Decoding Holiday Promos: A Data Score Interview with Flywheel on Fashion Industry Pricing Trends
Interview: Flywheel Digital's James Griffiths and Nick Katzaroff on the Fashion Industry Holiday Promotional Activity
Welcome to the Data Score newsletter, composed by DataChorus LLC. The newsletter is your go-to source for insights into the world of data-driven decision-making. Whether you're an insight seeker, a unique data company, a software-as-a-service provider, or an investor, this newsletter is for you. I'm Jason DeRise, a seasoned expert in the field of data-driven insights. As one of the first 10 members of UBS Evidence Lab, I was at the forefront of pioneering new ways to generate actionable insights from alternative data. Before that, I successfully built a sell-side equity research franchise based on proprietary data and non-consensus insights. After moving on from UBS Evidence Lab, I’ve remained active in the intersection of data, technology, and financial insights. Through my extensive experience as a purchaser and creator of data, I have gained a unique perspective, which I am sharing through the newsletter.
This edition of the Data Score Newsletter revives our Q&A series, offering a deep dive into the compelling insights that data analytics firms provide, showcasing the impactful narratives data can unfold. This and future data provider interviews won’t be paid placements or act as an endorsement of one data vendor over another. Also, this is not investment research.
Interview Focus: How are fashion companies promoting this holiday season?
With the holiday season underway, Black Friday and Cyber Monday spending in the US has increased slightly year over year compared to initial expectations that had come down.
More than 200 million shoppers made purchases both in-store and online during the Thanksgiving weekend, the National Retail Federation (NRF) said on Tuesday, representing a near 2% increase from last year and surpassing the trade association's estimates of 182 million.
Early indications from the US holiday selling season kicked off with somewhat higher revenue than a year ago. “I don’t think we’re seeing great sales numbers, but I think expectations were sufficiently beaten down that this was sort of expected, if not a little bit better," said AllianceBernstein Chief Investment Officer Jim Tierney. https://www.reuters.com/business/retail-consumer/us-cyber-monday-sales-hit-record-124-billion-big-discounts-report-2023-11-28/
Though the Black Friday weekend is important, it is not the entire holiday season. To get a better understanding of the drivers of the trend, we conducted a short interview with James Griffiths and Nick Katzaroff from Flywheel. We focused on the fashion industry and their web-mined pricing data. Flywheel tracks the list price and discounted price on the product display page of each individual retailer’s website each day. As a caveat to the data collected and analyzed, Flywheel flagged that they do not capture coupon codes or site-wide discounts that only apply at checkout.
The Data Score: Given the backdrop, how has the fashion industry in aggregate responded with their promotional activity this year compared to last year?
James Griffiths and Nick Katzaroff from Flywheel Digital: The US fashion industry has responded by promoting more aggressively so far this holiday season compared to last year. Looking at the weighted average of a sample of US fashion retailers using Flywheel E-commerce pricing and promotion data, US fashion e-commerce discounting activity1 for the trailing 28-day period ended December 3rd increased by 0.6% versus last year. This was driven by a 2.2% increase in the percentage of products discounted, as 57% of products tracked were being discounted. Meanwhile, the average percentage markdown was 46%, which was 1.7% lower than last year. Higher overall product discounts along with a 5% decline in average prices2 likely drove a greater percentage of products to sell out3, which increased 7.9% YoY. The ratio of new to total products tracked4 also declined by 5%, as fashion retailers are likely prioritizing clearing out current products and do not want to be stuck with excess inventory like last holiday season.
The Data Score: Are any fashion retailers promoting more aggressively than a year ago? Any fashion retailers holding firmer on prices by promoting much less than a year ago?
James Griffiths and Nick Katzaroff from Flywheel Digital: Yes, as you can see in the chart above, 48% of retailers were promoting more aggressively than last year, with 4% of retailers promoting with the same aggressiveness. Meanwhile, the remaining 48% were promoting less aggressively. Key US fashion retailers promoting significantly more aggressively (+4% YOY or greater) include: Old Navy, Adidas, American Eagle, Target (Fashion), H&M, Neiman Marcus, Saks Fifth Avenue, ASOS, JCPenney, Michael Kors, and Rent the Runway. Meanwhile, Macy’s, Nike, Under Armour, Gap, Revolve, Shopbop, Hollister, and Levi's have all promoted much less aggressively (-4% YOY or lower) so far this holiday season.
Concluding thoughts
I’d like to thank James and Nick for their time and effort to share the insights based on their data. If you’d like to learn more, you can reach out to James and Nick by email at james.griffiths@flywheeldigital.com and nick.katzaroff@flywheeldigital.com.
Also, feel free to leave comments and questions below the article too.
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- Jason DeRise, CFA
Flywheel definition: Discounting activity = (% of products discounted) x (average % markdown)
Flywheel definition: Average price = Average USD price of all products regardless of discounting or in-stock status
Flywheel definition: Sell-through = % products sold out
Flywheel definition: New product ratio = % of total products tracked that were launched in the past 30 days