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Sierra has become the dominant off-price retailer in the outdoor and active space with TJX Cos.’s help, and vendors see more positives than negatives in the rapid growth.
That’s at least according to an article in The Daily Outdoor Retailer I penned that chronicled Sierra reaching a milestone of 100 locations, up from only four when TJX acquired the business in 2012.
The primary benefit for most brands is how Sierra helps efficiently dispose of excess merchandise.
“The reality with Sierra is it’s a necessary part of the product sales ecosystem,” said Peter Sachs, general manager at Lowa Boots. “At some point, there’s product that nobody else seems to want to buy, and they’re usually willing to step up and buy it.”
“Sierra is best in class as it relates to the value closeout channel,” said Shane Wallace, VP of global sales at Dakine, the maker of outdoor apparel and equipment. “They are particular with their assortments, they always try to represent the most premium brands, and most of the Sierra buyers are smart industry veterans.”
Sierra often offers the quickest path to clear excess inventories with its capacity to purchase larger lots versus off-price competitors as well as brands trying to slowly clear merchandise in their own outlet stores or online.
Many specialty retailers in the space reportedly prefer product being cleared through Sierra because discounts are hard to detect across the chain’s 100 stores and more easily discovered on vendors’ own websites or on Amazon. Full-price sellers recognize that their own moves to cancel or reduce futures orders partly cause the need for clearance.
For some vendors, side benefits to selling to Sierra include being able to meet minimum production runs required by overseas factories, particularly as Sierra’s buying power has grown under TJX. Stocked with a wide array of outdoor and active brands, Sierra’s stores also offer a better in-store selling environment to introduce brands to consumers versus generic off-price options, such as T.J. Maxx or Ross Stores.
“There’s a great selection of brands and products, all at very sharp price points,” said Neil Saunders, managing director at GlobalData Retail and a RetailWire BrainTrust panelist, in a recent LinkedIn post. “And, despite being off-price, the store is neat and organized.”
On the downside, vendors earn minimal margin or outright lose money on orders being sold to off-price channels, including Sierra. Brands becoming known for being available at off-pricers risk conditioning consumers to only buy on discount. The North Face in 2017 moved to reduce its exposure to off-price channels over price perceptions, while Under Armour, Ralph Lauren, Puma, and Levi’s in recent years have pulled back similarly.
More controversially, some brands reportedly make products specifically for the off-price channel beyond closeouts and overstocks, in a tradeoff of adding volume to reach selling goals at a lower margin.
“Handled properly, [off-price] could be a growth vehicle for a brand,” said Matt Powell, a veteran footwear analyst. “As with any strategy there needs to be a balance. It’s the brand’s responsibility to manage the marketplace.”