Consumers\u2019 Checkbook<\/a> published an investigation of outlet stores from 40 major brands, including Coach, J.Crew and Banana Republic.<\/p>\nWhat they found was surprising. More than half the merchandise they examined wasn\u2019t leftover inventory at all. It was manufactured specifically for outlet stores.<\/p>\n
Brands have essentially created an entirely separate business around customers who want the brand name but can\u2019t afford regular prices.<\/p>\n
And there are three reasons this works so well.<\/p>\n
1. They Created a Low-Cost Option <\/p>\n
Here\u2019s something most shoppers don\u2019t realize. The dress you\u2019re buying at Banana Republic Factory might not be the same dress sold at Banana Republic for twice the price.<\/p>\n
Consumers\u2019 Checkbook found that Banana Republic Factory used synthetic linen blends where comparable mainline dresses used pure linen. Cole Haan outlet shoes had rubber soles instead of leather.<\/p>\n
These aren\u2019t necessarily bad products. They\u2019re simply made differently to hit a lower price.<\/p>\n
And that\u2019s an important distinction.<\/p>\n
For founders: If you want to reach customers with smaller budgets, you don\u2019t necessarily have to discount your existing products.<\/p>\n
You can create a simpler version.<\/p>\n
A furniture company could use less expensive materials. A software company could offer fewer features.<\/p>\n
The idea is to figure out what customers are willing to give up in exchange for a lower price, without removing what makes the product valuable to them.<\/p>\n
2. They Turned Leftover Inventory Into An Entire Business<\/p>\n
Think about how outlets originally worked.<\/p>\n
Brands had extra merchandise they couldn\u2019t sell, so they sent it to outlets at a discount.<\/p>\n
The problem was that they never knew exactly how much inventory they\u2019d have available.<\/p>\n
Now, instead of waiting to see what\u2019s left over, brands manufacture products specifically for outlet customers.<\/p>\n
They can plan their collections, production and inventory around what those customers actually buy.<\/p>\n
That\u2019s a completely different business model.<\/p>\n
For founders: When you identify consistent customer demand, you can build a predictable business around it instead of relying on occasional opportunities.<\/p>\n
That\u2019s what these brands did.<\/p>\n
3. They Found A Whole New Customer Without Lowering Their Prices<\/p>\n
Someone willing to spend $500 on a handbag isn\u2019t necessarily the same customer shopping for one at $99.<\/p>\n
Instead of forcing both customers into the same product line, brands created different products for different budgets.<\/p>\n
And that\u2019s the real business strategy here.<\/p>\n
They can reach more customers without constantly discounting their premium products.<\/p>\n
For founders: Think about how you could serve customers who want what you offer but can\u2019t afford your current prices.<\/p>\n
If you\u2019re a consultant, maybe you offer expensive one-on-one advisory services alongside a lower-priced group program.<\/p>\n
If you\u2019re a fitness coach, you could offer private training and group classes.<\/p>\n
You\u2019re not selling the exact same thing for less. You\u2019re creating a different offer for a different customer.<\/p>\n
Keep This In Mind<\/p>\n
Creating a cheaper product for a different customer is a smart way to expand a business. But making customers believe they\u2019re getting something they\u2019re not can damage the very brand you\u2019ve worked to build.<\/p>\n
The bigger takeaway is that you don\u2019t always need more customers for the same product.<\/p>\n
Sometimes you can find an entirely new market by changing what you sell, how you make it and what you charge.<\/p>\n
That\u2019s how brands turned what used to be a place for leftover merchandise into a multibillion-dollar retail business.<\/p>\n","protected":false},"excerpt":{"rendered":"SANTA FE, NM – JANUARY 7, 2020: A table of discounted clothing at a Ralph Lauren outlet store…\n","protected":false},"author":2,"featured_media":806451,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[84,4203,56,54,55],"class_list":["post-806450","post","type-post","status-publish","format-standard","has-post-thumbnail","category-entrepreneurship","tag-business","tag-entrepreneurship","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/806450","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=806450"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/806450\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/806451"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=806450"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=806450"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=806450"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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