Outlet stores

The (big) business of cheap and luxury outlet stores

Hoping to get your hands on some discounted end-of-season looks in one of Prada’s glittering flagship outposts? Think again. The Milan-based fashion brand announced earlier this year that it would ban sale items from the boundaries of its carefully selected stores now, in a bid to bolster its image and profit margins. What will happen to expensive feathered dresses, often embellished outerwear, and logo-embellished handbags that don’t sell for full price in the appropriate season? They go to the brand’s factory outlets.

You won’t find any outlet stores listed on the Prada website, but that doesn’t mean they don’t exist. They do. Prada outlets dot the map, from its SPACE location on the outskirts of Florence to one just a short distance from the bustling streets of New York. In many cases, Prada’s budget stores can be found in outlet centers alongside Alexander McQueen, Balenciaga, Bottega Veneta, Christian Dior, Fendi, Givenchy, Gucci, Loewe, Loro Piana, Saint Laurent and Valentino, and their own respective markdowns.

Thanks to such outposts, these brands – among others – are able to increase their income columns at the end of each fiscal year with numbers directly tied to the money they are making rather quietly out of the off-season. , markdown and / or clothing and accessories for factory outlets.

Exactly how much oomph do high fashion outlet stores have? It’s hard to say, in large part because few of those companies – which typically operated by tightly controlling production and distribution with the aim of positioning themselves as exclusive and / or luxurious, and therefore selling their wares at a price. de luxe – act as open books on these endeavors.

In fact, overpriced efforts (and products designed for stores, if applicable) are rarely topics industry participants discuss. For example, “Neither Kering, nor LVMH, nor Richemont – the largest luxury companies in the world – publicly report the value of ‘off-price’ or discounted sales in their annual reports,” the Financial Times said end of 2016.

LVMH – whose brands Celine, Dior, Fendi, Givenchy and Kenzo are among those with outposts in the factory village of Bicester in Oxford – only briefly mentions factory sales in its annual report, noting that “Louis Vuitton is the only brand in the world never to organize sales [to the public] nor sell in points of sale. Kering is a bit more open, revealing in its annual report that one of the “six formats of sale” in its wholesale distribution model is “points of sale”. These outlets account for 12 percent of wholesale sales, after single-brand stores (30 percent), specialty stores (22 percent) and department stores (20 percent), and ahead of online stores (10 percent). percent) ”and airport stores (6 percent).

Kering further notes in its 2018 annual report that as part of an effort “to simplify structures and processes and generate additional synergies between functions” for its Gucci brand, it has created “a new organizational structure … based on four pillars ”. Among these pillars? In addition to merchandising and global markets, branding and customer engagement, and digital commerce and innovation … are the indirect channels, Exitand Travel Retail.

Yet the norm is that luxury brands have “physically moved their points of sale away from [their] downtown stores ”, according to Deloitte 2018 Global Powers of Luxury Goods report, with the aim of maintaining their meticulously maintained images. (While Dior, for example, holds sales every year to offload unsold fashion items, these take place “only twice a year and for very short periods of time, and in separate leased locations,” according to Deloitte. , “never in their flagship store on Avenue Montaigne.”)

While almost all luxury brands have remained relatively separate and uniformly discreet about their overpriced operations, though the growing incomes of a handful of high-end shopping centers – such as Bicester Village just outside London, La Vallée Village in Paris or Woodbury Commons, which is located in about an hour and a half from Manhattan – are an indication it’s a lucrative side business, and they’re not likely to be leaving anytime soon.

Value Retail, for example – which owns and operates 11 global shopping centers, such as Bicester Village, with store directories that rival those of Rodeo Drive – has revealed that it “has seen double-digit growth in gross sales every year. year ‘between its launch in 1995 until 2018. The private London-based group provided a report Over $ 3 billion for 2017. That same year, the group, which says it is “partnering” with brands to sell their “excess brand inventory,” revealed it was making about $ 5,215 per square foot in its villages, some of which are a sprawling 25,000 square feet or more.

Overall, these low-cost outlets “work well,” said Hessam Nadji, president and CEO of real estate brokerage firm Marcus & Millichap Inc. the wall street journal. “Encouraged by shoppers looking for discounted products, outlet center owners are showing strong results in an otherwise bleak retail environment,” the publication revealed last spring. But it is not only all discount buyers.

Bain & Co. asserted in its study of the global luxury goods market fall-winter 2018 that “non-price sales” represent “about a third of luxury products market ”, approaching 35 billion dollars worldwide, up 23% from 2013. The market consulting firm only expects this segment to increase further, with“ the development of distribution channels, such as as discount outlets ”, helping to enable the personal luxury goods market to reach $ 361- $ 412 billion by 2025.

In other words, even luxury consumers are not immune to the appeal of discounted products, and given the potential revenue that a brand can generate, while retaining its exclusive image, at least as far as its main outposts are concerned, luxury players are also not swearing outlets. They might not advertise much on their websites or make any sales internally.

Luxury is a game that depends entirely on the image, after all.

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