Telfar handbag
Photo: Getty Images / Edward Berthelot

Telfar’s Dynamic Pricing Model Offers a New Way to Gauge Luxury Item Demand

Telfar, the Black-owned luxury label known for its tote bags, has introduced a “Live Price” pricing model based on customer demand. Instead of pre-setting retail prices, the price of many items will instead be determined by how quickly they sell out after they drop, with the item remaining cheaper the faster it sells.

The pricing model was introduced Monday with the online introduction of the brand’s latest collection and will be tested with weekly drops through April 24. Telfar’s collections have a reputation for quickly selling out.

Under the model:

  • At the drop time, each item in the range becomes available at the wholesale price (the price retailers pay), which is generally more than 50 percent off retail price.
  • The introductory price then rises slowly (about one cent every 20 minutes or about $10 to $20 every week).
  • Whatever price it sells out at, the discounted figure will be the price permanently for future collections.

Telfar explains on its website, “YOU DECIDE THE PRICE: the more you want it – the lower the price.”

The pricing model is designed to support the affordability of the brand’s most-popular items. Founder Telfar Clemens has long emphasized the importance of accessibility for his products, describing his brand as “anti-luxury” and using the tagline, “not for you – for everyone.”

From an operations standpoint, the auction-like determination process helps Telfar get an early read on demand. For quick sellers, larger volumes can be ordered to support the lower price.

“Many brands use price as a barrier to entry,” said Mr. Clemens in an interview with Fast Company. “I never wanted that for my brand.”

The launch announcement drew some confusion on social media with some feeling dynamic pricing would only make the brand’s product scarcer, but others praising the brand for seeking ways to make their products more accessible.

YouTube influencer Dee Brady feels shoppers will now be “happy” instead of being disappointed when a collection quickly sells out because they’ll know the item will be available at a low price when it’s back in stock. She said, “It actually triggers someone to buy more.”

BrainTrust

"This is an interesting idea that could really shake up the market. It's a great example of outside-the-box thinking."

Ken Morris

Managing Partner Cambridge Retail Advisors


"Telfar’s pricing strategy is innovative and will most definitely expand their reach in the market."

Liza Amlani

Principal and Founder, Retail Strategy Group


"This is strange for a luxury brand. The more popular they are the lower the price, so the most undesirable items are the highest price and most exclusive!"

Andrew Blatherwick

Chairman Emeritus, Relex Solutions


Discussion Questions

DISCUSSION QUESTIONS: How would you rate Telfar’s dynamic pricing model as a tool for measuring demand and setting prices of luxury items? What questions or concerns do you have about how the model works?

Poll

8 Comments
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Neil Saunders
Famed Member
1 year ago

This is an interesting model. If the objective is to make items affordable and increase accessibility it will likely work. It also helps Telfar to assess demand, which means it can optimize production levels and future prices. However the model is somewhat odd in that low demand items will gradually increase in price which will make them even less likely to sell. I also can’t see most luxury houses adopting this because their aim isn’t accessibility, it’s brand integrity and margin maximization.

Bob Amster
Trusted Member
Reply to  Neil Saunders
1 year ago

I agree completely. We should give it a name: “Reverse price elasticity.”

Ken Morris
Trusted Member
1 year ago

This is brilliant—more of a marketing strategy than what most would call “dynamic pricing.” Telfar is lowering the price based on sales volume. Most retailers use the reverse pricing logic: finding the apex price point, the one at which the customer demand goes down and setting that as the go forward price. This is an interesting idea that could really shake up the market. It’s a great example of outside-the-box thinking. 

Georganne Bender
Noble Member
1 year ago

I opened this article thinking Telfar’s dynamic pricing was going to be about raising prices as demand grows, so I was pleasantly surprised to find it the opposite. Watching the items sell live on the Telfar website is a trip.

Obviously the company is still making money on each item it sells, it’s also building unusual demand and customer loyalty at the same time. I think it’s a brilliant move.

Liza Amlani
Active Member
1 year ago

Telfar’s pricing strategy is innovative and will most definitely expand their reach in the market. Putting the price in the customer’s hands is creative and engages the customer in a new way. Capturing insights from this strategy could help drive and inform merchandising, product and marketing decisions.

Andrew Blatherwick
Member
1 year ago

This is strange for a luxury brand. The more popular they are the lower the price, so the most undesirable items are the highest price and most exclusive! It makes sense given Telfar’s principle that they want to make their brand accessible but I do not think this is appropriate for other luxury brands. It would certainly provide valuable information for future pricing and also understanding the product lifecycle so it certainly has value and will probably create interest for their consumers.

Richard Hernandez
Active Member
1 year ago

Dynamic pricing is not a new or novel. They are using it as a marketing tool to drive recognition that they carry luxury brands and hope they can build customer loyalty that way. Time and customer understanding will tell.

Anil Patel
Member
11 months ago

A product that customers want but cannot afford, makes it a luxury item.

But with affordable luxury, retailers tend to make compromises in products to bring down their prices. Doing so allows their customers to relish the luxury at economical prices.

Since Telfar has defined its brand image around the pricing and availability of luxury items at a lower price, therefore in my opinion, Telfar’s dynamic pricing model seems very interesting.