Why Telfar’s New Pricing Model Matters

American independent brand Telfar will release a new apparel collection next week and along with it, a novel way of setting prices.

When the assortment of basketball pants, mesh shirts and hoodies hit the virtual shelves Monday, they will be priced at wholesale, typically about half off retail. Every second, the price will go up, Telfar explains on its website, until the piece sells out. That will then become, more or less, the item’s “forever” price. A crewneck sweatshirt could start out at $65 and rise to $260. The highest potential prices listed on Telfar’s website reflect a standard retail markup of about four times the cost of making the garment.

The idea is that the faster an item sells out, the lower its price is the opposite of conventional retail wisdom, which dictates that the cost of an item should rise if demand exceeds supply. The brand itself describes Telfar Live as “a total reversal of the markdown sale structure of the fashion industry… literally a sale in reversal.”

In theory, Telfar may be leaving money on the table; it’s conventional retail wisdom to raise prices on in-demand products for a reason. But there are plenty of potential benefits to the brand.

By assessing the popularity of each style in real time, Telfar will get a clear sense of what its customers want, which will inform future buying decisions. If that crewneck sweatshirt sells out in seconds, Telfar can place a big order with its factory to replenish its stock, likely at a lower manufacturing price. This system also makes it far less likely Telfar will have extra inventory, eliminating waste in the supply chain.

Dynamic pricing could even ultimately boost Telfar’s margins, according to Yasen Dimitrov, co-founder of retail insights service Intelligence Node.

“This is the whole idea of the loss leader [approach] — sacrifice margin on low-cost popular items and make it up with lower velocity, high-margin items,” Dimitrov told BoF in an email. “It is the oldest trick in the marketeer’s pocket.”

Of course, retailers have another way to gauge potential demand and avoid overstock that doesn’t require reinventing the pricing playbook: preorders. Setting aside the economics of Telfar Live, it’s also a clever marketing moment. Most retailers use dynamic pricing to strategically raise prices, ensuring they can extract as much money as possible from their customers.

That’s in keeping with Telfar Clemens’ approach to his brand, which he founded in 2005: that high-quality fashion should be accessible to anyone who wants it.

Telfar’s wildly popular “Bushwick Birkin” retails for the same price today as it did in 2014: $150 for the mini, $257 for the large. In the resale market, the bags frequently command twice that, indicating Telfar could raise prices significantly if it wanted to. Plenty of its competitors have: luxury labels increased their prices 25 percent between 2019 and 2022, according to retail intelligence firm Edited.

Telfar has bucked retail convention in other ways, including eschewing a traditional New York Fashion Week show and launching a streaming app called Telfar TV to keep customers engaged.

These unconventional business decisions also tie into Telfar’s social justice mission; keeping prices low is cast as a statement of political solidarity with the brand’s core consumer.

“[Telfar Live] provides an economic model that corresponds to the nature of black cultural invention — in a market where Black culture moves all culture — but Black people don’t own their shit,” the company said in an online statement about its dynamic pricing model.

Telfar isn’t the first fashion company to use pricing to send a message. Everlane, for one, built its business around the notion of “radical transparency,” with the “true cost” of each item shown on product listings, next to the retail price. The strategy comes with risks: In 2020, current and former employees alleged Everlane fostered a toxic workplace culture at odds with its ethical tagline. Radical transparency also wasn’t enough to keep customers hooked on Everlane’s basics. The brand is now focusing on a much more traditional mission to boost sales: creating differentiated products.

The trajectory of “radical transparency” should serve as a warning to brands that think they can copy and paste Telfar’s dynamic pricing strategy into their own business models. Telfar’s pricing will likely succeed in selling clothes, and at the margins Clemens and Radboy need to grow their business, because the brand is trusted by its large and growing customer base.

