Good News For Consumers: Fashion Deflation is Here

Posted on March 16, 2009

Forbes magazine declares that it's time for a Fashion Deflation. Prices on clothing and accessories have been rising so steeply for so long, that some thought the increases would never end. But it turns out there is a limit to what women will pay for a handbag or a pair of jeans. Now that consumer demand has fallen off a cliff, fashion prices are coming down. Way, way down.
There's some good news for shoppers amid the economic gloom: Lower clothing prices are coming soon, and not just for sale items. Mainstream brands such as Lacoste and Coach plan to cut retail prices as much as 30% on their fall offerings.

The reason: Fashion producers are trying to anticipate consumers' tighter budgets and avoid last year's drastic markdowns, which can undercut a brand's perceived strength. "The 70% discounts we saw during the holiday season are risky not just for brand integrity but brand equity," says Erwan Rambourg, luxury and sporting goods analyst at HSBC.

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For the fall, Lacoste will offer cable-knit sweaters, normally $145, for $98, says Robert Siegel, chairman and chief executive of the company. In spring 2010, Lacoste plans to lower prices in other categories, including its signature polo shirts. Price cuts do not mean a cut in quality, says Siegel. "We are taking it out of our own margins in our attempt to be more consumer-friendly."

Coach is also planning to trim profit margins, reducing its average handbag price to $300 from $335. Joe's Jeans, which sells premium denim, is dropping its entry price point to $138 from $145.

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Retailers are also trimming their sails. Instead of lowering prices on the lines they usually stock, boutiques are starting to incorporate more accessible products into their collections. Nordstrom plans to spend more inventory dollars on lower-priced merchandise.
Lower prices will be welcome for consumers, although spending is going to remain weak for the rest of the year at least. Many experts are wondering if consumers have totally lost their taste for paying outrageous prices for luxury items, such as handbags and shoes. After all the discounting that's been going on, some experts say that pricing in the luxury market has been permanently changed.