Playbook Sample: How to Navigate the Off-Price Epidemic

As the off-price market continues to grow despite the improving economy, many brands and retailers are falling into a trap, selling more off-price products to compete in the consumer economy, and lowering their margins in the process.

This Playbook, which accompanies The Off-Price Epidemic, provides a framework of actionable questions and directives for brands, retailers, investors and real estate professionals to avoid falling into the off-price trap or to climb their way out.  

1) Work with faster lead times and buy less inventory.

You can trace many of the problems from off-price back to one thing: too much inventory. Over-producing at full-price stores leads to the discount cycle that effectively turned these destinations into off-price stores and then paved the way—both for companies and shoppers—for off-price stores themselves to thrive.


  • Take a serious look at your buying and planning process and trim the fat. Start with the assumption that you are buying too much inventory and work backward from there. Yes, gross sales might go down but net margin will increase, while also freeing up cash flow.
    • What isn’t selling? Why are you buying it then? What would happen if you cut these products?
    • How would shifting toward more direct-to-consumer sales improve your inventory and cash flow? What would you do with this extra cash flow?
    • How can you calibrate expectations around revenue if you are prioritizing profit and free cash flow?
  • Reevaluate your understanding of sell-through, especially since it is relative to inventory.  
    • What are your sell-throughs and how is over-buying affecting them?
    • Why are your targets where they are? How has discounting affected them and how could you undo these affects?


  • Companies that hold less inventory for less time and can make new inventory faster than their competitors are best poised to evolve with the market, as leading fast-fashion brands have shown.
    • What are your portfolio companies’ lead times and inventories? How do these benchmark to competitors? Will they be able to improve these features or are the problems structural and slow moving?
    • How are lead times affecting cash flow? Is there enough money to invest in a leaner supply chain? What are competitors with faster lead times and lower inventory doing with this cash flow?

Real Estate Professionals

  • Stores that heavily rely on discounts in your full-price locations are dragging down the quality of the property and bringing in less advantageous shoppers.
    • How can you work with your tenants to better cultivate full-price shoppers? The shoppers in the property also affect your tenants. How can you share learnings across the portfolio—especially lessons from direct-to-consumer tenants—about attracting these full-price shoppers?
    • How would stores with less inventory affect your properties and how could you use this space differently? Could you break up bigger floorplans into smaller ones? Could you add online fulfillment locations either for individual tenants or in a centralized fashion?

2) Create more evergreen products.

Evergreen products work well because they are scalable—something seen in a large number of digitally-native direct-to-consumer brands from Warby Parker and Away to Glossier, and now gaining speed with more traditional brands like VF Corp, which are using evergreen products to lower their excess inventory and remove the need to sell off-price.

Conversely, fast fashion, which creates on-demand, on-trend items multiple times a year, requires extremely agile supply chains, better served by the speedy and low-cost production cycle of brands like Zara whose model has remained sustainable for now, selling at its low price points. Fast fashion stores sell apparel products at much lower price points than full-price, off-price, and direct to consumer stores, dragging down expectations of price.

Focusing on evergreen products is a proven way to control inventory. Because these products avoid seasonality, it’s harder for their value to diminish—instead, they become a signature offering for the brand. This helps to keep brand equity high because it allows a company to more easily control consumers’ expectations on price, quality and product assortment—and it’s easier to plan for on the back end.


  • Assess your production cycle, both from a cash flow and lead time perspective.
    • What needs to change in order for you to keep your margins and demand high without having to heavily discount or move into off-price channels?
    • How can you reconceptualize your production cycle to embody evergreen practices that lower your inventory and sell your products at higher margin?
    • What are least time effective aspects of your production cycle? What can you do to speed up these stages in the process or remove them completely?
    • How can you incorporate a faster supply chain—similar to fast fashion—into your brand to create and sell more efficiently in a leaner capacity?
  • Identify the products that consistently sell through with the highest margins.
    • How can you establish an inventory architecture that reflects a successful ratio of breadth to depth and leads to higher demand of your products on the market?
    • How could you use scarcity to improve sell-through, revenue and margins?
    • How can you test which products will consistently sell through with the highest margins and the best proportion of these products in store? How can you funnel more resources into those while trimming your inventory?
    • How can you exploit these products to bring in and/or retain new customers? How can you build these in a way that complements your revenue drivers and your core selection?
    • How can you play into your brand’s strengths to cast a better ratio between SKUs and quantity of each SKU, minimizing risk and increasing market demand for your inventory?
  • Think through new ways to create excitement and demand around your products that appeals to customers and improves brand equity.
    • What capsule collections or collaborations or evergreen or other niche lines could create this excitement for your products, while also limiting inventory?
    • What type of campaigns can you envision around these collections that will draw in the most engaged customers and attract new ones?


