Many retailers are stuck with excess amounts of inventory meant for their stores over the pandemic. With the high seasonality of fashion products, retailers are being faced with ageing inventory and cash tied up in stock that is quickly becoming obsolete. This can potentially pose a great threat to a retailer’s or brand’s financial health, so alternative channels of distribution are increasingly sought after.
Ecommerce rose to 30 per cent of a retailer’s total sales during the peak phases of the pandemic lockdown. But even if eCommerce remained at this level and all inventory was made available online, it would not absorb all the stock sitting in stores. To minimise the damage to the balance sheet, there is a significant opportunity for retailers to tap into the rapidly growing off-price segment and build new and complementary revenue streams.
Leveraging product lifecycle
Many brands have a clear idea of their commercial operating model, which usually entails launching a new product or collection and seeing it gradually mature over time with a tactical merchandising and discounting approach.
Off-price channels should become a key part of ecommerce strategies, as it provides a platform to sell to many consumers, especially new ones from different segments.
There will always be some leftover inventory, but this can be leveraged into a major opportunity instead of becoming a burden, if played tactically with off-price channels. This will ensure their products have a life even after the original season ends and ageing inventory can be monetised in a smart way.
Protecting your brand through off-price
Traditionally the off-price segment focused on bargains and deals for consumers. Brands were hesitant to be associated with bargain hunting platforms and drastic price reductions, however, new platforms and shopping clubs target a more upscaled segment that consciously market the products in an appealing way.
The Outnet, a sister site to luxury platform Net-a-porter, is a perfect example of this. They stock high-end brands at up to 75 per cent discount and do so through high-quality imagery and content marketing, which does not diminish the brands associated with the platform. The product may not always be current season but flawless and high quality, nevertheless.
Additionally, retailers can consider building their own shopping club, which shields discounted products from being visible to everyone online. This protects the image and price perception of the brands as high quality.
Off-price segments no longer have to be cheap in appeal and can be a considerable business opportunity. An off-price retail strategy can now be part of an overarching operating model to keep products moving. With more opportunities available from retailers, brands can ensure their image is protected, while building new revenue streams and de-risking their business.