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Unit 4: Buying for Off-price Retail Operations

Introduction Notes

The term “off-price” is often confused with discounting. Although both formats feature
merchandise with a value orientation, they are not the same concepts. The off-pricers purchase
goods far below the regular wholesale price and pass the savings on to the consumer. The
discounter pays the usual wholesale price and resells the merchandise at prices that have a lower
markup. The former’s markup is generally the same as the traditionalists, their price feature
coming from the savings they enjoy from off-price purchasing. The latter works on a lower
markup and makes up for it by selling in large volumes. Some of the better known off-price
merchants include Marshall’s, Syms, Today’s Man, T.J. Maxx, and the aforementioned
Loehmann’s. The most popular of the discounters are Walmart, Kmart, and Target, Buying for
Discount Operations. The number of off-price operations continues to grow in the United States,
making it an excellent arena for buyers to work. They are found coast-to-coast, featuring a wide
assortment of goods in addition to apparel and accessories, and such items as home furnishings,
toys, outdoor furniture, and food products. Their locations include freestanding venues; off-
price merchandising centers such as the ones in Freeport, Maine, Reading, Pennsylvania, and
Orlando, Florida; and power centers, shopping areas that cluster high-volume, value-oriented
retailers.
4.1 Off-price: Fact or Fiction?

While the off-price phenomenon gains momentum, many traditional retailers try to dispel the
price differential between themselves and the off-pricers by stating that the items offered for
sale at these “bargain” retail outlets are second-quality, manufacturer rejects, end-of-season
closeouts that have lost their luster, poor-quality copies of original designs, unwanted colors, or
ill-fitting. Is the merchandise offered by the off-pricer the same as that found in the typical
department store or specialty chain? Or is it some poor-quality, bargain items mixed together
with the “real thing”? Is off-price fact or fiction?
The research of Kirby and Dardes, “A Pricing Study of Women’s Apparel in Off-price and
Department Stores,” in the Journal of Retailing, indicates that there were, in fact, major price
differences between the off-pricers and department stores. “Average prices for all twenty items
during thirteen weeks were 40% greater in department stores than in off-price stores.” The 20
items in the study included shirts, blouses, vests, sweaters, jeans, slacks, skirts, dresses, suits, and
jackets.

While this research does scientifically prove the reality of the price advantage in off-price stores,
it is not the only indicator that off-price is fact not fiction. Today’s consumer is an educated one.
He or she is generally knowledgeable about quality, timeliness of styling, prices, and other
factors needed to make appropriate purchases. With enormous numbers of consumers visiting
and buying from the off-price merchants, it is obvious that they have spoken and have determined
that off-pricers provide the goods they want, and the prices are lower than charged by the
traditional retail operations.

Self Assessment

Fill in the blanks:
1. The ............................... pays the usual wholesale price and resells the merchandise at prices
that have a lower markup.
2. ............................... provide the goods they want, and the prices are lower than charged by
the traditional retail operations.

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