Transparency in Pricing: Everlane’s Radical Strategy
Would you advertise your markup? What if it led to a better guest experience, a more welcoming local community, and a huge grassroots demand for your product?
“People should know what the cost of their goods are, and what they’re getting,” Everlane CEO Michael Preysman tells Jim Cramer on CNBC’s Mad Money. His clothing company has taken a bold approach, employing a radical pricing structure for its collection of essential pieces. “There’s a lot of fat in the supply chain that existed. We’re cutting it all out, really slimming it down, and keeping it as simple as possible,” he explains.
“People should know what the cost of their goods are, and what they’re getting”
Michael Preysman, Everlane CEO
In a commitment to bring transparency to the manufacturing process, the company shows the costs of products through each stage of production (materials, labor, transportation, etc.). Everlane carefully vets and continually audits partner factories to ensure they have fair and ethical practices, and tells the stories of the workers through its website and social media. When a customer purchases, they know they’re getting a high-quality product, yet are supporting workers and communities globally in an equitable way. The model has driven sales and led to customers waiting in lines for product launches at the company’s brick and mortars.
Most surprisingly, Everlane identifies its markup, which is consistently below industry standards. Preysman feels this shows consumers they’re not getting ripped off. For certain overstock items, a dynamic pricing model allows customers the choice to pay one of three different amounts, based on whether they want to simply cover costs, contribute to overhead, or fund research and development in addition to overhead.
“The goal is always if we’re transparent and we’re honest… to the customer, they’ll tell the story for us”
“The goal is always if we’re transparent and we’re honest and we keep a really great price and design to the customer, they’ll tell the story for us,” Preysman says of his company’s small marketing budget. He finds social media and word of mouth to be a major part of trimming the fat against big budget competitors.
It’s an interesting model that has a larger application than just fashion. What if we could show a traveler the breakdown of their nightly rate, and tell the stories of the locals it supports?
Transparency could show the percentage of the rate, meals, and excursions that goes to housekeepers, landscapers, bellmen, front desk workers, concierges, servers, bartenders, tour guides, etc. The consumer would feel great about supporting the communities they visit, and would feel confident that the amount they’re paying is fair for the quality of service they receive.
It would also help hospitality employees, their families and other locals see the impact each traveler has directly on their micro-economy, and ultimately, themselves. The more the community can quantify the personal impact visitors bring, the easier it is for them to embrace the industry. When locals fully buy in, the visitor’s overall experience improves, and everyone ends up in a better position.
