LONDON – Off-price retail is increasingly becoming an important source of growth for the fashion industry as inflation spiked post-pandemic, McKinsey’s new research titled ‘Harnessing Off-price Fashion’ revealed on Thursday. in an omnichannel world”.
According to an analysis of global data on the off-price market and a survey of 11,000 consumers in 10 European countries, it appeared that this segment grew faster than the fashion market as a whole, and that it was less hard hit during the pandemic.
McKinsey has estimated that off-price retail is likely to grow five times faster than the overall market between 2025 and 2030. A key driver of this growth is the growing online presence of off-price retailers. . Even TK Maxx, the European arm of TJ Maxx, has dramatically increased online offerings during the COVID-19 shutdowns.
Other online models that have taken hold include flash sales, made by players like Dress-for-less, Limango, Veepee and Zalando Lounge; mystery boxes from startups like Heat and Scare; and more traditional sites that offer a permanent assortment of fashion items, such as BestSecret, Booztlet, Brands4friends, Otrium and Yoox.
Katharina Schumacher, digital expert and co-author of the study, said: “Online sales are 40% of the non-price market and they’re growing extremely fast right now – around 13% a year, on average.”
She added that mastering off-price fashion in an omnichannel world will be key for fashion companies to “enable their brands to reach new consumers who wouldn’t normally consider buying at full price” and sell their excess stock in a more sustainable way.
The study also revealed that off-price followers, who are interested in products from the luxury, accessible luxury and premium categories and shop on specialized platforms such as Dress-for-less, BestSecret, Brands4friends or Scarce, like to compare prices and spend 2.3 times more on their purchases than other fashion shopper groups.
In Germany, for example, the study found that 30% of off-price customers spend more than €1,000 per year on fashion purchases, accounting for 70% of total fashion spend.
Achim Berg, global apparel, fashion and luxury leader at McKinsey, added: “At the same time, these shoppers are fundamentally willing to pay full price for premium and luxury brands. Fashion companies must therefore carefully weigh the products they offer at a discount.
Bargain hunters’ expectation of low-cost purchases has also increased.
The study showed that this group of customers is younger and tends to spend more. They like to go to malls but tend to avoid the usual luxury stores in high-end shopping districts.
Felix Rölkens, the other co-author of the McKinsey study, said: “Outlets present an opportunity for luxury fashion brands to not only be more profitable, but also to reach new groups of customers without cannibalizing their full price assortment and damaging their brand.
“But buyers’ expectations of points of sale are constantly growing: equipment that resembles those of traditional stores, sellers who speak several languages, restaurants and a good customer experience,” he said. he adds.
To take full advantage of the opportunity across the board, the study suggested that “brands need to adopt a multi-pronged strategy to maximize revenue from both channels and secure their brand image – without cannibalizing full-price offers. “.