Benefits and Strategies for Selling Inventory to Discount Retailers

Benefits and Strategies for Selling Inventory to Discount Retailers
By: Emily Sanchez | August 21, 2023 | Reading Time: 7 minutes

The discount stores market has experienced remarkable growth over the years, showcasing its immense potential in the retail industry. In 2022, the market size was valued at a substantial USD 510.09 Billion. However, this impressive figure is only a glimpse of what is yet to come. Projections indicate that the market is set to expand exponentially, with an estimated value of USD 834.74 Billion by the year 2030. This trajectory of rapid expansion is fueled by a robust compound annual growth rate (CAGR) of 5.35% expected from 2023 to 2030.

The increasing popularity of discount stores can be attributed to their ability to offer consumers cost-effective alternatives without compromising on quality, making them an attractive option for budget-conscious shoppers. As consumers continue to seek value-for-money, discount stores are poised to play an increasingly vital role in the retail landscape, further solidifying their position as a major driver of growth in retail.  Simply put, discount retailers are becoming more and more important as part of a retail brand strategy. 

For brands looking to clear excess inventory or increase sales volume, discount channels offer a valuable opportunity. These channels caters to price-conscious consumers seeking deals. Getting inventory into discount channels requires careful planning and execution. This article compares some of the major players, and  explores effective strategies for businesses to leverage discount channels, maximize profitability, and efficiently move inventory.

Understanding Discount Retailers

Discount channels refer to retail platforms that specialize in offering products at reduced prices. These channels attract consumers seeking cost-effective merchandise, clearance items, or lower-cost alternatives to mainstream retail stores.

Common Types Of Discount Stores

There are several types of affordable retailers that operate in various formats and cater to different consumer needs. Following are the some of types:

Off-Price Retailers

These retailers offer brand-name and designer products at reduced prices by purchasing excess inventory, closeouts, or discontinued items from manufacturers and other retailers.

Examples include T.J.Maxx, Marshalls, and Ross Dress for Less.

Closeout Retailers

Closeout retailers typically specialize in selling inventory that is discontinued, often obtained from manufacturers or wholesalers who want to clear out excess inventory. They typically offer merchandise at low prices by purchasing excess inventory, canceled orders, or overstock from manufacturers or other retailers.  They can be branded or non-branded products.

Examples include Job Lots, Ollie’s Bargain Outlet, and Bargain Hunt.

Dollar Stores

Dollar stores sell a variety of products at low, fixed prices, typically ranging from $1 to a few dollars. They focus on offering inexpensive household goods, party supplies, cleaning products, and snacks.

Examples include Dollar General, Dollar Tree, and Family Dollar.

Salvage Stores

Salvage stores sell products that have been damaged, returned, or have some other form of imperfection. These stores offer significant reduced prices on these items, and customers often find bargains on items such as appliances, furniture, and electronics. 

Examples include Ocean State Job Lot, Dirt Cheap, and The ReUse People.

Online Retailers

Online retailers operate exclusively online and offer a wide range of affordable products. They often source products from various suppliers and offer affordable prices through bulk purchasing or direct partnerships.

Examples include Overstock.com and Zulily.

How Off-Price Retailers Differ from Dollar Stores

Off-price retailers and dollar stores have some similarities in terms of offering low prices, but they differ in several key aspects. Here are the main differences between off-price retailers and dollar stores:

Merchandise Assortment

Off-price retailers primarily focus on offering brand-name and designer products at clearance-prices. They often carry a wide range of merchandise across various categories, including apparel, accessories, home goods, and electronics. Their inventory consists of excess inventory, closeouts, or discontinued items from manufacturers and other retailers.

In contrast, dollar stores typically offer a mix of inexpensive products across various categories, including household items, cleaning supplies, party supplies, snacks, and basic groceries. They focus on providing everyday items at low, fixed prices.

Pricing Structure

Off-price retailers offer products at low-prices, but the price can vary depending on the specific item and its original retail price. These retailers may sell items at a significant markdown compared to their original prices, but the low-price may not always be as deep as those found in dollar stores.

Dollar stores, on the other hand, have a fixed pricing structure where most items are priced at $1 or a few dollars. They aim to provide a consistent, low-cost shopping experience.

Brand Selection

Off-price retailers typically offer well-known brand names and designer labels, although the selection can vary depending on the available inventory. They often carry a mix of popular brands.

Dollar stores, on the other hand, may carry a mix of brand-name products alongside generic or private-label items. The emphasis in dollar stores is on affordability rather than specifically offering well-known brands.

Store Format

Off-price retailers generally have a store format similar to traditional retail stores, with organized departments and racks for various product categories. They may have a larger store footprint and offer a more extensive shopping experience.

Dollar stores, on the other hand, often have a smaller store format with a focus on maximizing efficiency and stocking a high volume of products in a compact space.

Customer Base

Off-price retailers typically attract a broad range of customers looking for affordable brand-name products. Their customer base may include bargain shoppers, fashion-conscious individuals, and those seeking quality items at a lower price.

