13 October 2020
Author: Rhiannon McGregor
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.