Off-price retailing is growing, with high street and luxury fashion retailers 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, centred 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 external and the H&M group's own brands at discounted prices.
In the UK, TK Maxx has been defying the gloom of the high street, reaching nearly £3bn in sales by late 2018 through rapid store expansion. Discounting online has experienced similar growth, with Brand Alley, Secret Sales and The Outnet acting as online marketplaces selling various brands at discounted prices.
From our long experience working with outlets, which recorded double-digit sales growth from 2012 to 2017 according to CBRE, 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 that consumers want; the same excitement associated with off-price retailing and bagging a bargain. From our experience working with outlets and retailers, we advise focusing on the following areas to keep consumers excited 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 such as Bicester Village 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.