Most companies are finding it tough to maintain their discounted factory outlets as consumers are increasingly turning to online shopping due to the lure of bigger discounts.
Megamart from Arvind Brands, for instance, recently rebranded its large format stores that have been struggling to shed their ‘discount format’ image. Bengaluru-based discount-led garment chain Coupon was sold to Future group’s discount format Brand Factory, while some discount chains such as ‘The Loot’ and ‘The Grab Store’ have completely shut operations in the past two years. “This model has become stagnant. Going forward, there will be closures and we will soon see the end of factory outlets,” said J Suresh, chief executive of Arvind Brands.
Discounted factory outlets started coming up about a decade ago and offered extraordinary savings on merchandise that was two to three seasons old. These outlets were mainly used by companies to attract new customers who could not otherwise afford the brand. According to industry experts 5-10 per cent of the store merchandise is routed through factory outlets.
Offline retailers blame online players for getting “more enquiries and less sales” at their stores. “The growth of discounted format has fallen from high double digits to 7 per cent since the advent of online platform. There are too many offline and online sales that have impacted the factory outlet model,” a senior executive of a Bengaluru-based retail company, said. “Not many brands are looking to expand in this segment any more. The roll-out of factory outlets will be gradual now.”
Internationally, value format stores are the third line of business for major brands after offline and online stores. “Globally 50-60 per cent of the merchandise is specifically manufactured for factory outlets whereas in India these are more of stock disposal outlets,” said Pankaj Ranjhen, managing director-retail at Jones Lang Lassalle said.
