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? DISCOUNTED PRICES HERE & EBAY?

Discussion in 'Classic Menswear' started by arvi, Dec 2, 2004.

  1. arvi

    arvi Well-Known Member

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    this may be a naive question;but how for example can nwt or nwot borrelli shirts or kiton ties,etc. be sold at such great discounts on ebay and by some members of forum? are the markups in the stores that sell merchandise of this quality really so astronomical? not looking compete with any of these seller but need some enlightenment..thanks
     
  2. drizzt3117

    drizzt3117 Well-Known Member

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    generally the markups of high end products are quite large. Note that most retailers will have last call type sales during season changes of 65% off retail or so...
     
  3. A Harris

    A Harris Well-Known Member

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    They are not nearly as large as you might think.

    It is a misconception that retail stores will not sell items at below cost. They sell items at far below cost on a regular basis. Generally, they have made enough on the buy to come out ahead in the end. In some cases they may have actually lost money. Irregardless, last years unsold merchandise does them absolutely no good on the floor, or in the basement.

    If anybody has been into Cable Car Clothiers, you will know what I mean. Lot's of vintage suits on the racks, apparently they don't believe in getting rid of some old merchandise.
     
  4. Stu

    Stu Well-Known Member

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    Loss leaders is a time-honored concept in retail and a very effective one at that.
     
  5. Bic Pentameter

    Bic Pentameter Well-Known Member

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    Interesting comment, Stu. I am familiar with loss leaders in retail foods (sugar and milk), but had never thought that there might be loss leaders in retail fashion. Can you think of some loss leader examples in that you have seen in men's retail?

    Bic
     
  6. Stu

    Stu Well-Known Member

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    Well, I'm not a retailer so I can't point to any specific examples in men's fashion. But I worked as as a business reporter for years, specifically covering retail. I learned a lot from my sources, and the concept of loss leader is something they all had in common.

    I saw it a lot in mass merchandisers, the Kmart-type stores. I don't know how that translates to high end men's retailers, but retailing principles are the same so I'm sure it does.
     
  7. Stu

    Stu Well-Known Member

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    Good point Mack. Of course you are correct as per Ebay, because the very nature of Ebay takes away the whole impulse to spend more thing that B&M stores have. I was specifically responding to Andrew's point about retail B&M stores, rather than Arvi's.
     
  8. drizzt3117

    drizzt3117 Well-Known Member

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    A Harris,

    I understand that high end retailers will typically sell below cost to recoup some money from out-of-season clothing, my point was that the markups are generally fairly high on many of the products they sell, one easy way to find out is to take a quick look at the gross margins of the various companies in question. Neiman Marcus looks like it's making around 33% gross margin and Saks is at 36%, while Nordstrom's is at 35%. That takes into account the markdowns as well, so at full retail, one could assume they are making well more than 50%. These are pretty high gross margin numbers, Best Buy (which I worked for previously as a DM) makes something like 25% GM and they are a category killer in their sector with enormous margins on accessories and digital products.

    As for loss leaders, companies like Best Buy throw them out all the time, especially on Black Friday, they were selling MP3 players for $30 and laptops for $200, that's how they have people lining up at 1 AM Thursday night to buy stuff.
     
  9. j

    j Well-Known Member

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    I think what Andrew was talking about was not loss leaders, but that stores hope to have made enough on their sales of an item (or line, maybe) at full price to be able to cover the inevitable loss when they end up marking things down below cost, or at least below cost + overhead. A loss leader in a clothing store would be e.g. an advertised special "cashmere sweater $80" but when you get there, while that one is pretty nice, there is one next to it that's 120 that's a lot better, and the $120 one is the one the store makes the money on. Hey, it's only $40, right? Well, only 40 more... I mean I already decided to spend 80, so that money's written off in my mind, etc., is the thought process. Some loss leaders (as I understand the concept anyway) are just a cheap product to get people to come in the store and once there, hopefully buy other things the store will make profit on, and some are a cheap product to get people to come in and then notice the "upgrades" sitting right next to the nearly empty (ever noticed that?) shelf where the cheap one sits. I see this at Fry's all the time. I actually wondered whether they purposely understock the cheap item, at least on the floor, and allow the loss leader's display to get messy, so the nearby "upgrade" items look more attractive. That's what I'd do, anyway.. [​IMG]
     
  10. Bic Pentameter

    Bic Pentameter Well-Known Member

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    I can see that. I do remember one Saturday when I was 13 years old. My parents drove me 2 hours to a store I had never been to in a mall I had never been to because the store was offering new Jordache jeans for $10 or something like that. I suppose the thought was that we would also pick up a sweatshirt and a pair of socks while we were there.

