Why every retailer needs an off-price strategy
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By Jordan Hart
When you hear the term “off-price,” what comes to mind? Bargain? Discounted? What you should think when you hear off-price is: money making opportunity. The pandemic has put shopping habits under a microscope as many consumers are tightening the reigns on their wallets and many retail giants have shut the doors on some of their locations. Yet off-price continues to thrive and could be the boost your business is looking for.
According to Retail Dive, the off-price model ‘seems to endure no matter what — attracting shoppers of all ages and incomes, in all kinds of economies.’ In a struggling economy, ‘off-price stores can help provide price relief.’ But not only that, according to Retail Dive, ‘even in times of economic growth, these stores still do well. Overall, for a significant portion of the population, price and value are important from an income standpoint, and off-price is therefore very relevant and successful.’
With many people out of work from the ongoing pandemic, shopping is now a luxury in a way it was not previously. According to CNBC’s Jim Cramer, ‘you need to be off-price or online to win in retail. Everything else is in trouble, especially in this post-coronavirus world where things are getting a whole lot tougher for the whole industry.’
Ed Bernard, co-founder of the OFFPRICE show and consultant with Tarsus Group, shared some of his insights from the world of all things off-price.
What is off-price retail?
The off-price business has many facets. Obviously, there are many stores that are solely off-price retailers, TJ Maxx, Ross, etc., but there are many stores that carry off-price to augment their inventory and highlight margin builders within their stores. Previously off-price was just excess stock or closeouts, and that is no longer the case. The off-pricers today have an element called engineered off-price. It is manufactured product that stores are bringing in to highlight brand names. Less and less close-outs are available to go around to all the off-pricers so they have to mix in an element on engineered product. Different stores all have different percentages of true off-price product and engineered off-price product. Engineered off-price used to have a stigma around it, but a lot of the engineered off-price product – especially from the vendors we have at our show – is really quality made product that they are able to sell for a very good price by keeping their expenses down in manufacturing.
Is there an off-price strategy for everyone?
Absolutely. You can take a boutique store with 90 percent of their product as specialty items and blend in 10 percent off-price products as margin builders and all you are going to do is make more money. Because of the pandemic, people need spot goods; they need product right away. In the off-price world, we are able to come up with product for them that they can buy immediately and get that product into their stores immediately.
What is the turnaround time of a traditional vs off-price buying cycle?
It depends; a true jobber has the product in their warehouse and once the order is taken, the product can go out immediately. With engineered off-price, vendors will collect orders and then only cut the product when they get a certain percentage of that cut sold. The cycles can change depending on the season and where the product is made. Product made in Central America has a much shorter turnaround time vs product made in China because of transit time. However, true closeouts and true jobbers are ready to ship immediately once they get the order.
Why are off-price stores expanding while traditional stores are closing?
The consumer still wants to shop. While online has a huge presence today and the percentage of online shopping has jumped because of the pandemic, there is still an element of in-person shopping that can't be replicated. People don't have as much money as they once did, but they still want value. Off-price retailers are expanding because their business and stock are good. They are in the right place at the right time right now. More stores are bringing that element of off-price into their stores. Whether it is boutiques or farm stores, they are showing the consumer that not only can they have their top-of-the-line brands, but they can also have some great priced product within their store to make sure the customer is going to keep coming back.
Why should all apparel businesses be in offprice?
You need to examine the off-price business as part of your entire purchase strategy. Shopping Las Vegas fashion week should include shopping OFFPRICE as well as MAGIC and WWIN to get a true sense of what the comparison is and where the value is for their customer. Everyone's customer is different, so you need to shop all the shows to make sure you are making the best decision for your store. I do believe there is an element of off-price that should work in every retailer, depending on the percentage you put into your stores.
Click here to watch this video interview: https://youtu.be/d5CBuMTvRcQ