As a result of the pandemic, retailers globally remain laden with surplus stock from their recent collections, paving the way for major markdowns during autumn/winter 2020.
‘We have millions of dollars’ worth of merchandise and it’s just sitting here,’ explains Amy Smilovic, creative director of New York-based fashion label Tibi. It’s a sentiment echoed by Ganni founder Nicolaj Reffstrup, who explains that the label has ‘a massive inventory problem that we are trying to deal with’.
British retailers slashed prices in May this year – the most in a single month since 2006 according to industry figures – as a way to tackle the issue. There is concern, however, about the long-term effects of heavy discounting on brand image.
At the same time, consumers’ priorities are changing. With a looming global recession, people are more mindful about where they spend their money and lower prices are becoming more attractive. In response, retail brands are launching off-price strategies that demonstrate value without diminishing brand equity.
What is off-price retailing? Off-price retailing is a trading model based on discount pricing, for example, selling brand-name products and merchandise at a discounted price.
Mid-market brands and retailers have been hit hard by Covid-19, as people choose either to spend more on heavily discounted luxury goods or trade down for essentials. ‘The middle market fashion players are all but extinct, with the pandemic lockdown accelerating [their] demise,’ says retail analyst Nick Bubb.
To keep the mid-market alive and thriving, third-party consultancies are reframing discounts as positive for brands. The UK-based Parker Lane Group (PLG) does this by providing brands with the infrastructure to sell old inventory in secondary markets that have been less affected by Covid-19. According to Julie Hutchinson, business development executive at PLG, the benefits are threefold. ‘First, brands make a financial return on stock deemed worthless in primary markets. Second, they protect the brand image in core markets. Third, they promote a genuinely circular economy as a product’s lifecycle is extended to its maximum potential.’
Dutch e-commerce platform Otrium offers technology and software, as well as logistics handling, to fast fashion and streetwear brands, allowing them to create their own end-of-season clearance stores. Brands have total control over how they curate their outlet, the discounts they want to offer, the number of items they sell and for how long. As a testament to its potential, Otrium recently secured £21.3m ($27.9m, €24m) in funding and now boasts more than 200 brand partners.
In a similar vein, New York's 260 Sample Sale offers brands the means to launch online sample sales in a matter of days. Such off-price events have been running throughout the pandemic, with each limited to a short time – usually between four and seven days – in order to drive hype around the event.
Published by: 
13 October 2020
Author: Rhiannon McGregor
Image: Microsoft rebranding by Microsoft and Tendril
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In the past, luxury brands have been largely unwilling to discount unsold items, with companies like Burberry infamously burning unsold accessories and beauty stock to prevent items from reaching the grey market.
The public outcry that ensued set the scene for change, with Covid-19 proving to be the tipping point for off-price luxury as brands embrace reductions as a means to offload old stock. In some cases, labels are rebranding these price reductions as archive sales to increase their desirability. Alexander Wang, for example, hosted a 72-hour archival flash sale, which sold out in less than a day. Luxury shoemaker Manolo Blahnik, meanwhile, has unveiled a dedicated end-of-season sale website.
Offline, the pandemic is driving new opportunities for off-price destination retail as brands look to bolster store footfall. Opened in July 2020, Harrods Outlet is an 80,000-square-feet concept store in the Westfield London mall designed to ease the pressure of socially distant shopping at its Knightsbridge flagship store. ‘Our normal sale in the Knightsbridge store takes us four weeks to clear and that is with 80,000 people going through the store each day,’ says Michael Ward, Harrods managing director. ‘We are currently limited to 4,500 at any one time.’
With international travel to Europe and the US still disrupted by Covid-19, off-price retail is also shifting its attention to new territories. Value Retail China, which operates the popular Bicester Village outlet in the UK, is driving an ambitious expansion of its Suzhou site in China to become the largest of its global operations. ‘The demand of Chinese consumers is still there; it’s just being repatriated back to China.’ explains Simon Williamson, chief merchant at Value Retail China. ‘This is something that brands and retail developers really need to be focused on this year.’
Generation Z are emerging as the target for off-price retailers, who recognise growing interest from this thrifty demographic. Some 65% of Generation Z globally say they want to ‘get real value for their money, with discounts, coupons and a rewards programme’ when it comes to spending (source: IBM).
In China, Alibaba’s Tmall introduced off-price e-commerce platform Luxury Soho in April 2020 as both a response to Covid-19 and to cater for Tmall's influx of younger consumers. With many of its Gen Z shoppers living outside of China’s megacities, and with less disposable income than the brand’s typical luxury audience, the platform has so far ‘seen a lot of positive curiosity', says Alibaba director of fashion and luxury for Europe, Christina Fontana.
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