Retailers Test Pricing Strategy Amid Tariffs
NEW YORK – Several apparel retailers, including Levi and Aritzia, are pushing for more authentic products while gauging whether affluent shoppers are still willing to spend, despite the adverse effects of tariffs.
So far, the results are promising.
For instance, Levi Strauss raised its prices on some items in July but didn’t notice any dip in demand, according to Harmit Singh, the company’s CFO, speaking at the Goldman Sachs Global Retailing Conference in New York.
“We’re making a full court press to promote pricier products than we did before,” he mentioned. “Levi’s consumers typically earn over $100,000, and those we’ve encountered are largely resilient.”
Aritzia’s financial director also indicated that the price hike earlier this year had only a minimal effect on the order volume from U.S. customers.
This brand has a following among celebrities like Beyoncé and Bella Hadid, and they are not looking to discount heavily this holiday season. Instead, they plan to offer weekly sales during Black Friday, with full prices for the rest of the Cyber Monday season.
“We’re confident in consumer resilience,” asserted Todd Ingledieu, CFO of the Canadian retailer, during the same meeting.
While lower-income households are hunting for bargains due to President Trump’s trade war causing prices to rise, wealthier consumers appear to be hardly impacted by the slower labor market. Gains from the stock market and low levels of credit card debt have bolstered their financial standing. According to Moody’s, the top 10% of Americans, earning at least $250,000 annually, now make up 50% of all consumer spending.
Other companies, like Under Armour and Abercrombie & Fitch, are also shifting towards a more premium strategy in their latest revenue reports.
Kevin Plank, CEO of Under Armour, mentioned in August that they are considering raising prices for “embedded consumers who can handle the costs.” He noted they’ve successfully tested new high-priced items like the $45 self-form hat and a heat gear collection.
If this approach falters, advanced consumer tracking technology will enable retailers to adapt their promotions quickly and boost profit margins, as stated by Kate McShane, managing director at Goldman Sachs.
“The old methodology involved regular discounts, such as 25% off,” she explained. “Now they’re selling North Face fleece jackets in New York, testing prices for just a few days before adjusting them elsewhere.”
Analysts observe that many companies have already absorbed considerable tariff costs and aim to minimize discounts during this holiday shopping season, especially compared to prior years when excess inventory prompted heavy discounting.
“When I reviewed Summer and Back-to-School sales this year, I noted a strategy to launch seasonal items at full price,” remarked Allison Furman, a retail consultant at PWC, highlighting the unique shopping habits around Halloween. “It’s a bit like testing the waters to see what consumers will pay at full price, and if it doesn’t gain traction, then shifting to promotions.”
