To apparel wholesalers and retailers, a recent Fortune magazine headline on the rapid spread of off-price product sourcing was not cheerful:

Discounters Lose Their Edge
Department Stores Venture Into Off-Price Territory

More Sales

More Discounts

Macy

That warning headline by Suzanne Kapner used her surprise as a clothing bargain hunter at finding the exact same women’s jacket, at the exact same low price, in two very different clothing stores: (1) “upscale” Bloomingdale’s Department Store, and (2) deeply discounted, “off-price retailers” like Loehmann’s and T.J. Maxx.

Should smart buyers and sellers of off-price inventory be worried about this trend, which Fortune’s Kapner says is “bad news for discounters, who lure customers on their pricing edge alone?” (That’s our emphasis added.)

And, will more “upscale” department stores, now venturing into off-price product-sourcing territory, “only become a bigger headache for discounters,” as the Fortune article warned?

Discounters Don’t Have To Lose Their Off-Price Edge

· Off-price Buyers Are Still Ahead. Fortune’s Kapner pointed to December sales, which said most department stores had double-digit drops, while discount merchandisers didn’t lose as much business or had sales only “flatten.” Does that sound like all-bad discounter news?

Explained Kapner: Retail analysts said off-pricers would have done better than “flat” sales if they were not competing with “upscale” department stores who entered off-price territory. So, even if we notice more competition from department store buyers in the value-priced, off-price merchandise market, “flat” sales are still ahead of “double-digit drops.”

· Not All Discounters Are The Same. According to retail sales data for Holiday 2008 generated by the MasterCard payments network: Total retail sales were down between 5 and 8%. The steepest drops were recorded in Apparel – up to 21% for the general category and a 23% drop in women’s apparel sales — compared to same-period sales in 2007.

But that gloomy statistic is an average; and averages dump every seller into the same bin.

For example: Average Declines buried the fact that the steepest drops in Apparel sales occurred at higher priced department stores, like Bergdorfs and Saks. Discount chains that did not drop by double digits, but held steady or registered increases, include TJX Companies (parent of the T.J. Maxx discount chain) and Ross Stores. Nor did double-digit doldrums hit all retailers. Look at teen-focused apparel retailer Aeropostale (sales rose 12%), and niche-targeted independents like Hot Topic, who stocked tie-in clothing and accessories for the teen entertainment blockbuster Twilight and saw holiday sales increase by 4.3%.

Successful clothing buyers and sellers offer discount pricing AND trendy inventory AND value to their target customers. Averages don’t tell the whole story.

· Discount Pricing, Customer Service, Value All Work Together. What’s wrong with this picture?

“Offering similar-priced goods in a nicer environment than the hand-to-hand combat associated with discounters gives them a leg up … “ (from Are Discounters Losing Their Edge?)

Did you find it?

Successful off-price buyers and sellers, during economic good times and down times, build personalized services and relationships with their customers. Personal mailings. Advance notice of Special Sales. Holding specialty items or hard-to-keep-in-stock styles (like plus-sized romantic clothing styles) for targeted customers.

Those are not the trademarks of “hand-to-hand combat” shopping experiences!! They’re called CRM – Customer Relationship Management.

· Off-Price Product Sourcing Levels the Field. Wholesalers and retailers, buyers and sellers of any size or product category – apparel to toys, fashion accessories to personal electronics, Dollar Store inventory to specialty clothing – can compete with the right product sourcing strategy. Key to successful sourcing is buying in the right marketplaces in order to sell at the right price points.

1. Search for suppliers by your targeted key word needs at trusted wholesale and manufacturing auction, listing and directory networks. Examples include Top Ten Wholesale , Manufacturer.com (Buyer/Seller exchanges; Source direct from manufacturers), and Wholezilla.

2. Access hundreds of sellers who specialize in the off-price marketplace and offer trendy product categories at 50-to-70 percent below wholesale, at established value price trade shows. Examples include Off-Price Specialists Show and Value Price Expos , depending on your inventory needs.

3. Keep up with industry, retailing and online marketing trends … without trying to scan everything out there. Sign up for Google or Yahoo! Product Alerts. Subscribe to weekly digest eNewsletters or, more time-efficiently, register for automatic alerts, such as RSS feeds at specialized industry sites. Examples: Off-Price Network, Internet Retailer, TopTenWholesale Newsroom and Top Ten Wholesale Blog and WholesaleU Blog.