As a reseller, many of us utilize off-price retailers such as TJ Maxx and Marshalls for sourcing inventory. These stores allow resellers to purchase new items at discounted prices. While walking around these off-price retailers, have you ever wondered where the merchandise in these stores originates from? I have and today, I wanted to share with you some insight on how these stores acquire their inventory and how they are able to sell them to consumers at discounted rates.
In the recent years, there has been an increase in the value-seeking mindset amongst consumers. As a result, off-price retailers worldwide have seen a significant increase in demand. Consumers love off-price retailers because they sell designer goods for 20 to 60% less than department stores and their inventory is constantly changing. The reason that they are able to do this is because their buyers search year-round for inventory instead of only buying during a buying season like most traditional retailers.
So how exactly do they acquire their inventory?
There are 3 ways that off-price retailers acquire their inventory:
1) Buying Excess Inventory From Full-Price Retailers
At the end of a fashion buying season, many full-price retailers will have excess inventory. In order to liquidate this inventory, they will typically sell it to off-price retailers. These off-price retailers will then negotiate with full-price retailers for a lower price. These negotiations will either occur between full and off-price retailers directly or through liquidation marketplaces. Additionally, off-price retailers will buy orders that department stores cancelled at the last minute.
2) Buying Directly from Manufacturers
When it comes to fashion manufacturing, the majority of it occurs overseas. Many times, full-price retailers will place larger than necessary orders with manufacturers because it is more cost effective for them. As a result, there is a surplus of inventory that the full-price retailer doesn’t need. Off-price retailers are aware of this overproduction and will go directly to the manufacturer to buy out the remaining inventory at a discounted price.
3) Partnering with Manufacturers to Create Their Own Brands
Many off-price retailers like TJ Maxx and Marshalls, have private labels that allow for large scale production and a reliable source of inventory. TJX in particular has licensing agreements with certain designers that allow TJX to produce and manufacture items with a designer’s name on it. These items are specifically made for TJX and not from the designer on the label. Designers allow TJX to produce and utilize their name on the label in return for a royalty.
As a reseller, it is important to be educated on the behind-the-scenes of the dynamics between off-price and full-price retailers and the circulation of merchandise. If off-price retailers didn’t step in to buy the excess inventory produced by manufacturers and ordered by retailers, then those items would probably end up in a landfill somewhere.
The Future of Off-Price Shopping
It is no secret that full-price retailers are on the decline in recent years, especially after the pandemic. With the increase in off-price shopping, many full-price retailers are wanting a piece of the action too. Instead of sending their excess items to liquidation markets for off-price retailers to buy, they are creating their own off-price stores. Examples of these stores include: Saks Off Fifth, Nordstrom Rack, and Last Call Neiman Marcus. Creating these stores has been more cost-effective to them.
Full-price retailers aren’t the only ones learning from off-price retailers. Additionally, outlet malls are re-structuring their stores in order to follow a similar model and to appeal to the same demographic of buyers in the coming years.
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