    One reference I saw to loss leaders online suggested milk and sugar two items that all supermarkets stock at low prices knowing that people who drop by for milk will proably also pick up a basket of other goodies. I wondered if there were similar products in men's clothing stores.

    Also, I've seen mention on this board that the Ralph Lauren Purple Label line looses money. Would you consider this a loss leader line?
     
  11. j

    j Well-Known Member

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    That's also why the milk is almost invariably (at least in recently-designed supermarkets) in the very back of the store- so you have to walk by everything else to get to it. I don't know about the low prices though, my local markets always want a lot for milk. Surprisingly, the Rite Aid drugstores always have it for $2 a gallon, about 1/2 price of the supermarkets. And actually, that one used to work on me, to get me in there. And while I'm in there, I do have a sniffle, perhaps some Sudafed or Kleenexes.... I don't really drink milk anymore, but anyway.

    RLPL: Perhaps they consider it an advertising/cachet expense, like very expensive runway shows that only represent a concept and actually bring no direct income to the brand (AFAIK, anyway). It's not a loss leader because no one goes to buy RLPL at such a great price and, "while they're there anyway," picks up some more pedestrian Polo garb at the same time. However, I don't doubt that they may lose money on some things in their Polo line, perhaps some staples like the Polo shirt itself, in order to draw shoppers into the Polo area of a store, and improve brand ubiquity as well by having as many people wear their logo as possible. Now that I think about it, maybe that's the point of the $20 polo shirts at the outlets that are, as far as I can tell, exactly the same as the ~$60 ones at the mall.
     
  12. drizzt3117

    drizzt3117 Well-Known Member

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    From what I'm told, Polo makes most of their money from their outlets and from polo shirts being sold in retail stores (their own and others)
     
  13. Stu

    Stu Well-Known Member

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    That would make sense, as some of the posters here have commented that the high-end RL stores lose lots of money. Those stores can lose money because they create brand awareness that fuels the much larger mass market for the cheaper polos and stuff. The margin is probably pretty good on that stuff, what with cheap labor and all, and the volume is probably off the charts.

    Pretty good strategy.
     
  14. arvi

    arvi Well-Known Member

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    thanks ...i now know a lot more about loss leaders than before [​IMG]
     
  15. HeyYouItsMike

    HeyYouItsMike Well-Known Member

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    Sometimes entire stores are loss leaders. A lot of flagship stores (most notably the Prada store in Soho) in NYC are money pits that are just there to help build the brand.
     
  16. RJman

    RJman Well-Known Member

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    AAAAAHHHH.....
     
  17. johnapril

    johnapril Well-Known Member

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    (A Harris @ Dec. 02 2004,19:31) Irregardless,
    AAAAAHHHH.....
    OOOOOOOMYYYYYYYYYYYGOOOOOOOOOD.
     
  18. Alexander Kabbaz

    Alexander Kabbaz Well-Known Member

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    When I used to make all of Alexander Julian's shirts, they would come in with a special project once annually. That project involved: How could we make a shirt which would look like one of their regular shirts, but in a cheaper fabric and with a much cheaper CMT cost. Without getting boring, let's just say that there are ways to do this. These shirts, which looked normal in every respect but cost them about 40% of their usual, had three destinations: 1] The annual AJ sample sale 2] The AJ outlet store in Conway, NH 3] Nordstroms FWIW.....
     
  19. AlanC

    AlanC Well-Known Member

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    Bait and switch.
     
  20. thinman

    thinman Well-Known Member

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    Interesting comment, Stu. I am familiar with loss leaders in retail foods (sugar and milk), but had never thought that there might be loss leaders in retail fashion. Can you think of some loss leader examples in that you have seen in men's retail?
    When I used to make all of Alexander Julian's shirts, they would come in with a special project once annually. That project involved: How could we make a shirt which would look like one of their regular shirts, but in a cheaper fabric and with a much cheaper CMT cost. Without getting boring, let's just say that there are ways to do this. These shirts, which looked normal in every respect but cost them about 40% of their usual, had three destinations: 1] The annual AJ sample sale 2] The AJ outlet store in Conway, NH 3] Nordstroms FWIW.....
    Very interesting post Alex. It may change some of my buying habits, as there are some items where I want top quality and am willing to pay for it ("top quality" being relative of course [​IMG] ).
     

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