Recently, Business Insider reported companies that usually offer consumers up-scale products for a high price will open more discount outlets to drive sales.
Now the problem with this isn’t that the stores aren’t making money, they are. Typically clothing is marked up about 1100 to 350 percent. Therefore, the prices consumers are paying at outlets are most likely still marked up fairly high.
The problem is that the consumer’s perception of the brand is beginning to change, as it’s questionable if these companies are still considered luxury brands.
When companies offer their products for a discounted rate, they are targeting a different market. This is a problem that not only Nordstrom will face, but it’s also something Calvin Klein and Michael Kors are currently facing as the latest reports show a decrease in the companies’ profits, according to CNN.
I don’t think these companies can target wealthy individuals who want that expensive and unique product as well as individuals who can’t afford premium items at full price. These types of consumers are completely different and it’s challenging to target both.
Outlet stores have their positives too like an increase in exposure from consumers who may want to test the brand before paying the premium price and a way to hook consumers at a younger age. However, the devalue of a brand is a huge issue for these companies and Luxury Daily suggests that management must be focused on building the brand, not creating low-priced alternatives. Why would someone pay full price if in a few months it’ll be available for half the cost?
What do you think? Do you think Nordstrom and other luxury retail stores should have discount outlets even if it hurts the quality of their products? How do you think Nordstrom can continue to be a luxury brand when they have so many retail outlets?