Suzanne O’Connor’s Bargains LA

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Thursday, March 14, 2019

Grey Market Know How

By Suzanne O'Connor

Describing what I do is complicated to non retail/ non manufacturer industry people. Usually I say something like, “I research, post and promote Discount Outlets, Sample and Warehouse Sales.”

But when I am talking to someone in the industry, “I say I cover the direct to the public Grey Market sales and outlets.”

By definition the Grey Market refers to goods which have been manufactured by or with the consent of the brand owner, but are sold outside of the brand owner’s normally approved distribution channels.

Most designers & manufacturers make more than they actual sell through standard distribution channels.  They want to get the costs per item as low as possible and because they need excess inventory for reorders.
At the middle to end of every season, they have to deal with the Grey Market to unload over production, past production and samples. They hold direct to public sales like Sample & Warehouse Sales or sell to Off Price Marketplace including Jobbers, Liquidators, Online & Brick & Mortar Outlets, Secondhand stores as well as overseas liquidation channels.

Many designers and manufacturers actually destroy product. Louis Vuitton, Burberry, H & M, Nike, Cartier, Piaget, Michael Kors, Victoria Secret and many others destroy unsold product. They simply make too much to be absorbed by their main distribution channels or the Grey Market marketplace. Plus by destroying product, they keep their brands image solid, making it more difficult to find their product discounted anywhere.

It costs manufacturers to store excess product, so they want to get rid of it.  The first option is usually direct to the public sales.  These are the best for consumer deals. But even after those have happened, they still have excess and often look to liquidators to buy the excess.

Liquidators come in at pennies on the dollar. So if an item initially wholesaled at $20-$40, retailed at $90-$150, liquidators would come in at $1-$5 an item. They then liquidate to indie off price retailers at $10- $15 a hanger who then resell to the public at 50-85% off original retail.

However, the Grey Market is much more complicated than that. Where ever a manufacturer can deal directly with an off price retailer, they can get more money per item, which is good for their bottom line. But often they don’t want their product showing up at off price retailers.  So they try to make deals where the liquidator can only resell over seas or 15 miles away from boutiques that sell their product at retail. Sometimes they’re successful, sometimes not.

You ‘ll see excess product in just about every consumer goods industry from household goods & furniture and appliances to home décor and electronics.

Shopping the Grey Market takes a bit more effort than standard retail. Grey Market outlets are not usually in main shopping areas and don’t advertise much.  You’ll have to search online and go out of your way. But the savings, I think are worth it.

 

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