Optimal pricing and production decisions of fashion apparel brands in a two-stage sales setting

Clothing is a typical seasonal and fashionable product; it is very easy to cause inventory backlog problems. This paper addresses the determination of pricing and production of a fashion clothing brand under both presale and regular sales stages. More specifically, we analyze the effect of the fashion degree of clothing and price on the demand. Demand during different market periods (peak sales season, low sales season, and stable market) change with time. The static pricing decision of presale price is made at the presale stage, but the regular sales price under static and dynamic pricing decisions is compared. We build both static and dynamic pricing models, with the objective of finding a pricing and production strategy that maximizes total expected profit of the clothing brand under two-stage sale. The influences of the fashion degree attenuation factor and the initial fashion degree on the brand's optimal pricing and revenue are analyzed. We show that when the market is in the off season or the market size is stable, the brand can benefit from the dynamic pricing policy. When the market is in peak sales season, the static price is better than the dynamic price strategy. No matter how the market size changes, in the regular sales stage, the optimal price of the brand always decreases with the fashion degree attenuation factor, and increases with the fashion degree sensitivity coefficient.