The need to preserve their image and drive full-price sales is encouraging major luxury players like Prada and Kering-owned Gucci to find new ways to control discounts offered to consumers. As per a Business of Fashion report, luxury players are slowly phasing out end-of-season sales in their boutiques. They are also staying away from discount-prone wholesalers. Luxury retailers Gucci and Kering are urging brands to either transform to a concession model or pull out altogether.
Bridge, premium and sportswear brands including Ralph Lauren, PVH’s Calvin Klein and Nike are also planning to limit their discounts. They are being increasingly pressured by consumers and government regulators in markets like France to end the practice of discounting and destroying unsold goods.
Sustainable disposal of excess inventory
Off-price sales of brands are on a rise currently as they help clear unsold inventory. These sales are expected to continue growing from 2025 to 2030, revealed an April report from McKinsey.
Discounts help brands sell excess inventory in a sustainable way, as per a report by McKinsey & Co. Further digitalization of retail segment is expected to boost discounts by brands in future. The report states, online discounts in Europe are expected to increase 13 per cent annually from 2021 to 2025.
One such emerging discounter in the online segment includes the Munich-based BestSecret which reported 53 per cent sales growth to €943 million ($1.02 billion) in 2021. The online brand is known for its investments in foreign markets under owner Permira, the private equity fund that also owns Golden Goose and Reformation.
BestSecret sells sneakers from Bottega Veneta loafers at 70 per cent discounts. Givenchy logo cardigans and Adidas workout gear are sold only to registered members having a unique referral code. None of the brands or products sold on BestSecret are tagged for Google and other search engines. Advertisements for the site also do not mention the brands that manufacture them by name.
BestSecret sources 95 per cent products directly from brands, says Jason Visse-Demortier, Chief Supply Officer. The company plans to transition major brands to a concession model to access a deeper range of items and sizes, Visse-Demortier says.
Physical retailers step up luxury investments
With more online retailers taking the discounts route, physical retailers are stepping up investments in the luxury segment. One such retailer, Value Retail, which faced a downfall in last couple of years, is on track to resurge to 2019′s pre-pandemic levels this year. The retailer’s physical outlets help prevent cannibalization of full-price sales, says Scott Malkin, Founder and CEO, Value Retail. They also help brands control prices, selection, and client’s shopping experience, he adds.
British brand Burberry has often been criticized for resorting to discounts to boost sales. The brand’s reputation as an online retailer complements its significant exposure to physical outlets, explains Aurélie Husson-Dumoutier, Analyst, HSBC. Looking at the advantages and disadvantages of both online and offline discounts, luxury brands need to explore both opportunities. They need to find new ways to increase online discounts — without damaging full-price offerings and brand equity.