We discuss today the experience of Edward Vizard, founder of Garçonne & Chérubin, on this pricing scheme.
IntoTheMinds: How did you come up with the idea of making a Pay-What-You-Want system?
Edward Vizard : Being of British origin and particularly interested in UK consumers’ consumption patterns, I got interested in new UK selling techniques and detected a new trend comparable to the one we put in place. Brands like Everlane in the United States offer shoppers during the sales to choose between 3 prices, hence giving the consumer the choice of the price that he wishes to pay for the product. The first price covers the production costs, the second one, the production costs + the structural costs, and finally the highest price allows the brand to make a profit to sustain its growth.
Our idea works as follows : The customer chooses the price he wants to pay (no minimum, no maximum) depending on what he believes will give him a chance to “win” the product. It is therefore a bet, which is assimilated to an auction.
After a given period (say, one week), the customer is notified whether or not his offer has been accepted. The success of his offer depends on the price set in comparison with the offers made by other consumers for the same product, as well as on the level of stock available for the item.
These two systems – quite similar in approach – have the effect of giving the consumer the opportunity to understand the logics behind the pricing and to take an active role. In France, the logic of growth through profits is still poorly considered (by cultural heritage), hence the tendency of brands to “hide” as much as possible their make profits to fuel their growth, which is always the basis of any sustainable business. This type of innovation makes it possible to highlight some of these contradictions and to change minds.
IntoTheMinds: What advantages does this system have compared to conventional approaches ?
Edward Vizard: This system is advantageous for us because it allows us to play with the uncertainties of doing business. In the shoe market the problem of sizes needs to be managed at best. If statistically, a 38 sells better than a 36, nothing ensures that on a given collection the opposite won’t become true. However, both sizes have exactly the same market value.
Thus, allowing the customer to freely fix his/her price allows us to sell our collections at the fairest market price, both for us and for our customers.
IntoTheMinds: Some e-merchants have massively recruited new customers through this system (Brandalley) but were unable to keep these customers on the long-term. What is your strategy to avoid the same disappointments?
Edward Vizard: The system that Brandalley tried was very different. What they implemented was a system that allowed their customers to pay the price they wanted on a selection of products, without limits nor market logic. As a consequence they had to ship a lot of goods sold at 1 €, which generated financial losses. This way of operating does not correspond to any sustainable economic logics and allows at best to create attention for a limited time. We are following today quite an opposite way, by leveraging a slow yet thoughtful consumption of our products.
IntoTheMinds: The possibility to use the Pay-What-You-Want scheme ended up on 08 February. What are your conclusions and will you renew it in the future ?
Edward Vizard: Our average discount is similar to what we observed during the classic sales period (-35% on average). However the number of successful transactions increased by 30% compared to the traditional sales.
It should be noted that out of 100 total transactions (accepted and refused), 33 were accepted. The remaining 66 interactions are additional exchanges with our community. Those exchanges didn’t previously exist with traditional sales. We have had very good feedback from our customers on this concept.
As for the rest, we have launched the concept with a long-term strategy, and we plan to renew it on the occasion of future sales periods. It may also be preceded by a short period of sales, with limited discounts, because we believe that these two systems are complementary.