Today’s consumers are constantly shopping for a bargain, whether its holiday sale season or not.
Earlier this year, 48 percent of Americans said they would take advantage of post-holiday discounts, up slightly from the previous year, according to the National Retail Federation. And why not? We all know there are deals to be had. But despite the 154 million Americans who shopped the Black Friday sales in November, they spent less ($289 in 2016 versus $299 the prior year) and focused more on value than in years passed (more than one-third of shoppers said 100 percent of their purchases were made on sale).
That creates a quandary for retailers.
Deep discounts train the consumer to expect cheaper prices, making full-price commerce weaker over time. There’s also the risk turning off high-end customers who prefer not to think of their luxury purchases as something anyone can afford. However, if you stay steady at full price, you risk being left with a glut of product come season’s end. So now what?
One approach to solving this dilemma can be seen in the boom of brick-and-mortar outlets for off-price apparel in the U.S. Last year, discount stores like Ross, TJ Maxx and Marshalls grew by 12 percent—this in an economy where their full-price parent locations have been shrinking in size and numbers. And it’s a trend I see continuing in the near future. Selling excess merchandise in a separate location from the flagship store can help companies reach a new, bargain-hunting customer base while maintaining their upscale image for full-price customers. Moreover, it does not solve the long-term issue that similar items are being sold just down the road from each other at drastically different price points. Consumers are a savvy bunch. It won’t take long until full-price shoppers make the switch to off-price purchasing, and then what do you do?
Another more valuable approach to handling excess inventory is to find reputable, reliable buyers overseas. In this business minded approach, American consumers are less likely to see their full priced designer favorites being worn by bargain hunters, and then wonder why they can’t purchase goods for half-price as well. In the international marketplace, there is less focus on seasonal trends. If a dress or shirt is part of a designer’s Fall 2016 collection, people are still happy to buy it in the spring or summer of 2017, while fashion-focused shoppers prefer the very latest runway trends.
Many retailers don’t realize how huge the appetite for excess inventory is abroad.
By some estimates, the potential global market for discount merchandise is $280 billion, but currently only $90 billion in sales is being realized in the U.S. That gap reveals only two things you need to know about the international off-price industry: it is thriving and vastly underserved.
I saw this need firsthand in my years as an economic advisor for the United States Agency for International Development in Afghanistan and other developing nations. The biggest roadblock to economic growth in the trade industry is not a lack of funds to purchase new product or lack of resources to create goods for sale, it is the inability for buyers and sellers across national and continental lines to make contact with each other and form meaningful business relationships. International trade is traditionally a murky, messy business ripe with fraud, misunderstandings and missed opportunities. The result of this is an inefficient, corrupt system of brokers and intermediaries who take an enormous cut of the profit before wholesale buyers even begin to recoup their investment. The system is outdated and frankly, does not work.
What I realized in that time overseas is even more apparent today: buyers and sellers in the global off-price retail scene need an established, neutral marketplace to facilitate business deals. They need a simplified method to market and transact that is safe, secure and transparent. They need advisors who understand the complexities of international trade law, the subtleties of local business law and the delicate nature of brand licensing and trademark rules.
With platforms like TigerTrade, buyers around the world are able to search sellers’ existing overstock, select quality and assortment of inventory and purchase styles for their market. Sellers are able to restrict potential buyers or certain countries to be sure there is no conflict of interest for their brands and can feel secure that payments will be made on time. Both parties are assured that the deals will go through, because a team of international commerce experts has vetted them.
There is no doubt that off-price international retail is the way of the future.
Retailers in countries like China and Mexico have plans to double or even triple their number of stores selling discount inventory in the next few years. The global growth of middle and upper-middle class families, combined with technology that has raised brand awareness around the world, will drive the global appetite for American brands to an all-time high. It is a prime opportunity for U.S. brands and luxury labels that are wary of diving headfirst into the developing markets to test the waters and gauge response. A total sell-through of excess inventory in one of these markets? Maybe it’s time to open a flagship store. Several of our European clients, who are entering developing markets they never would have considered before, are witnessing the tremendous success of their excess inventory sales in these locations.
The biggest hurdle to international off-price trade isn’t the funding or the manufacturing, it is finding a trusted partner with the expertise to execute million-dollar deals between parties thousands of miles apart. If companies can remove uncertainty, everyone wins.
By Tanjila Islam, CEO and founder of TigerTrade, a B2B platform that facilitates buying and selling off-price merchandise.