  • Investors should be wary of companies that are focusing too much on their short-term cash gains rather than their long-term viability. Brands with full-price businesses should have the lowest proportion of off-price to full-price possible, allowing for upmost control of inventory without diluting the main brand.
    • What is the best proportion of off-price to full-price for your portfolio company? How can you ensure that the company doesn’t focus too heavily on off-price and can bring in enough revenue in the future to meet its growth expectations with as many full-price sales as possible?
    • How can you ensure that the company isn’t devaluing its brand or customer base by relying too heavily on off-price or other forms of discounts?
  • Your portfolio companies should be looking into ways to funnel resources into full-price products and divert resources away from off-price initiatives.
    • How can businesses add services, products and redesign their online and offline experiences to encourage more people to buy full-price and stand out in a consumer landscape that is increasingly fed with lower prices?

Real Estate Professionals

  • Real estate professionals must think through how to respond to the rising popularity of off-price department stores and increasing closures of full-price department stores.
    • How can you decipher which off-price stores to include in your property? How will this affect your contracts with full-price tenants?
    • What legal and logistical changes should you establish for stores that want to include in-store off-price options like Backstage at Macy’s?
    • How can you design the retail spaces in your property to be flexible to your tenants’ changing needs as they introduce off-price, capsule collections, or reduce inventory?
  • Properties need to evolve the composition of full-price and off-price tenants, without offering so many off-price stores that they drive away full-price shoppers.
    • If you haven’t traditionally accepted off-price stores in your properties before, how can you work with tenants to advertise their off-price options in a way that doesn’t denigrate the perception of the store or your property?
    • When it comes to the ratio of off-price and full-price stores in your property, how can you survey and learn from your competitors to compose the most effective blueprint for your mall? Where can you position off-price stores in your property so as not to detract from full-price traffic? Where can you position off-price options to best complement full-price options?
    • What incentives can you provide full-price tenants? How can you advertise them or collaborate with them in a way that encourages more foot traffic to full-price stores on your property?
    • As full-price anchor stores turn increasingly to off-price, how can you assess the long-term effects of this move on your property? Are you better off bringing in younger, full-price options to offset this shift? What about other anchors like gyms?

3) Launch confident and consistent pricing.

In order to sustain and evolve in the long run, companies should establish a confident and consistent pricing strategy. In turn, investors and real estate developers should incentivize and work with brands and retailers whose price structures prioritize full-price over off-price and discounting. Incorporating lessons from direct-to-consumer and ecommerce companies into traditional brands and retailers can attract more full-price customers to meet this goal.


  • Brands and retailers can learn from direct-to-consumer companies, which use other strategies like an invisible “straw man” to establish less detrimental, more confident pricing.
    • What would happen if you eschewed discounting your products altogether?
    • How long would it take to wean yourself off of discounting? What stakeholders would need to be on board? How can you use customer insights to prove your case? How can you learn from your competitors’ moves?
  • Look inward at inventory practices, customer insights, and/or stakeholders. Gather a team that can help you conceptualize, test, and eventually change new pricing structures that emphasize full-price.   
    • How could you prioritize long-term thinking at the expense of short-term losses? How would you need to change both internal and shopper incentives to make this happen?
    • How can you think through what kind of timeline is most effective? How can you ensure that you do not alienate customers in the process? How can you begin to market yourself as a company not built around discounts?
    • What will it take to infuse this new pricing structure into your wholesale and/or direct supply chains?
    • If you have excess inventory, what’s a more clever way to discount your products to avoid diluting your brand image?


  • Investors should research the landscape as it changes quickly to de-risk their investments on companies—especially those brands and retailers that are digitally-native and direct-to-consumer—and ensure that these companies have a pricing architecture that will scale well over time.
    • How can you ensure that a digitally-native or direct-to-consumer company you’ve invested in is positioning its pricing structure for eventual profitability and significant scale? Does it have the margins to support a large retail network as well as continuous ecommerce investments?
    • How can you position your investments to work toward building better valuations, less inventory, and more full-price customers for these companies?
    • If your company subsidizes prices, how long should it continue to do so before it erodes its own scalability? How could up-front pricing offer more transparency with shoppers and more scalability over time?

