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Discounts beyond our control, say brands

Brands have told Drapers their hands are tied when it comes to discounting, as pressure mounted this week from independent retailers worried about the impact on their bottom lines.

Following Drapers’ story last week (December 13 issue) about heavy and earlier discounting on the high street, several more indies confirmed the situation was reaching breaking point, with many considering dropping brands that fail to police discounting.

Martin Schneider, owner of Leeds premium retailer Accent, told Drapers: “The discounting is the worst I’ve ever seen it. One day I had three customers buy a pair of Grenson shoes, which I have stocked each season for 30 years, at full price, and then go down the road only to be told they could get them from somewhere else for 25% off. They came back and I had to refund all three pairs.”

Like many others, he is calling for brands to control discounting of their stock. He highlighted Moncler and Stone Island as brands that are not often discounted.

“Next season I’ll drop brands stocked in stores that have huge discounts, reduce my forward orders and buy more in-season,” he said.

Karen Hume, co-owner of Drapers Award-winning A Hume Country Clothing of Kelso in the Scottish Borders, agreed, pointing to brands like Barbour and Loake, which have been discounted in other places.

“[With] the brands that really care, some of our bestselling brands like RM Williams, Dubarry and Schoffel, there is no discounting at all because they police it. Other brands need to learn from them,” she said.

Jo Davies, owner of contemporary womenswear retailer Black White Denim in Wilmslow, Cheshire, said she could understand the pressure some of the bigger retailers are under to shift stock, but was riled by brands that discount on their own websites.

“When they are discounting, they are not only damaging the businesses but it’s like sticking two fingers up to the retailer that supported them,” she said.

But brands hit back, with many claiming discounting is out of their control. One brand marketing manager said: “It’s difficult as we’re not allowed to dictate what someone sells our product at. It’s illegal for us to say you have to sell at this price.”

Andrew Loake, managing director of men’s footwear brand Loake, said: “We don’t have a strategy around discounting; we don’t think it is our place to have one. Retailers need to be free to set their own discount levels. It would be anti-competitive and illegal to impose one.”

Another brand managing director told Drapers: “You can’t tell them what price they are allowed to sell at and you can’t threaten to pull stock if they don’t. Brands can be fined up to 10% of their global turnover if found guilty of price fixing.

“The only thing you can do is make a decision at the start of the season to change your distribution policy. If you know a stockist will only sell 20 pairs of shoes at full price for example, you shouldn’t sell them 40, it’s as simple as that.”

Readers' comments (6)

  • Garth Coverdale

    Remove the bulk buying discount and early settlement discount from these repeat offenders.

    This will reduce their margin and will encourage them to sell at full price.

    This is a simple and effective way of sorting this mess out.

    If you allow them to keep margin whilst discounting it will

    never stop!!

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  • Garth hit the nail on the head.

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  • Brands are to blame for this culture. Back in the days when Reps were allowed to manage their areas, they knew who would discount and who would respect the brand, so they chose accordingly.

    Now reps are no more than order takers who have little to no interest in pricing. They're interested in numbers, not brand protection and on the whole are difficult to work with and not interested in the longer term.

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  • The biggest offenders are the websites, remember they are now international so consumers from all over the place reap the rewards of discounting. Its a bit like the chicken and the egg.who is to blame the retailer or the supplier, they both need each other but considering who runs the business the product and the brand are of no importance to accountants. Too much product for too few retailers who appreciate Product!
    That's the reason the big Brands Prada , LVMH, Burberry etc have their own shops ,their own distribution.

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  • Having seen mid-season sales from a number of multiples, the latest concern of indies about current discounting of brands is unsurprising.

    But:

    1. The points made by brands – that they cannot enforce resale price maintenance without infringing competition law – are correct.
    2. Price stability can be achieved to a greater extent when a brand has a selective distribution system is in place. Ironically, however, it is here that some brands do infringe competition law!
    3. Brand integrity is key to maintaining resale price and achieving high sell through.

    Finally where brands are not being discounted it is sometimes because the brand is acting unlawfully by enforcing resale prices. What will be interesting to see is the extent to which the Competition and Markets Authority starts to look closely at certain parts of the fashion industry in 2015.

    Stephen Sidkin
    Fashion Law Group
    Fox Williams LLP

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  • On of our brand has the following in their contract with us:

    'When offering the Goods for resale the Buyer shall, in order to preserve the integrity and public image of the Seller, ensure that the Goods are appropriately postponed in terms of quality, consumer appreciation, retail price and presentation and comply with the Seller's Retail Profile Criteria'

    While I totally agree and respect it, is it legal?

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