Online shopping: discounters

One of the best things about online shopping is being able to find all retailers: the hottest designer brands with the newest trends, the more moderately priced brands which sometimes do an even better job of commercializing those trends, down to mass market retailers which can offer an acceptable level of quality and are great at providing value with staple items because they have placed a huge production quantity with factories, sometimes up to a year or longer in advance, knowing the products are basics and won't go out of style.

Additionally, you can find some discount retailers that offer products primarily from the first two levels of suppliers listed above (designer and moderate brands) but at discounted prices. While the more popular discounters, such as Loehmann's, Marshall's, Burlington and Ross still remain brick and mortar retailers when it comes to selling merchandise, there are some online discounters.

Discounters sometimes offer products that are actually the same ones still at regular price in the department and specialty stores. If you wonder how that could be, I'll explain the reality of the situation.

Wholesale brands want to provide a customer service level above their competition, so many hold stock for their retail partners on what they hope will be hot items. This means that when a new product is shipped to the retailer at the beginning of a season (for the Fall season, that would usually mean shipping July and August), the supplier sometimes agrees to carry backup stock such that if the item does well at retail, the retailer can place a fill-in order with the wholesaler and quickly be back in stock on any sold out sizes, colors, etc. A second reason could be that the total sum of orders on a pattern, from all retailers, may not have met the minimum order requirement set by the factory.

When the wholesaler is faced with that situation, he has three options: a) cancel any in-house orders from retailers and then, notifying them that it will not get made (and dealing with some irate retailers when they find out), b)  re-negotiating with the factory to still produce the style, but at a lower minimum in exchange for the wholesaler paying a higher per unit cost, to make up the factory's gross margin loss, and c)  taking on the burden of placing an additional order for the balance of the minimum, which the wholesaler hopes to sell in the form of in-season reorders.

Regardless of the reason why there may be unsold stock as the first regular price orders start to ship, the wholesaler at that point may have to consider external factors at that moment in time, which may have changed since factory orders were placed several months (sometimes up to 6 or 9 months) prior. One factor could be the economic environment, which may have turned for the worse and the potential that it may have an adverse affect on consumer spending, ultimately reducing his ability to sell the stock at full wholesale price in season, or perhaps he has to deal with  pressures from factors (companies that loan money to wholesalers in order to pay the factories to produce goods, in exchange for the factor being the first to receive payment from the retail customers with an added interest fee before the wholesaler ever sees any money).

In your head you may be thinking about one style and wondering what the big deal is, but you have to remember a new season's line is comprised of many new patterns, a good number of which may be leveraged in this way. The cumulative financial burden becomes quite high if the planned retail success does not materialize.

To reduce the risk, the wholesaler can decide to sell a portion of the uncommitted backup stock right at the beginning of the season to a discount retailer. While the price offered by the discounter may be 30-50% off the regular wholesale cost he might get if the item is a hot seller, he has to weigh it against the greater possibility that it may not be. If he waits to find out how the pattern retails, he puts himself in the position of having to offer these goods to the discounter at a time when hundreds of other suppliers are also  offering that same discounter more options than the discounter could ever purchase. When that happens, the offer price from the discounter drops substantially, and could be as low as 75-85% off the regular wholesale price. Having to sell at those wholesale costs, could quickly turn a profitable season into a disastrous one, depending on how much uncommitted stock needs to be liquidated.

The wholesaler must consider these different possible scenarios, if he has uncommitted seasonal merchandise, before the first regular wholesale cost order ever ships from his warehouse.  Complicating the situation even further, is the move by retailers to commit less of their open-to-buy budget up front, thus giving themselves flexibility to change course if need be closer to the start of the season and during it, in the event that expected fashion trends don't take off.  With this shift in buying habits, the result is an even greater frequency of these wholesale situations, to the point where deciding to unload excess stock before or early in the season to a discounter has become common place. This has played a major part in the growth of discounters over the past decade, because more off-price goods aqre regularly available to discounters.

The ironic thing about all of this, is the retailers' frustration with wholesalers if they ever come across a pattern they have bought and are selling at regular price in their stores, available in a discounter which may be retailing it for 30-50% off MSRP.  Following the process of how it all happens, some of the cause relates directly back to the full-price retailer in the first place. 

The product category doesn't matter in this cycle. You can find dresses, outerwear, sportswear, jeans, clothing, shoes, boots, slippers, athletic shoes, home decor, handbags and other accessories at these discount retailers, due to the reason above. But as a total, these goods account for a very small amount of the discounters' stock. The discounters' assortment is predominantly made up of prior season's styles. But for those that keep searching, you will find goods that are current.

Now instead of jumping in a car to drive to the closest outlet mall, you can just click this link which will take you to the "discount wing" of the H2H International Online Shopping Mall, or as we call it, the H2H Online Outlet Mall, providing the links to retailers offering current trends and styles at promotional prices. This is especially beneficial to shoppers who don't live near discounters or outlet malls. International shoppers can especially benefit, because the popularity of discount malls is nothing like in the United States, where you can usually find one within a short drive.  For example, in the Netherlands, there are only two outlet malls, one in the northern part of the country near the German boarder and one in the south near the Belgian border. Both are two hour car rides from key metro areas like Amsterdam, The Hague and Rotterdam.

Happy shopping!

 

 

 

 

 

 

Comments

Online shopping: discounters — 1 Comment

  1. Great post, thanks for sharing, online shopping is the best way for shopping.