The same costume brand combats direct-from-factory competition through sophisticated pricing architecture that maintains competitiveness while improving unit economics.
Fresh off their storage fee victory, the Costume Brand faced a new existential threat: Chinese factories selling direct on Amazon at prices they couldn't match.
The economics were brutal. Container shipping costs had increased 40% year-over-year. Amazon advertising costs reached $3.50 per click during peak season. Meanwhile, factories in China—their own suppliers in some cases—were now selling direct to consumers at $19.99 for costumes the brand sold at $29.99.
The traditional response would be catastrophic:
The insight from the Advisory engagement: not all sizes face equal price pressure. The Medium size—which appeared in search results—needed to be competitive. But what about the other sizes?
"We couldn't win a race to the bottom against our own factories. We needed to change the game entirely."
— VP of Merchandising, Digitally Native Costume Brand
Deep analysis of buying behavior revealed a critical insight: customers shopping for fringe sizes showed dramatically different price sensitivity.
Medium dominated at 50% of sales, but XS and XL customers had 73% lower price sensitivity—they had fewer options
Only the default variation (Medium) showed in search results—other sizes invisible until product page
Chinese factories only offered S-L sizing, leaving XS and XL+ underserved with 60% less competition
Customers who clicked through to fringe sizes had 2.3x higher conversion—higher purchase intent
Virtuous Commerce designed a strategic size-based pricing architecture that maintained competitive visibility while capturing margin on less price-sensitive segments.
Instead of uniform $29.99 pricing across all sizes, we implemented a sophisticated tiered structure:
The weighted average selling price increased from $29.99 to $31.99, while maintaining the competitive $29.99 price point in search results.
Two-month testing protocol to validate assumptions:
Key finding: XS and XL customers showed only 7% conversion decline at $5 higher price, while contributing 67% more margin per unit.
Rolled out optimized pricing across entire catalog for peak season:
The mixed-pricing strategy delivered margin improvement without sacrificing market share—a seemingly impossible outcome.
12 percentage points gained
Without losing conversion
Fully maintained
$220K additional
"We thought we had to choose between margin and market share. This strategy proved that with sophisticated pricing, you can protect both. The Chinese factories are still at $19.99, and we're thriving at $31.99 average."
— CEO, Digitally Native Costume Brand
Fringe size customers have different price sensitivity—they're underserved and willing to pay for availability.
What faces out in search can be competitive while hidden variations capture margin.
August-September testing ensured confidence for October's $8M revenue month.
Offering XS and XL+ sizes that Chinese factories don't provides pricing power.