Why go for the discounting strategy when you can innovate?

A few months ago I wrote a piece here about the increased interest in the development of more outlet centres in the Middle East, something that was fresh in my mind due to a groundswell of interest from several separate enquiries that I had received at that time.

The overriding theme at the time was not necessarily about the desirability of building outlet centres per se, but more about developers and retailers wanting to cash in on the increased popularity of cheap, low-cost and/or discounted goods.

Retailers are usually quick to spot a trend and also in offloading goods that they feel are quickly becoming tired or not relevant to the demands of consumers trends. This is one reason why outlets centres are a pretty vogue thing at the moment, hence the interest. But this desire for discounting is not borne of a desire to build, but from increased interest from consumers to bargain shop.

As long as shoppers can continue buying but at the same time feel like they are saving money, then they are happy, which means retailers need to continue to pursue new ways of keeping the tills ringing, but at lower costs and lower prices.

Outlet centres are one way to achieve this, but they do however need to be built, and with stock markets beginning to see some new life and oil prices ticking slowly higher, things may be on the upswing before any more new outlet centres have a chance to come out of the ground.

The alternative that seems to be gaining momentum is that of design collaboration between low-price point, high-fashion retailers and genuine high-end designers, whose wares usually sell for 10 times the price of these new products.

This is a radical movement away from the discounted route and seems to be one that is gaining much more prestige across all consumer groups. Although the main target audience is of course those people that cannot afford the main brands or labels produced by these designers and who then use these collaborative efforts to trade-up in their purchases and buy into a brand or label that they otherwise wouldn't or couldn't afford.

Secondly then, come those people who are brand and designer led customers. These people are less limited by price point and more driven by labels and the designers behind them, who as a result probably wouldn't buy discounted goods, but are happy to purchase the cheaper full price goods, as they have the favourite designers on the swing tag.

The latest such collaboration in this movement is between the global Swedish retailer Hennes & Mauritz (H&M) and the London based shoemaker Jimmy Choo, a brand usually favoured by celebrities and the wealthy. H&M aren't strangers to this design collaboration concept, in fact they were one of the first innovators of it. In 2004 they started teaming up with high-fashion designers such as Stella McCartney and Roberto Cavalli in an effort to distance itself from the growing number of budget clothing retailers on the high street.

However with the heightened awareness of the consumers' newfound favouritism towards lower prices, this teaming of designers and high-street brands has witnessed a greater degree of interest in the past 12-18 months.

Moreover, with the efficiency of modern supply chains, the stock for these collaborations can move from design, cut-and-sew, manufacture and through to the shop floor in a matter of weeks, which is certainly a quicker, easier and cheaper option than building a new outlet centre.

The clincher for these designer ranges is that retailers like H&M are not only able to broaden their consumer appeal, but also heighten the desirability of the brand as most of these collaborations are branded as limited stock runs, although with 1,800 stores across 34 markets its questionable how limited they really are.

The key here though is that with a little innovation and the roll-out of such designer ranges in their stores, the tills keep ringing and the stores continue to be busy, whilst the competition are left wondering what they're doing wrong by peddling the normal 50-80 per cent discounts; a lesson we could all maybe take something from.

- The writer is Head of Retail Services, GRMC Advisory Services.