As demand for deluxe duds decline, off-price stores offer deep discounts

One of the sectors of the economy that has been hit hard since the flareup of the coronavirus pandemic is the garment industry. Obviously people working from their homes have little or no need for dressing up. 

Shukan Jitsuwa (Sept 2) turns its attention to the growing retailing sector of so-called off-price stores, which offer discounts of anywhere from 20% to 90% for famous brand items.

"These stores buy up unsold remnants from manufacturers and sell them at extremely low prices," a source in the garment industry is quoted as saying. "They began expanding in the U.S. and other countries from about seven or eight years ago. The first of these shops in Japan opened around two years ago, but since the coronavirus pandemic last year, they've been opening one after the other." 

The spread of such stores signifies the serious situation affecting the garment industry. 

"To reduce production costs, Japan's garment firms last year placed large orders to China, Vietnam and other countries," the aforementioned source continues. "It would be great if the merchandise had sold, but if not, the companies would be stuck with mountains of unsold inventory." 

Ordering merchandise is a risky endeavor, as consumer behavior can be affected not only by fads and trends, but by unpredictable conditions such as weather patterns. 

It's also difficult, the source explained, to know what's likely to be popular. Hit the mark,  and an item will sell out like hotcakes. Miss, and you've got a warehouse full of unsold merchandise. 

"Companies are saddled with fixed costs like rents and salaries that they must meet, so they can't easily cut back on the volume of orders," he says. "As often as not, all a season of strong sales really achieves is covering for the seasons that incur losses." 

On an annual basis, the Japan market typically consumes a total of 2.9 billion items of wear. Those not sold within two months from their introduction are gradually placed on sale; those still remaining after that are channeled to outlet malls. 

In order to protect brand-name items from being dumped on the market at rock-bottom prices, it is said that 1.5 billion items are destroyed.  

"In recent years, disposal of items of clothing by burning has come under criticism from environmentalists, who say it contributes to global warming," an economic analyst tells Shukan Jitsuwa. "In 2018, it was discovered that the UK's Burberry company was burning the equivalent of 4.2 billion Japanese yen in goods per year. So in the face of increasingly shrill criticism, more companies have been disposing of unsold merchandise through heavy discounting, and this has led to more off-price stores being opened." 

Since stores at outlet malls are generally limited to one company's brand, that form of discounting has moved mainly to online sales. This in turn has created more opportunities for off-price stores, which handle an assortment of brands. 

As one example, the Don Quixote chain opened an ofu-pura shop in Nagoya which stocks 33,000 different items, including such famous brands as Armani, Coach, Calvin Klein, Ralph Lauren, Givenchy and others.  

"Store customers have fun browsing in the shop with the sensation of being on a treasure hunt," says the aforementioned analyst. 

Other companies that have entered the fray include World, a major apparel distributor, and Geo holdings, a video rental chain, which has opened 13 stores under the name LuckRack, with one more slated for opening in Kashiwa, Chiba, on Sept 10. 

Based on the business performance of T.J. Maxx and other American chains, the top four of which are said to boast a combined annual turnover equivalent to 8 trillion yen, this could be the start of something big, the magazine predicts. Like other retailing businesses, the success or failure will depend to a large extent on their buyers' ability to gauge consumer demand and procure the right merchandise in a timely manner.

© Japan Today