Mastering off-price fashion in an omnichannel world

May 10, 2022


Why is the off-price market a leverage in the fashion industry?

First , t is a way to reach the attention of customers, especially online, where the competition is high.Also, sustainability and overstock are key subjects that brands need to consider, in the most ethical way.

The stake for the brands is to elaborate strategy which protects their brand image while catering to off-price customers. It must take into account the two segments: online and offline, without damaging they full price sales.  Brands who are able to manage both segments will be in a strong position and will reap the benefits of having a profitable off-price operation while mantaining their desirability for full price consumers.

Why are we seeing an off-price growth in the EU?

The part of the off-price revenue has started to be interesting for brands. According to McKinsey’s market model, total revenue for the European Union’s fashion industry was €368 billion in 2021, with the off-price segment accounting for 11 percent, or €40 billion.

And what about the luxury and premium market? Their online channels represent 40 percent of the off-price market and will continue to increase due to the commodity of the online shipping. The offline market is popular through discount malls, but its potential for the off-price is reduced compared to the online channel.

Who are the actors of the off price market? Where can you find the lowest price?

The increase of the demand launched the creation of several suppliers, such as Limango, Veepee, and Zalando Lounge, which offer products at a limited price.

Off-price marketplaces where customers sell directly to customers, we can evoke Vinted, Depop, Vestaire Collective as the chance for customers to obtain items with accessible prices. Moreover, the Luxury mystery box platforms have emerged in the past several years. HEAT and SCARCE curate boxes of goods from more than 60 luxury brands and orchestrate surprise drops promoted on social media.

Concerning the customers, they started to migrate toward e-commerce especially during the pandemic crisis which contributed to the development of the off-price on the online market. For instance, in Germany the audience will triple in 2020 and all the countries from the European Union are going to do the same in the short term.

Indeed, the European online off-price supply is estimated to grow 13 to 16 percent annually from 2021 to 2025, leaving sufficient stock if demand growth accelerates. Currently, the brands are not able to forecast the necessary stocks even with the analytical tools, the overproduction will remain and must be disposed of in different off-price channels. To respond to this issue, the brands are adopting an off-price strategy to manage volumes, use price discounts without eroding brand equity, and gain access to new customer groups. Another favorable driver for increasing supply is rising demand for sustainability that prevents the destruction of potential oversupply and makes off-price sales a positive contributor to environmental, social, and governance (ESG) measures and brand image. The attractiveness and sustainability of this market is no longer to be proven.

The pros and cons for the brands of the off-price segment:

The brands are concerned about the sales of their new collections, at a full price, namely the promotions of sales on their item could harm their brand image. The discount mall experience is excellent because the clients are not aware of the volume and the price transparency. Also, the distance of the location from the downtown of big cities limits the access of customers. However, the emergence of closed off-price portals enables brands to disclose prices and discounts while keeping those barriers in place. Fashion brands should remain vigilant in understanding the reach and transparency of online platforms while staying up to date on new membership-based models.

The brands are facing the dilemma of selling the overproduction, yet at the same time, avoiding the client to access easily to the sales, instead of buying the new collection at a full price.

What is ISLA doing to solve this issue? ->We enable brands to remonetize sleeping stock, without damaging their image nor the planet, by controlling their resale distribution. ♻️👕We manage your online #resale, your #overproduction through efficient marketplace and maintain your brand image.