Online Outlets – A reflection of the economic climate or just good business strategy?

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For years if you wanted to sell excess or end of line stock online you would reduce the item and place it in a sale category on your website. But, for the past few years there has been an increase in the number of online outlets being setup by companies such net-a-porta, asos, Argos, Tesco and Debenhams. The outlets referred to in this article are not outlets in the truest sense of the word for the retailers are, in most cases, not selling own label products direct from the manufacturer. For the sake of clarity and because I can’t think of a trendy new name for these shops (suggestions welcomed!) right now we shall keep the terminology the same.

The main point which provides me with the most interest is that online retailers are willing to create an entirely new sales channel to promote reduced items. The setup of what is essentially a new business (in the case of THE OUTNET) costs money… a lot of money and when you take into account requirements such as branding, website development, changes in warehouse packing routines and upgrades to backend fulfillment systems, it leaves you wondering how much of a mark-up was on the product in the first place to enable the business to maintain its profitability. I have however heard of some companies that are quite prepared to make a loss on outlet items and allow their full priced shop to subsidise the outlet. This, I imagine, is part of their wider business strategy and can be valid in some situations such as improving brand awareness and cash flow. In other cases it’s just the result of bad planning and a desperate attempt to move stock.

So, why has the formula for presenting sale stock changed so much? Walk into a high street shop with sale banners in the window and 9 times out of 10 you will be required to walk past full priced items first. Online outlets on the other hand allow the consumers to walk around the full priced items before getting to the sale.  In my view this is just indicative of how online selling is adapting to the needs of the increasingly savvy online shopper. The statistic that you have 7 seconds to make an impression on your customer before they leave your website has existed for years but it is still a valid point even more so when consumers looking for a bargain are involved! Personally, I don’t believe that online outlets are a sign of hard economic times. Sure retailers are struggling but the development of online outlets is just a natural evolution of online selling. In an increasing competitive online market place anything a retailer can do to help customers identify a suitable product and provide a quick and direct route to purchase is a positive move. It also serves to inspire loyalty and trust in the retailer.

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