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The trends are evident: A few years ago, seemingly every high-end retailer was opening an off-price chain, selling exclusive merchandise at discount prices. But today, the pendulum has swung back, and many of these retailers are closing up shop, at least in their off-price locations.

The latest to do so, Neiman Marcus will shutter more than one-quarter of its Last Call stores, going from 37 to 27 outlets. In doing so, it hopes to leave more resources available for the full-price stores under its primary brand, as well as optimize its off-price channel. Such outcomes in turn support its broader, newly revised strategy to dominate luxury retail markets.

Others preceded it, including Barneys New York, which closed many of its off-price stores several months ago. For Barneys, getting out of the discount business reflects its shift in strategy, back to what it considers its classic business model. In particular, it plans to focus more on ultra-exclusive merchandise. If it can stock just a few, rare versions of an appealing designer’s handbags or couture, which upscale, prestige-oriented shoppers will never find anywhere else, “we are not forced to mark it down.”

Retailers are not the only ones to exhibit this reversion to luxury; brands such as Coach and Ralph Lauren similarly are working to regain their high-end reputations and eliminate, or at least minimize, sales of more affordably priced options.

For consumers, the shifts suggest a potential loss, in that they will have less access to the off-price channels. But it also appears as if consumers are the ones leading the change. That is, retailers are closing these stores in some cases because sales have slowed in them. Thus it might be that it is the consumers who create the trends, and the retailers that simply follow where those shoppers are leading.

Discussion Questions:

  1. Why are Neiman Marcus and other luxury retailers closing their off-price stores?
  2. Do you agree with this strategy? Why or why not?

Source: Jasmine Glasheen, Retail Wire, September 20, 2017