Welcome to Lesson 3 of The GCC Pricing Strategy. We have discussed The Power of Pictures and Presentation; how a good picture can double the value of your product. Last week we discussed the importance of brand and market value in pricing.
We also reviewed the two principles that control pricing above all else, supply and demand (sprinkled a little Tickle Me Elmo in there). This week we will be breaking down the BIGGEST and most shared myth in the reseller world; comps are all encompassing and the most important point in pricing. Ladies, this is completely and totally FALSE!
COMPS DO NOT EQUAL MARKET VALUE. COMPS DO NOT EQUAL MARKET VALUE. COMPS DO NOT EQUAL MARKET VALUE. COMPS DO NOT EQUAL MARKET VALUE. ONE MORE TIME, FOR THE CHEAP SEATS IN THE BACK… COMPS DO NOT EQUAL MARKET VALUE.
In this lesson I will talk about how pricing based off comps could actually be costing you money. You could be leaving money on the table without knowing just by pricing based on comps. There are a lot of people that disagree with this, I was actually blocked by a major reseller this week for opening up a discussion about it. So, just hear me out, and make your own conclusion at the end.
WHAT ARE COMPS AND WHY DO THEY COST YOU MONEY?
So, in retail, comps are a company’s same store sales compared to previous years or a similar store. So, we apply it to resale in a slightly different way. When resellers talk about comps, they are looking at other people's recent solds of a particular product. They use it as a guide to pricing. They look up what this particular item has sold for recently so they can compete in the market.
Already, there is a huge discrepancy in the actual definition of comps (in retail) and the way we are using them. In retail, you are using YOUR OWN COMPS from a previous year or a different but similar store to compare your current performance to.
In this definition, comps are completely controlled by YOU. For example, the Beverly Hills Gucci store compares comps to its 2019 numbers, and it compares 2019 numbers from the Gucci Soho Store. The reason this makes sense is because they are the same company, with identical pricing, similar store setups, square footage, staff, strategy, similar affluent customer and tourist mix and customer experience. This makes sense because they are COMParable.
When we do it in reselling, we are comparing other people's sales, which we literally have no information on except for this one sold number, to our own business and using someone else's sales number as a guide to our own pricing. Does that sound like crazy talk yet?
It would be like the Beverly Hills Gucci store comparing its sales and basing its strategy on Neiman Marcus's 2019 comps? IT MAKES NO SENSE. They are not the same store, they both carry Gucci, but one ONLY carries Gucci products and the other carries an endless assortment of designer items. One is a 1200 sq foot boutique, the other is a 3000 sq foot giant! They have completely different identities and sales goals.
Here is the problem with pricing based on comps, aka recent solds… WE HAVE NO FREAKING CLUE WHAT THE CIRCUMSTANCES OF THAT SALE WERE. I will be telling you a few stories to explain why pricing off comps is complete and total BS
Meet the characters: Mrs. Jones and the tale of the Manolo’s she wore to her daughter’s wedding, Mrs. Correa and her ever expanding collection of shoes, me, the reseller trying to flip designer items, and Molly, boss babe extraordinaire who literally has no time to go to the stores and buys everything online.
SCENARIO 1: Does one woman’s sale determine the fate of a designer brand?
Meet Mrs. Jones. Mrs. Jones is a 60 year old woman, stay at home mom. She has been happily married for 40 years and raised her 3 children. Mrs. Jones usually shops at Chicos and Banana Republic. She went all out on some Manolo Blahnik’s a couple years ago for her daughter’s wedding. Mrs. Jones heard about Poshmark from her granddaughter and figured she would give it a shot. She lives a comfortable life and doesn’t really want to get into reselling, she just wants to get something back for her Manolo’s which are in excellent condition.
She lists the shoes for $200. Someone offers her $150, and she just wants them gone at this point so… she sells! These $745 Manolo Blahnik pumps now have a COMP of $150. Does this mean that these shoes are worth $150? No, not at all.
This comp just stands for the fact that Mrs. Jones just wanted to be done with the shoes and get anything back for them. So, why would you price based on this comp? Are you in Mrs. Jones’s situation? Does Mrs. Jones’s sale determine the market price of Manolo Blahnik moving forward? Nope. Not at all.
SCENARIO 2: Does the woman that just finished Marie Kondo’s book determine market value?
