike's average price has uplifted 8% YoY, with more options situated between £35-£40.

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US exit price points remain stable

Due to an array of technology for different sports and varying levels of support in each bra, there is a wide price architecture across active retailers. The entry price is supplied by adidas at $28, which is $3 more than its opening price in January 2021. Exit price points across the board are aligned with 2021, with Lululemon's $108 Enlite high support bra the most expensive. While PUMA has kept its entry and exit prices level with 2021, its average price has lifted 14% YoY due to retailing more options in the $60-$65 bucket, including its collaborations with goop and Liberty.

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While the supply chain saga continues, EDITED Retail Intelligence leads the industry in the analytics you'll need to react quickly to market changes, minimize any inefficiencies and capture other wins.
 
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Contributions by Retail Analysts Avery Faigen & Venetia Fryzer 

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