Off-price is a method of retailing in which branded clothing is sold for less than the usual retail price. It represents a large portion within the overall fashion market and it is expanding fast, especially because brands will always generate excess inventory and look for solutions to recover the investment, the space and enter new market segments in a sustainable way.
Offline vs Online distribution for stocks
The offline off-price market has evolved over the last years. At first it used to pile up the garments to unwelcoming outlets outside urban areas. Today off-price malls and villages resemble high-street retail and the spots where off-price garments would be just piled up are now carefully thought and arranged.
Now off-price stores give luxury brands the opportunity to get closer to new (and younger) customer groups that wouldn’t probably enter full-price luxurious stores.
As for the online off-price channel, its main attraction consists of the chance to look for covetable garments (usually midmarket or higher) at lower prices. According to McKinsey’s market model, “the online channel accounted for approximately 40 percent of the off-price segment in 2020” and is expected to continue growing.
Capturing a good share of the off-price market requires comprehensive strategies that both protect brand equity and maximize profit without cannibalizing the full-price market. These strategies must be able to make the most of the strengths and characteristics of this segment’s channels and face their challenges.
Brands need to embrace the opportunities and characteristics of both offline and online channels as non-excluding options that can build brand awareness.
Also, they need to be discerning when it comes to choosing partners. For instance, the best off-price partners for the offline channel would be those with a network of distributors in other countries and markets, with capacity to work with high volumes of stocks while offering brand protection and traceability in the operations.
Finally, brands should be kept protected from too much price and volume transparency across channels, which it is easily done offline but not so much online. Online, brands need to protect their brands and use new models such as closed portals and membership-based modes.
The off-price retail segment will most certainly continue growing, therefore brands need to invest in global strategies which can capitalize on the opportunities that offline and online channels generate. This segment can bring increased profits, help brands expand their market reach and provide a sustainable way to sell overstock, all at the same time. The best fashion companies will be those that manage to make the most of it while keeping their brand label rising high.
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