Industry: Consumer Goods, Fashion

Area: Pricing Strategy, Research & Execution

In collaboration with EBITDA Catalyst, Revology's strategic partner for driving value creation for mid-market Private Equity.

SITUATION

Private Equity Involvement

• One of the world’s leading private equity firms acquired a major stake in Client co.

• The firm was eager to contribute best practices in areas like pricing.

Pandemic-Driven Demand Surge

• Client experienced booming demand in its direct-to- consumer (D2C) channel during the COVID pandemic.

• The Retail channel also saw widespread sell-outs and substantial growth during this period.

Regional Performance Disparities

• Client co operates in major geographic regions such as the Americas, Europe, and APAC.

• One region, "Region A," was outperforming the others significantly and was responsible for the majority of growth, revenue and operating profit.

ACTION

Client’s leadership team asked Revology and EBITDA Catalyst to undergo a Pricing Power Clarity assessment and recommend segmented, portfolio-wide pricing actions

Validated / assessed previously identified potential actions with a value-based pricing lens

• Client's previously identified pricing actions were well supported by analysis but fell short of fully harvesting value or covering inflation-driven cost increases.

• Client’s strategy of tightly managed supply, preserving scarcity and desirability, created an unusual demand curve, which strongly influenced the value-based pricing analysis and willingness to pay (WTP).

• Client had been conservative with past pricing actions, using strict MAP enforcement and rarely discounting, which gave the company a high credibility platform for pricing change
  

Reviewed the rest of the product portfolio for additional pricing strategy insights and price action opportunities

• Client’s product portfolio architecture offered advantages for mitigating price elasticity concerns, with “icon” styles having multiple price point options across a small “price ladder.”

• Client’s relationships with Retail partners were strong, allowing the Sales leadership to explore multiple “what if” scenarios and validate further proposed price actions.

• Additional competitive analysis was conducted using multiple price monitoring tools

OBSTACLES

Cost Increases and Manufacturing Challenges

• Client faced significant cost increases due to its manufacturing being concentrated in a high-labor-cost advanced economy.

• These cost increases were higher than some competitors, reflecting the rising "price of quality."

Product Portfolio and Innovation

Client had introduced many product innovations, yet its portfolio was anchored and heavily concentrated in its handful of “icons” styles.

Unit Economics and Channel Strategy

Client's unit economics were much better in the D2C channel, which raised questions about the pricing implications for the D2C channel compared to Retail.

RESULTS
The highly engaged partnership with relevant SME’s from Region A resulted insignificant lift in insights, and ultimately results:

• 8-digit $ gross margin improvement, double-digit % gain in $ gross margin (above and beyond previously contemplated actions).

• Client resolved in a focused consensus meeting to cross the “psychological frontier” and raise several of its long-standing “psychological” prices ($199, etc.) based on empirical evidence from both sales channels and competitive analysis.

• SKU-level $GM economics were developed and implemented throughout the analysis, combining multiple previously disparate data sources across client.