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The Industry The Discount Designer Apparel and Off Price industry is one of the most lucrative businesses known to man. This multi-billion dollar sector of the world economy is constantly reinventing itself to prosper in any economic climate. Fashion has always been a useful way for people to express themselves in an artistic manner, showing their style preferences and tastes. You can tell a lot about a person just by how they dress. It’s an industry that is considered throughout the world as “sexy” and it continues to thrive by the talent that flocks to it. The industry has so many facets involved that it would be nearly impossible to cover all of them in this article. However, the main point of this story is for you to understand the money making potential for individuals interested in starting their own business, or more importantly, for anyone who is interested in saving lots of money when buying their favorite designer brands. I want to cover as much as I can on this page, so you realize right from the start, if this is an opportunity you might be interested in. First of all, the discount designer clothing and accessories business, in its aftermarket form, is broken down into many different categories. You need to understand each type of classification so that you know what to look out for when working with an off price wholesaler. As much as there are good people out there who are truly trustworthy and fun to work with, there are also the typical thieves and shady individuals looking to exploit the newcomers to the industry. So let’s make sure you’re not one of them. The fashion industry tries its best, of course, to sell as much of their merchandise for top dollar right from the start. But it is very, very difficult for them to sell everything without items being returned, overstocked, pulled, or damaged. This website is all about helping you understand the secondary market of fashion and the mechanics involved. There are millions and millions of pieces that need to be sold in the aftermarket, equating into billions of dollars for those involved in the selling process. The top players in the industry want you to believe that they have it all for themselves, but what you need to know, is that there is plenty of business to go around for everyone. So what are the categories of the secondary fashion market? The RETAIL aftermarket usually consists of the following. · Overstocks · Closeouts · Less Than Perfects · Job Outs · Salvage · Customer Returns · Phantom Inventory · Return To Vendor Overstock/Closeouts Overstocked and Closeout merchandise is created when a company produces too many pieces of a given item. The excess items need to be “closed out” and sold to reduce inventory. Not all items that are classified as “closeouts” will make it to the secondary market. Some of the items will be sold in the store when the retailer starts a closeout sale. The rest will usually go to liquidators like you to get rid of. Less Than Perfects A term most used commonly by mail order companies that inspect their merchandise before they send out the goods. The term works exactly as described, if the items are less than perfect, they should not be mailed out to people. If they are mailed out, you should be notified as to what you are getting before you receive the package. Job Outs Job out merchandise arises when a vendor tries to markdown a particular product line or piece and is not able to sell all the merchandise by the end of the sale period, or season. Job outs can often be considered part of the closeout or shelf pulls category. These items are good because they have minimal damage and can be resold for top dollar. Salvage In every store and in every warehouse there are boxes of items that go unseen for lengthy periods of time. Eventually, someone will walk up to the box and discover what the contents are. From there a salvage order is identified and must be liquidated. It could be clothes from two seasons ago, or just more overstock that went unnoticed. Customer Returns Customer returns are a huge part of the liquidation process. Returns are very rarely put right back on the rack, if they are, they are marked down drastically. Phantom Inventory Phantom Inventory is usually a computer discovery that is made when an employee figures out that somewhere, possibly in a warehouse, there is unsold and unidentified apparel that needs to be tracked down and liquidated. Return To Vendor Some retailers have a special contract in place with their vendors that allows for them to return merchandise that is not selling well. The vendor will take delivery of these goods, and use wholesalers and liquidators in the secondary market to dispose of it. Retail Aftermarket Summary You can see how much inventory there is to be resold in the secondary market. The seasons are always changing, and fashion is always fresh and trendy. You will never be short on inventory to sell. The above lesson only covers one phase of where the secondary market gets their merchandise from. That is the retail liquidation side of the business. Now I would like to cover the other phase, which is liquidation from the vendor channel. The VENDOR aftermarket usually consists of the following. · Irregulars · BuyBacks · Retail Returns · Obsolete Inventory · Overruns Irregulars A vendor will have many pieces throughout the year that its manufacturing facilities produce that are at “less than perfect” quality levels. Instead of jeopardizing their established relationships with retailers, and sending them damaged merchandise, they release the merchandise to the secondary market at deeply discounted prices. BuyBacks/ Retail Returns Merchandise that the retailer could not sell, or highly returned goods will sometimes be returned to the vendor based on the contract that exists between the vendor and retailer. This agreement is becoming almost mandatory for retailers to agree to sell that vendor’s product. The vendor will often use an agreement that contains very liberal language as to how much can be returned. It’s a smart business strategy for the vendor to “sweeten” the deal of gaining more of the retailer’s floor space. Obsolete Inventory This category applies more so to vendors that produce electronics, generic household items, and tools. The inventory becomes obsolete when improvements are made to the products, or they become safer. The old merchandise is disposed of to welcome the newer versions. Sometimes this applies to designer merchandise, most commonly in designer sunglasses, that can sometimes be manufactured differently than its original design intended for. Overruns Overruns are very common in the designer liquidation business. The manufacturer will often make too many pieces, or overestimate the amount of demand that will exist for its products. Sometimes the manufacturer will overproduce a product on purpose. They do this to gain better pricing on the materials used, with hopes that they can sell all the merchandise. Words of Advice There are opportunities in all forms of the designer liquidation business. You can make different areas a specialty or niche business. The main thing you need to know, right from the start, is “know your wholesaler, know your merchandise”. Do you need me to repeat that for you? “Know your wholesaler, know your merchandise”. When a jobber is advertising a 500 piece, mixed lot of Macy’s merchandise, the first thing you need to do is find out what that entails. They will tell you that if you take the whole lot, it will cost you $4 per piece. Sounds good, but did you know that you could easily agree to purchase this lot, just to find out that only 150 pieces are actually apparel, and the rest might be loads of underwear, bras, socks, tees, etc. How horrible would that be? You would be shocked, but people fall for this all the time. Even worse, what if only 50 of those apparel pieces were top designers and the rest were Charter Club, Sag Harbor, Columbia and others. How much money do you think you could get for these items? Not much. So know what you are buying in advance. If you can make a trip to the wholesaler’s warehouse, this would be your best bet for not getting ripped off. You also need to pay attention to damaged lots, and damaged merchandise. This is actually worse than unknowingly purchasing a second tier lot of designer goods. Ask the wholesaler what percentage of the lot is damaged. Always ask percentages. What percentage are top designer brands? What percentage is damaged? What percentage are socks and bras? What percentage are second tier designer goods?
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