Merchant Innovation

Can The ‘Pay What You Want’ Culture Survive In Retail?

Of all the trends working with or against each other in fashion retail, the race to the bottom of the pricing charts among fast fashion brands like H&M, Primark and Uniqlo has brought waves of customers with it. While quality may not be at the front of these shoppers’ minds when staring at a $10 price tag on a pair of jeans, that doesn’t mean that the concept of paying what something is actually worth is completely dead and buried in retail.

On the contrary, online fashion retailer Everlane proved over the last few days of 2015 that some shoppers out there are willing to pay top dollar for their favorite items — even when they don’t have to.

Fashionista explained that even though Everlane normally doesn’t run discounts and doesn’t bake the assumed prices of deals into its regular listing, the online merchant ran a year-end inventory clear out sale with an intriguing wrinkle to their payment options: shoppers could pick one of several prices for select items. Most came with three distinct price points, as well as explanations for why those dollar amounts were chosen. The smallest amounts, usually half of the regular retail price, covered only production costs, while the median tallies also included Everlane’s overhead expenses for the items. Only at the top price point (the one most likely to resemble a normal retail listing) would Everlane see any piece of the profits.

While it might be tempting to write this off as just another gimmick by just another online retailer trying to clear inventory after a slow holiday shopping season, Quartz explained that since it was a brand like Everlane to give variable pricing a try, it’s worth digging into the peculiarities of what effect it might have had on customers. An Everlane spokesperson declined Quartz’s request for sales figures from the promotion, but it’s worth noting that Everlane has always tried to justify its premium price points with detailed explanations on what design components or manufacturing processes contributed to those totals.

This “pay what you want” initiative played into that same philosophy for transparency: shoppers were more than welcome to buy Everlane apparel for up to and more than 50 percent off, but there was also a modicum of guilt tripping when the retailer is so upfront about the fact that it would be losing money on each sale where consumers picked the lowest price. As Quartz noted, Everlane’s pricing experiment also functioned as a sort of moral quandary for shoppers. Do they take the deal and make off like a bandit, hurting Everlane in the process, or is it in their best interests as consumers to pay full price and envision their magnanimity as an investment into the brand’s future?

As interesting a social experiment as Everlane’s post-Christmas sale might be, the science actually points to a perplexing result when retailers give shoppers more leeway in what they choose to pay for services. A 2012 study conducted by researchers at the University of California, San Diego, found that when given the option to pay either $5 or whatever they’d like for a souvenir photo, tourists are more likely to purchase more of the $5 photos. Because many consumers feel guilty or ashamed of paying less than what they perceive the value of a product or service to be, the average shopper is more liable to simply walk away without purchasing anything in any amount when given the option to set his or her own price.

It’s a difficult spot for intrepid retailers to find themselves in. In a retail environment where the slightest advantage on competitors can mean a year’s worth of sales, it’s a hard lesson learned when what seems like a new and engaging sales tactic might not be the best for the brand after all.




B2B APIs aren’t just for large enterprises anymore — middle-market firms and SMBs now realize their potential for enabling low-cost access to real-time payments and account data. But those capabilities are only the tip of the API iceberg, says HSBC global head of liquidity and cash management Diane Reyes. In this month’s B2B API Tracker, Reyes explains how the next wave of banking APIs could fight payments fraud and proactively alert middle-market treasurers to investment opportunities.