Off-price retailing is growing, and luxury fashion retailers are launching spin-off brands to access this channel.
According to Euromonitor, the global off-price retail market grew more than 30% between 2012 and 2017, with the US owning the largest share of the total.
Off-price retail sales in Western Europe grew 49% during this period. In the US, some of the largest department stores have launched their own spin-off brands, centered around discounting. Luxury department store Saks 5th Avenue launched Saks Off 5th, which has grown to over 100 stores, while Nordstrom has launched Nordstrom Rack, which now has more stores than its flagship brand.
Even H&M has followed suit, launching a "style- and deal-hunting paradise" called Afound (seen above), which opened its first store in Stockholm and sells H&M and external brands at discounted prices.
From our long experience working with outlets, which according to CBRE have recorded double-digit sales growth from 2012 to 2017, we have seen first-hand their increasing appeal for brands and investors alike.
In order to stay competitive in a challenging market, brands will have to maintain the excitement associated with off-price retailing and bagging a bargain that consumers crave. We advise focusing on the following areas to keep consumers active and engaged:
Inspiring, experiential retail experiences - discounting alone cannot shield retailers from rising competition, both in the full price and off-price segments, and outlets have already set the bar high
Launching exclusive items (e.g. in-store exclusives) or limited editions can make consumers feel special by owning something unique
Regularly rotating merchandise in store gives consumers a reason to visit more frequently and increases overall spend
Curating original, inspirational content
Streamlining the omnichannel experience (i.e. bringing online to physical channels through pop-ups and concessions, making it easier and more convenient for consumers to shop)
Building an outlet proposition and strategy that focuses on these areas and creates buzz amongst consumers can unlock the huge potential of outlets for retailers.