Real Estate Professionals

  • Properties need to feature destinations for full-price shoppers, and ones that will wean “treasure hunter” and “coupon” shoppers off of their low-price expectations.
    • How is your property’s blueprint affecting and drawing in off-price and full-price shoppers? What supplemental tenants could you bring in that would cater to more full-price shoppers and don’t rely on discounting?
  • Work with your tenants to rely less on discounting, knowing it will positively impact tenants across the entire property.
    • How can you discourage high levels of discounting by your tenants and instead encourage full-price businesses?
    • How can your data about foot traffic and shopper demographics help companies decipher what price points they can offer without discounts and where they should index their full-price businesses?
    • How can you use short-term leases or concessions to specifically incentivize full-price business, possibly even giving them better lease terms because of the shoppers they bring in?

What can the direct-to-consumer explosion learn from the farm-to-table movement?

In the 1970s, the chef Alice Waters began the farm-to-table food movement in earnest after canned and processed foods hit peak levels in the U.S. It was a gut reaction to the commodification and mechanization of the food system, built on the premise that there had to be a better way to grow, package and sell food products.

The movement didn’t really take off until the mid 2000s, when consumers accepted the tenets of Waters’ movement and became increasingly conscious of the food they were putting in their bodies. Health and science had moved forward, consumers started conducting their own research online, and the culinary scene innovated to match these burgeoning trends. What followed was an explosion of local restaurants, greenmarkets and home cooking—all of which drove people to increasingly consider what they put in their bodies.

While the growth of farm-to-table opposed the packaged foods that ruled the previous century, it also came up against the international ascendancy of chain restaurants, even for celebrity chefs like Wolfgang Puck, who operates dozens of restaurants and has licensed his name to food courts and airport kiosks. Farm-to-table was about eating better, buying less and supporting local organizations—not about global domination.

While the food industry is often ahead of others because it sells products that people physically consume, the consumer goods space—fashion, apparel, beauty, CPG and more—is following behind its edible sibling. While mega brands—from P&G and Calvin Klein, Gap to Unilever, and Zara to J.Crew—ruled the end of the 20th century and beginning of the 21st, they are now facing fierce competition from smaller upstarts, many of which are digitally-native and sell direct-to-consumer. While there is not conclusive data that proves causation, these mega brands are shrinking while smaller brands are growing.

Comparing these two industries leads to some interesting insights:

  • Many purveyors in the farm-to-table world are small businesses, whether they are farmers, restaurants or other suppliers. Few have raised money, let alone from institutional investors, and they build their businesses slowly and locally. Direct-to-consumer brands, however, have by and large raised significant amounts of money from bigger institutions, attempting to scale quickly and deliver to an endless array of zip codes. These brands’ aspirations are anything but local.
  • The shift to farm-to-table food led to higher prices for most consumers, both in the supermarket and at restaurants. Both entities raised prices to protect their margins, which are already razor thin and might be declining. Direct-to-consumer brands, however, are able to offer lower prices to consumers while ideally delivering better quality items and higher margins for themselves. The pricing effects of these respective shifts are inverted.
  • Despite these differences, consumers seem to be embracing both trends. They are also more open-minded to the product offerings of younger brands, as opposed to older brands offering similar or the same products as they always have. And, interestingly, both industries have turned to smaller retail footprints, often pop-ups, to test their concepts, whether it’s pop-up restaurants with guest chefs or smaller stores with shorter leases to test out new products and locations.

Yet it’s striking that a similar development across two industries has led companies and investors down two different paths: direct-to-consumer is about quickly scaling far and wide, whereas farm-to-table is about staying local and growing slowly, if at all. The presence of billions of dollars of investment in the consumer goods space is most likely driving this difference in expansion and speed, but it is unclear if direct-to-consumer will net out to be worthwhile from both a company-building and an investment perspective. When it comes to the farm-to-table movement, which has been starved for money, some rebalancing of dollars in its favor might be opportunistic—and needed. It’s likely that the low margins of the restaurant industry are keeping investors away, but as people spend more on good food, this should slowly evolve.

Finally, the question we always focus on is what is getting built and how long will it last? From a longevity perspective, the farm-to-table movement and the businesses within it seem to have more staying power than their venture-funded, direct-to-consumer counterparts, simply because the former get to control their optionality and the expectations around their businesses. But given the positive impact that eating more healthy and ethical food has, versus just buying more stuff, a tradeoff—on fewer investors and less global domination, but higher local impact—might be one worth making.