What is pricing transparency and how can it benefit you?

What is pricing transparency and how can it benefit you?

In an age where consumers can find a product they like and compare its cost to thousands of channels that sell the exact same product in just a couple of minutes, it’s no wonder that retailers are struggling to maintain margins especially against online discounters and mammoths like Amazon.

Some smaller retailers have found a smart solution to this problem.


What is pricing transparency?

Pricing transparency is essentially showing the actual cost of an item broken down by cost of materials, labour needed to create the item, transportation of the item and more.  In other words, the retail price fully explained. Until now, showing your hand like this has been unthinkable, however this is changing.

Luxury leather goods company, Oliver Cabell, practices pricing transparency by exposing the costs of all products on their website like so:

With a cost of about $130 and a price of $285 for a bag, you may be thinking that Oliver Cabell is digging their own grave by broadcasting the difference – but customers are responding.


Why does cost transparency work?

Pricing transparency is a bold response to the growing desire amongst consumers to see that everybody is getting paid fairly for goods they buy – it’s known as ‘conscious consumption’ and it’s growing, particularly amongst cashed-up millennials.

The evidence is that customers accept the retailer’s right to make a reasonable margin, and they’ll reward retailers that share dollars around on an ethical basis.

Customers like to be in the know and like to be treated with respect. The sharing of hitherto hidden information helps build trust and loyalty, which can only be built on respect.

Seeing exactly how much that t-shirt, couch or shoe cost can actually highlight the value of the products. Transparency can be used to show people how much of a good deal they are getting compared to other retailers.


Still not convinced? Here’s an example:

A handbags and wallet retailer decided to promote sales on their website by including an infographic that broke out their costs on a particular wallet. But wait – they forgot to include this infographic on every variant of the wallet, so the wallet in burgundy, black, and grey had the infographic whilst the bone and tan models did not. Only after a few weeks did the retailer notice the issue, and on closer inspection, the retailer found that the sales of the models that included the pricing transparency infographic improved by a whopping 44 %!*

Cost transparency may not work for everyone. If you are getting away with charging margins that are way above the market norm or you’re using cheap labour, cheap materials or inflating costs this isn’t going do you any favours. Then again if that’s what you’re doing, you might just want to look at your pricing strategies because the trend is perhaps not going to be your friend!


If you’re interested in learning more about consumer trends that can help you take your retail marketing to the next level, contact us on 1800 737 266 or email ask@permission.com.au for a chat.








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