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An emerging trend in retail should scare everyone from Michael Kors to Macy's

Everlane shirtEverlaneEverlane sells basic items that are marketed as better quality than fast fashion.

Consumers are increasingly questioning the prices behind the products they buy  — and this trend is challenging some of retail’s biggest heavyweights.

Retail startup Everlane, which claims to offer better prices on clothing, encourages consumers not to shell out at department and specialty mall stores.

“Know your factories. Know your costs. Always ask why,” the company’s “about” page reads.

The e-commerce startup breaks down production costs (labour, materials, transporting the apparel, and duties) for all of its shoppers to see. One dress, for instance, is $US98 at Everlane, and Everlane claims traditional retailers would sell a comparable dress for $US190.

This is especially pertinent as consumers get used to to paying less for apparel on a consistent basis. Look no further than fast fashion — wherein behemoths like Zara churn out runway-like looks for less —  and the rise of discount retailers like TJ Maxx.

Macy’s is in the process of opening off-price outlets, while Nordstrom is expanding its Rack concept.

 

And the idea of transparency in fashion, which is increasingly important to young shoppers, could also challenge luxury brands like Coach and Michael Kors.

“64% per cent of millennials would rather wear a socially-conscious brand than a luxury brand,” Rachel Krautkremer, an editorial director for the creative agency Deep Focus, told Racked. “It’s a shift in how this generation views their clothing. They want to know where their product is coming from.”


Lower prices offer an additional appeal to cash-strapped millennials — or anyone watching his or her budget, for that matter.

“We thought, ‘What would it mean to build a Ralph Lauren from scratch on the web and go straight to the consumer?” Everlane’s CEO Michael Preysman said to Business Insider in 2012. “We’re not going to be the cheapest price, but we won’t be the most expensive either.  The clothing will be Barney’s quality at one-third the price.” 

 

Honest by prides itself on its transparency. “Honest by offers products with complete transparency in price and manufacturing, creating a new paradigm in fashion and retail,” the company writes on its website.

Up-and-coming retailer Oliver Cabell shows off its transparency in this graphic:

Oliver CabellOliver Cabell is transparent when it comes to production costs.

Usually, it’s a mystery as to how bags became so expensive.

“We’re actually flipping that inside out and saying, ‘Hey, we’re going to show you all these things,” Oliver Cabell’s CEO, Scott Gabrielson, said to In Forum.

There are some components to this process that make it easier to facilitate.

“Designing in-house, dealing directly with the factory; the business model is really structured to be as value-providing as possible,” Gabrielson said to In Forum. 

Everlane doesn’t have any brick and mortar stores, which certainly helps cut costs.

Jet.comJet/FacebookA box from Jet.com

Amazon-and-Costco-esque Jet.com — another company known for its abnormal level of transparency — is able to sell products for 10-to-15% lower than its competitors do by opting not to profit off of its sales. The company strictly makes money from shoppers’ $US50 annual membership fees.

Jet.com has outlined that it operates on principles of “transparency, trust and fairness.”

Further, by revealing production costs, retailers can make consumers feel closer to them. It’s a tactic that can plausibly help sales.

“If we think about our interpersonal relationships, when people share things with us — as long as they don’t overshare — we tend to like them better,”  Harvard Business School assistant professor Ryan Buell said to Harvard Business School’s Working Knowledge contributor channel on Forbes. “We find it interesting that we’re seeing evidence of the same thing in our relationships with companies.”

Ultimately, choosing to share this information with consumers can make companies more likable. 

“Our evidence suggests you should open yourself up and say, ‘Here I am, warts and all,”” Harvard Business School assistant professor Leslie K. John said to Harvard Business School’s Working Knowledge contributor channel on Forbes. “When you make yourself vulnerable, people like you more

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