The concept of off-price retail originated in the US when Edward Filene opened the first “bargain basement” in 1909, selling off excess inventory in the basement of his downtown department store. This revolutionary idea caught on quickly, and soon many department stores across America had their own “bargain basement” that sold last season’s stock at low prices.
These off-price retailers understood that fashion moves quickly, which deviated from the slow purchasing model at full-price retailers where stores were often left with outdated and unwanted items. The durability of this model has led to the growth of the off-price sector not just across retail within the US, but all throughout Europe as well.
So, How Have Off-Price Retailers Evolved in Europe?
Previously confined to North America, the off-price boom reached Europe by 1976 with the first off-price retail store opening in France under the “Le Soldeur” trademark. The store offered discounted clothes that had been bought from factories that were closing down. As of 2018, this French off-price retailer, now called “NOZ”, has over 300 stores throughout Europe.
While NOZ was the first European off-price retailer, the TJX companies who own T.K. Maxx have since overtaken NOZ as the largest off-price retailers in Europe. T.K. Maxx opened their first international store in Bristol, UK in 1994, and as of 2017, T.K. Maxx has grown to over 540 stores operating across the UK, Ireland, Germany, Poland, Austria, and the Netherlands.
Sales at TJX International, which covers Europe and Australia, were up by 8% to $1.23bn during the first quarter of 2019 thanks to a greater need among shoppers for trendy clothing that is both affordable and sustainable. This is a stark contrast to high-street shops like Debenhams who are reportedly closing 22 out of their 50 stores in 2020.
The popularity of off-price merchandise in the UK can also be seen in its many discount villages, which continue to thrive. Opening in 1995, Bicester Village, home to designer outlets from Prada and Gucci, as well as a host of others, now attracts over 6 million visitors annually. These discount designer villages continue to expand, with Bicester Village opening 28 new retail stores in 2017.
Why is Off-Price Thriving in Europe?
Discovery seems to be the name of the game for consumers. Many of these off-price retailers offer shoppers something of a treasure hunt with varied merchandise arranged by size and lifestyle on long, horizontal racks instead of traditional clustered racks featuring one or two products. The unique price tag also lets the customer know the item’s original price, the discounted price, and the total savings, which is a strong motivator for those looking for a great bargain.
In addition, a drive to become more sustainable is a growing, contributing factor to the durability of the off-price model. France is currently drafting a law that prevents companies from destroying old, unsold inventory, with the country’s junior minister declaring that, “Production for destruction is irresponsible and incomprehensible”. As a result, France is already making its way towards becoming a “circular economy,” which entails the promotion and use of recyclable and reusable products.
This trend is likely to spread across Europe with consumers becoming increasingly more conscious of the impact of consumerism and the need to reduce waste. Even fashion retailers see the severity of the issue, with many promising that they will no longer destroy their unsold clothing. For example, Burberry pledged to stop destroying unsold products in 2018 after it was revealed they destroyed £28.6mn worth of products in 2017 alone. The chief executive of Burberry, Marco Gobbetti, said, “Modern luxury means being socially and environmentally responsible. This belief is core to us at Burberry and key to our long-term success. We are committed to applying the same creativity to all parts of Burberry as we do to our products.”
Climate change has had an effect on sales too; excess stock of winter and cold weather clothing has left off-price retailers much to buy thanks to less accurate weather forecasts, mild winters, and longer purchasing cycles of full-price retailers.
What Does the Future Hold?
According to data from Euromonitor International, the off-price sector accounts for just 2% of European apparel specialist retail sales in 2018. However, while growth in Europe was initially slow, off-price retail outlets are now flourishing, with the number of off-price stores more than doubling between 2003 and 2017.
So while Europe does not have as many off-price retailers as the US just yet, there is still a great opportunity for expansion. Deborah Weinswig, a noted retail analyst, believes that, “The immaturity of the off-price channel in Europe suggests opportunities for growth.”
T.K. Maxx is leading the way for off-price retailers, increasing its total European sales by 21% through fiscal years 2013 to 2015. However, French off-price retailer NOZ is not far behind, with over 300 stores now open across Europe since its conception in 1976. This trend is not slowing down either, as new stores continue to open in Germany, the UK, Poland, and Austria. In Germany alone, the off-price sector now accounts for a 6% share of the country’s total fashion turnover. All of this promisingly points to a bright future for off-price in Europe as consumers increasingly seek low-cost but high-quality, sustainable items.