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Discounting new discount concepts | CSA

Others, meanwhile, experiment with new value concepts. Kohl’s is opening up Amazon return centers and selling specialty Amazon products (the Echo line of electronics, for instance) at a number of locations. The early returns are positive, as Kohl’s posted strong first quarter numbers, and traffic at Kohl’s stores featuring Amazon was up 8.5%.

Experimentation in the discount sector is hardly a new phenomenon. When Mills Corporation came along in the 1990s and began developing the large outlet centers they have become known for, not every discount store was a hit. Many early concepts struggled, in fact. Neiman Marcus Last Call and Saks Off 5th were both early standouts, however, but it’s noteworthy that both of those brands had the added hook of offering what were traditionally luxury products at an accessible price.

Fueled at least in part by the recessionary cycle of the late 2000’s, discount concepts have increased traction in the post-recessionary period, appealing to households in a broad range of economic standing. Here in my home market of Houston, the highest-volume and best-performing Home Goods stores in the region are those located in some of the city’s wealthiest neighborhoods.

This raises two important questions, the answers to which may have less-than-optimistic implications for retailers and, by extension, retail real estate.

The first is this: How do retailers ever go back to full price? With discount now becoming the norm, and the majority of new concepts in recent years (especially in apparel) being discount formats, it is going to continue to become harder to buck the tide of consumer spending habits and expectations. Discount, once a rare and thrilling exception, is now the rule.

The second question is almost a corollary of the first: With so much more discount out there, how can new concepts hope to stand out? Already tight margins and a lack of differentiation in a crowded segment is a worrisome combination.

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