Dollar stores, on the other hand, cater to a more price-sensitive customer base, including budget-conscious shoppers, individuals looking for everyday essentials, and those seeking the convenience of one-stop shopping at a low cost.

Benefits of Selling through Discount Channels

Clearance of Excess Inventory

Clearance of Excess Inventory

These affordable channels provide a viable solution for clearing slow-moving inventory. By offering low-prices, businesses can quickly move products that would otherwise tie up valuable resources.

Expanded Customer Base

Expanded Customer Base

Lower-price channels attract a specific customer segment seeking affordability and value. By tapping into these channels, businesses can reach a broader customer base and potentially attract new customers who may not have considered their products otherwise.

Revenue Generation

Revenue Generation

Selling through affordable channels generates revenue that might have been lost if the inventory remained stagnant. While profit margins will be lower, the increased sales volume may compensate for the reduced per-unit profitability.

Brand Visibility and Awareness

Brand Visibility and Awareness

Placing inventory in these stores exposes the brand to a wider audience. Consumers may later become loyal customers, leading to increased brand awareness and long-term growth opportunities.

Strategies for Getting Inventory into Affordable Stores

If you’re interested in selling your inventory at stores like T.J. Maxx, Ross Store, Job Lots or Dollar General, here are some steps you can follow:

Research

Thoroughly research retailers to identify those most aligned with the target audience and product category. Consider factors such as the retailer’s customer base, pricing structure, reputation, and geographic coverage. Choose a platform that complement the brand and offer the best opportunity for success.

Pricing and Margins

Determine appropriate pricing that maintains profitability while appealing to cost-conscious consumers. Consider factors such as the product’s perceived value, market competition, and desired sales volume. Negotiate favorable pricing terms to maximize profit margins.

Inventory Segmentation

Categorize inventory based on factors such as seasonality, popularity, or product life cycle. Allocate appropriate quantities while ensuring sufficient stock for other distribution channels. This segmentation prevents cannibalization of full-priced sales and optimizes inventory allocation.

Strategic Partnerships

Collaborate with the retailers to secure partnerships that streamline the process of getting inventory into stores. Develop mutually beneficial agreements, negotiate terms, and establish efficient logistics and inventory management processes.

Exclusive or Limited-Time Offers

Create exclusive or limited-time promotions tailored specifically for the selected stores. This strategy generates a sense of urgency, driving consumers to take advantage of the low prices. Highlight the value proposition and uniqueness of the offer to attract customers.

Marketing and Promotion

Implement targeted marketing campaigns to raise awareness about the presence of inventory in the stores. Leverage various marketing channels, including email marketing, social media, paid advertising, and search engine optimization, to drive traffic and conversions.

Efficient Inventory Management

Maintain accurate inventory records and establish seamless communication between the business and the stores. Implement real-time inventory tracking systems to ensure inventory availability, prevent stockouts, and minimize order fulfillment delays.

Consistent Product Quality

Even when selling through the affordable platforms, prioritize delivering high-quality products and maintaining consistent standards. Positive customer experiences reinforce brand perception and can lead to repeat business and positive word-of-mouth recommendations.

Want to know the value of your inventory?

Frequently Asked Question

What are the benefits of shopping at discount stores?

There are many benefits to shopping at discount stores, including:
– Low prices: Discount stores offer a wide variety of products at discounted prices, which can save you a lot of money.
– Wide selection: Discount stores often have a wide selection of products, so you are more likely to find what you are looking for.
– Convenient locations: Discount stores are often located in convenient places, making it easy to get to them.
– Variety of brands: Discount stores often carry a variety of brands, so you can find name-brand items at a discounted price.

How do I find the best deals at discount stores?

There are a few things you can do to find the best deals at discount stores:
– Shop during the week: Discount stores often offer better deals during the week, so avoid shopping on weekends.
– Check the clearance section: Discount stores often have a clearance section where you can find deeply discounted items.
– Sign up for email alerts: Many discount stores offer email alerts when they have sales or promotions.
– Follow the stores on social media: Many discount stores also post about sales and promotions on social media.

What are the best discount store companies?

Some of the top discount retailers include Dollar General, Dollar Tree, Aldi, Lidl, Costco, Big Lots, TJ Maxx, Macy’s Backstage, and Burlington. These discount stores offer great bargains on name brands across categories like grocery, home goods, fashion, and more.

Conclusion

Remember, getting your inventory sold at these retailers can be a competitive process, and there is no guarantee of acceptance. It’s important to have a unique product, competitive pricing, and a professional approach to increase your chances of success.

Leveraging discount channels can be a powerful strategy for businesses to clear excess inventory, reach new customers, and generate revenue. By understanding the benefits of discount channels and implementing effective strategies, businesses can efficiently move inventory while maintaining profitability. Thorough research, strategic pricing, targeted marketing, and efficient inventory management are key elements in successfully getting inventory into discount channels. By embracing these strategies, businesses can capitalize on the opportunities presented by discount channels and achieve long-term success.

Companies like Overstock Trader play a crucial role in offering services to brands in entering various channels of distribution, helping them navigate through the complexities of these channels, and devising effective strategies to succeed in the competitive market.