In the luxury industry, Pricing is inelastic. Or as they say. But in the case of Victoria’s Secret, one of the world’s most popular inner wear brands, Pricing impacted Sales drastically. In the negative, that is. The stores had perpetual discount posters such as 5 pairs of inner wear for $28 and over time, customers declined with Sales slowing offline and online. However, UBS analysts found something interesting recently.
The average price on the website was up $44, up by 83% as compared to May 2019. There have been multiple reasons for this. With more customers on WFH for the whole of the last 12 months, it is not surprising that the demand for comfort and inner wear has soared high. Second, those consumers who walked away from the brand are coming back – perhaps due to small yet significant changes in the brand communication such as plus size models and more realistic mannequins, observed UBS analysts in their note.
Customers felt over the years that the brand was overpriced and the quality didn’t match as it used to be before. On the other hand, some remarkable improvements on the business side gives confidence that the brand is probably back in track. Same Store Sales Growth – SSSG – a key measure for retailers globally was 9% during Q1 CY 2021 up from 2019 levels. And Operating Income grew 665% during the same period. This means the brand is not only working hard in getting back customers to its stores and website, but has also improved the quality while focussing more on the assortment.