Ok, let’s move on to Mrs. Correa. Mrs. Correa had an amazing 30-year career as a corporate lawyer. She made so much money she had no idea what to do with it, so shoes seemed like a good option. She has the most amazing closet but doesn’t even wear heels anymore. She just finished watching Marie Kondo’s Netflix special and has decided to just get rid of all of it as it no longer sparks joy! Yaaay! She takes quick shots on her phone of her shoes (no lighting kit, no focus, no white background, her cat is in one of the shots).
She lists her Manolos at $200-$250. Isa (me), the reseller is browsing the webs and comes across Mrs. Correa’s lot. I offer her $500 for 4 designer shoes. I also bought Mrs. Jones’s Manolos for $150. She accepts. For her, its not about the money, it’s about getting rid of items that she no longer uses and no longer spark joy.
Does the fact that Mrs. Correa wanted to get rid of her non-joy sparking shoes determine the market value for designer shoes? Again, NO! Do you see a pattern here?
WHAT ROLE HAVE YOU CHOSEN FOR YOURSELF IN THE PRICING GAME?
Now, you come in. You have just purchased a killer pair of Manolos in preloved but excellent condition. You are doing your research and you come across the most recent comps on Manolos, so, $150, $125, $125, and $140. Manolo Blahnik shoes have a starting MSRP of around $745. Why on God’s green earth would you price yours at comps? You have $745 shoes!
Upon further research, you realize that the shoes you have are a very popular style, they never go on sale, and there are no size 38’s for sale during this time… why would you price at comps? You have done actual brand and market research. You have a great product, in excellent condition, that is low in supply and high in demand…. How the heck does pricing based on comps make any sense?
PRICING BASED ON BRAND AND MARKET VALUE JUST MAKES MORE SENSE
Let’s tie it all together. I, Isa the reseller, take my 5 pairs of shoes that I just bought off Poshmark and I list them for $399 each. That is over 50% off retail! (You will rarely see this kind of a discount on classic pairs of designer shoes).
Boss Babe Molly has been looking to get some new shoes in rotation. She is casually browsing Poshmark on her lunch break when she spots one of my shoes. Molly is used to designer prices and paying retail. She clicks to see what else I have in her size and see’s all the Manolo’s. She buys 3 of the 5 pairs, which is basically the retail price of 1.5 pairs. I just made $1197 off of $400 cost. How? I knew what I had, I priced them according to the brand and market value and not based on comps (comps which I created with my crazy low buy value).
So, do you understand why it makes absolutely no sense to price based on comps? We do not know what the circumstance of the sale was. Those sales do not necessarily dictate the value of a certain brand or item, the market does. If you price based on supply and demand, you will always have the upper hand. If you price based on comps, you will be pricing yourself down from the true potential of your product.
So, are comps completely useless? No! Not at all. Comps are a great starting point to whether or not you will pick something up. I have a whole BUYING strategy based off comps (note, BUYING strategy, not pricing strategy. I actually take advantage of people pricing based on comps because pricing on comp’s creates a buyer’s market). The idea is, comps are definitely something to be reviewed, but they should not be the only part of your pricing strategy. They should not even be in the top 3 spots of your pricing strategy.
For those of you that read my “Importance of Brand and Market Value” newsletter lesson, you know what I mean. You know what to look for. You know what matters in pricing. If you missed it, Sign up for the newsletter so you don’t miss important upcoming lessons!
So ladies, next time you see a MAJOR reseller telling people that comps are the only thing that matters, do nothing, we all have a right to our beliefs. But realize that there is all sorts of information out there. Do your own research.
Make sure you know who you are following? Do they have a business background? Are their arguments compelling? Does what they are telling you make sense? Are they giving you facts backing up what they say? Question everything. This is your business. Make the choice to follow people that give you reasons, that teach you the why. Don’t just follow people’s strategies and system’s blindly.
So, I have shared my honest point of view about why you should not price based on comps. As you all know, there has been some drama around this topic this week lol. Some people believe that what I am saying is bogus and crazy talk. Is it?
MY ASK: If there was any part of this post that caught your eye, anything you learned or found interesting... please share it on your stories and tag me so I can share it on my page. @theglobalcollectiveco
Sharing this information will make people think twice about why they do what they do. I could just keep this information to myself and take advantage of the amazing buying opportunities created by people pricing on comps. So why do I share...
Because I believe in sharing my knowledge and helping others. I believe there is room at the top for all of us.
Talk soon,
Isa
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