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Too Cheap, Too Early- How Underpricing Affects Fashion Startups And How to Deal With It

February 17, 2020 | by Femi | 0 Comments

Dreams alone do not keep a business going. Dreams, and a steady cash flow does. The dream may motivate you to start, but, to stay afloat, the brand must begin to make a steady profit.

 Forbes reported that 9 out of every 10 start-ups (fashion and others) fail. This is due to a number of reasons which include an apologetic or non-existent cash flow.

This happens not necessarily because the ideas, concepts, and designs are not laudable or the projects profitable. Rather, they fail because the brands are unable to grow quickly enough to a point where they can afford to pay the bills with a little extra in savings or investment.

Sometimes, this failure to gain traction is as a result of overwhelming challenges faced at the onset and in the early days of the business.

Exploring this, Mauvelli spoke to several designers and identified Underpricing as a major challenge faced by Nigerian fashion designers.

How do you know your products are being underpriced?

Underpricing happens when the amount you sell your product is lesser than the initial price tag you put on it. This means selling your product for lesser than you initially planned to.

In some cases, it is actually a pricing strategy that some brands use to aid sales because they want more patronage. When it is a pricing strategy, we can call it discount pricing strategy.


In our case here however, underpricing is not a strategy, rather it is what most brands, especially at the beginning stage, experience in the daily operations of running a fashion business.

To start with, here is why underpricing happens and how it can be avoided or stopped.

Swaying customer loyalty your way

Reducing price to get customer loyalty is a common strategy for startups. It has been proven over time that the easiest way to be competitive in a crowded market is to be the cheap alternative. Some brands stand out from their competition because they make a proposition that clients can't refuse, thereforethey gain loyal brand ambassadors.

When brands take to underpricing as a long term strategy, it ususally results in negative brand association and lower customer perception for the business. This means that even after the startegy period is over, customers continue to expect low prices from the brand and subsequently underprice its products.

Truly, people will go with what they consider to be the best option available to them. When that option is not your brand, you will have a difficult time convincing your client to buy at your set price, and this is what leads to the designers underpricing so that the customer can buy from the brand.

The branding angle

How customers see your business will invariably affect how they price your products. An upscale business may not necessarily have high prices and a start-up business may not necessarily have low prices. It's all about how the customer sees the business.

Branding holds a lot of influence in pricing. It can win the battle for you even before your customers approach the brand. How you define your brand, what people associate with your brand, the ethics and standards you uphold in your brand all make a statement to the customer.

Based on this statement, your brand will either be underpriced, normally-priced or overpriced. That is why packaging is so essential to some brands, and why some brands do not trifle with pictures, shows, social media and other items and avenues that portray their brand to the world, how they want it.


Customer buying power

The prevailing economic situation in the country will affect the buying power of your customers. If your customers make more money, you are likely to get your products sold for more. However, where your customers do not earn as much, it may result in them cutting costs; a strategy that will result in the underpricing of your products.

While it may not be possible to address all of these reasons as a designer, it is important that your pricing strategy comes from an analysis of your competitor's prices and that you focus on value creation. Just as there are customers that underprice, there are many more customers that will pay for the quality they want.

Create quality, keep it competitive and it will help to win loyal customers that will not underprice your product and service.

Getting Things Right

The key to pricing products right is research. While this can be tracked manually using the sales history of your brand and comparing it to your competition's, you can also use competitive intelligence software such as the Incompetitor for product tracking and the Inoptimizer for price optimization, if your brand can afford it.

It is important to understand that emotional desires drive most fashion purchases, according to an HBR article. You must be able to connect with your customers on this level. How you do this is by creating a product that people can relate to at certain parts of their lives.

Do not just create value randomly, attach a story to it. Committing to this form of value creation and creating an awesome user experience will keep customers coming back.

In the end, you may not be able to totally rule out the occurence of underpricing. However, as a designer, you can ensure it is dictated by your goals and business strategy and not by situation and circumstances.


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