The same strategy would come off as gimmicky at a label with less cultural cachet; a fading brand doesn’t need dynamic pricing to know that nobody wants its clothes. And the concept would strike many shoppers as hollow coming from a big chain; Old Navy Live or Macy’s Live doesn’t have the same ring to it. These retailers will need to come up with their own, brand-specific ways to keep their customers engaged.

The Telfar Live experiment runs through April 24. It’s unlikely to change the industry’s dominant thinking when it comes to the right price being as much as consumers will pay. But it may convince more companies to innovate. And it’s a fitting move for Telfar in its mission to democratise fashion.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Kering’s emissions increased 12 percent in 2022. Last week, the French luxury group set a target to nearly halve its greenhouse gas emissions by 2035, for the first time setting absolute targets that would require it to decouple sales growth from environmental impact.

Nike beats expectations. Nike reported $12.4 billion in revenue for the quarter ending in February, a 14 percent increase from a year ago, with net income of $1.2 billion, down from the same time last year but topping analysts’ forecasts.

On returns to profit, surpasses $1 billion in revenue. The fast-growing Swiss running footwear company reported a net income of CHF 57.7 million ($62.4 million), up from a loss of CHF 170.2 million in 2021, sending the company’s stock up as much as 28 percent in early trading on Tuesday.

Sports Direct eyes European M&A starting with France’s Go Sport. Buying the business out of administration would allow Frasers to grow in France “with some authority rather than opening store by store,” said chief executive officer Michael Murray.

Allbirds announces it’s developed the world’s first net-zero carbon shoe. The “Mo.onshot” is made from regenerative merino wool, sugarcane-based foam and bioplastic eyelets and is set to debut its first prototype this summer, as the brand looks to mount a turnaround.

Levi’s will begin testing AI-generated models. The company will begin experimenting with AI-generated models on its e-commerce channels later this year to increase the diversity of models shoppers can see wearing its products.

Italian fashion group Kiton is interested in IPO but as a long-term project. Italy’s Kiton is interested in a potential market listing, but sees an initial public offer as a long-term project, the fashion group’s chief executive said on Thursday.

Puppets and Puppets, Elena Velez win Fashion Trust US awards. Fashion Trust US, a non-profit organisation founded in 2022 to support emerging talent, awarded grants and mentorship to six brands as part of its inaugural ceremony.

EU proposes clampdown on ‘green’ claims. The European Commission proposed rules on Wednesday that would require companies in Europe to back up climate-friendly claims about their products with evidence.

THE BUSINESS OF BEAUTY

The RealReal winds down beauty operations. The resale platform is sunsetting its beauty category, which it first began testing in 2018. The existing beauty inventory will continue to be sold before the site shuts down its beauty business.

PEOPLE

Ivan Bart departs as IMG models president. Bart, who has served as president of IMG Models for over 10 years, is leaving the top post at the company. He will remain with IMG in an advisory capacity, Bart told BoF.

SMCP names Elina Kousourna CEO of Maje. Paris-based contemporary fashion group SMCP has named Elina Kousourna CEO of its second-biggest brand, Maje, moving the executive from its Fursac menswear division.

W Magazine announces China edition launch. The magazine is readying a new country edition with the publisher of Marie Claire China and added two new creative directors-at-large.

MEDIA AND TECHNOLOGY

TikTok hits 150 million US monthly users, up from 100 million in 2020. The Chinese-owned app confirmed the figure ahead of TikTok CEO Shou Zi Chew’s testimony, which occurred Thursday before the House Energy and Commerce Committee.

Google suspends Pinduoduo after finding malware in versions. Google has suspended PDD Holdings Inc.’s main Chinese shopping app Pinduoduo after discovering malware in unsanctioned versions of the software, dealing a blow to one of the country’s biggest online retailers.

Snap offers AR shopping products for retailers’ websites. Snap Inc., the parent company of video-messaging app Snapchat, is adapting the augmented reality technology behind its popular filters and lenses — tools that can add glittery makeup or cartoon eyes to someone’s video selfie — to help retailers use AR on their own websites and apps.

Compiled by Sarah Elson.