Companies we engage with frequently inquire if selling excess inventory to an off-price retailer is bad for their brand. It’s a very legitimate concern to have and one that all brands need to think about. Brand value is a critical asset for companies striving to establish a distinct identity and connect with their target audience. However, the rise of discount retailers has sparked a debate on whether these cost-focused outlets contribute to the devaluation of brands.
One of the most well-known and repeated proverbs in Spanish says,
Tell me who your friends are, and I will tell you who you are.
It is an old Spanish saying that means that you can predict a person’s behavior by analyzing the people they hang out with. The same holds for brands. Look who you are next to on the shelves, and that will let you know where you stand.
Friend or Foe? The Impact of Discounting on Brand Value
In recent years, a noteworthy trend has emerged wherein high-end and exclusive brands find their way into discount stores, providing consumers with the opportunity to access luxury goods at more affordable prices. This phenomenon challenges traditional retail norms, blurring the lines between upscale and budget-friendly shopping. Discount retailers, once synonymous with lower-tier brands, now showcase prestigious labels, creating a unique shopping experience. Brands like Burberry, Michael Kors, and Versace, known for their high quantity and elevated designs, have been spotted gracing the shelves of discount outlets, surprising and delighting shoppers who can now enjoy the allure of luxury without the hefty price tag. This shift reflects a changing landscape in the retail industry, as even the most esteemed brands recognize the value of reaching a broader audience through unconventional distribution channels.
It’s also important to understand that the discount retail landscape is a vast and diverse ecosystem, offering consumers a wide range of options to satisfy their shopping needs. It is essential to note that discount retail doesn’t adhere to a one-size-fits-all model. There exists considerable nuance among the various types, a few examples of which are outlined below:
Off-Price Retailers:
Stores like T.J. Maxx, Ross Dress for Less, and Marshalls are special because they sell famous brands at lower prices. They get extra items or things that didn’t sell from big stores and offer them at a discount.
People can buy different brands for way less than the regular price. These stores always have new things coming in, so people who love finding good deals visit often.
Closeout Retailers:
Stores that sell closeout inventory stand out by getting products that are almost done being sold in regular stores.
These products could be things that there’s too much of, stuff they won’t sell anymore, or things with different packaging. By buying a lot of these items at once, these stores can give customers big discounts.
Dollar Stores:
Dollar stores are found everywhere and sell many things at fixed, low prices. Examples are Dollar General, Dollar Tree, and Family Dollar.
These stores usually offer private label brands and small or multiple packs of well-known brands. By keeping things simple and focusing on saving money, dollar stores are liked by people who want to spend less.
Online Discount Retailers:
Because of online shopping, there are now many online discount stores. Websites like Overstock, Amazon Outlet, and Zulily sell a variety of things at lower prices, like electronics, home stuff, and clothes.
They often work with different brands to sell extra items or have special deals for a limited time.
Want to know the value of your inventory?
Frequently Asked Questions
What are the most effective pricing strategies for retailers who want to encourage customers to buy without sacrificing profit margins?
Discover the best pricing strategies, including discounts and creating a sense of urgency, that retailers can use to strike a balance between attracting customers and maintaining healthy profit margins.
Won’t selling to discount retailers hurt my brand image?
This is a common concern, but it doesn’t always hold true. While partnering with certain low-end stores might not be ideal for luxury brands, many high-end retailers have successfully utilized off-price outlets to manage excess inventory without harming their image. It all depends on choosing the right partner and ensuring that the discounted products represent a separate channel from your core offerings.
How can I control the way my products are sold at discount retailers?
Transparency and communication are key. Negotiate clear terms with the retailer regarding product placement, marketing tactics, and price restrictions. You can also consider implementing minimum advertised price (MAP) policies to maintain some control over your brand’s image.
Are there any alternatives to selling to discount retailers?
Yes, several options exist! Liquidation companies, online marketplaces like eBay, and even exporters can help you clear excess inventory. Each option has its own advantages and disadvantages, so weigh the potential impact on your brand and bottom line when making your choice.
Is e-commerce always cheaper than brick-and-mortar stores?
Not necessarily! Many retailers use different pricing strategies across channels. Compare prices and factor in shipping costs before assuming online is always cheaper.
Conclusion
Each of these types of discount retailers caters to a different buyer. If you are going for high-end luxury, being sold at a Dollar Store isn’t a “good look”. High-end brands are best suited for the off-price segment of the discount retail landscape.
When selling extra items, brands consider their situation and plan. Some worry it decreases brand value, but many high-end brands succeed, making them not less special in discount stores. It’s a strategic move for some to handle extra stock and reach new customers. Discount stores are valuable partners to sell items without harming the brand.
Consider experts like Overstock Trader for smooth navigation. They specialize in selling slow-moving items, freeing up space, and adding extra cash. This helps manage surplus stock and reach new demographics. The key is thoughtful consideration, transparent communication, and aligning decisions with long-term goals and values.