Designing for the Outlet
Smart Margin Play or Sign You’re Slipping?
You walk into an outlet store. The lights are a little too bright. The signage a little too desperate. And the racks? Full of pieces that don’t look like overstock or last season’s leftovers. They look… intentional.
Welcome to the new outlet economy.
In 2025, more brands are designing specifically for the outlet. Not just dumping unsold inventory, but producing new SKUs using leftover fabrics, simplified fits, or off-mainline designs, and labelling it as "archive" or "capsule" to maintain some prestige.
It’s a smart play, on the surface. But under the hood, it often exposes the opposite: a lack of alignment between buying, merchandising, and production.
When it is strategic
Let’s start with the generous view.
If you're producing purpose-built outlet product:
Using leftover stock fabric in a controlled way
Designing SKUs that don't compete directly with mainline
Maintaining pricing integrity in full-price channels
Then yes, you’re playing a smart margin game. You're protecting your brand while maximising return on assets. You're creating an entry point for customers who might otherwise never interact with your brand.
Brands like Reiss and Burberry have used this approach in the past. These weren’t duds they were trying to shift. They were pieces made from surplus fabric, sized properly, and dropped into outlets deliberately to boost margin.
That’s smart.
But more often, it's a clean-up job
Now for the more common scenario.
You're carrying excess fabric because your forecasts were off. The production team’s KPI is to use it up. So they do, but the product lands late. Maybe even after the season ends. There’s no room to trade it. No channel to sell it full price.
So it gets marked down.
If your outlets are full of pieces that were never really part of your seasonal plan, or worse, if your team is inventing SKUs post hoc just to move fabric, that’s not strategy. That’s salvage.
And while the customer might not see the difference, your balance sheet will.
The UK pricing trick
Here’s a fun legal twist (for UK brands, at least): to legally show a markdown, a product has to have been sold at full price for a period of time first.
What do many brands do? Ship a single unit to a full-price store for 30 days. Job done. Legally, it can now be sold at 50% off in your outlet. (Not a legal advice).
No wonder so many outlet tags read like fiction.
The outlet pyramid
Outlets exist for a reason. But they sit halfway down the food chain:
Full-price sell-through
In-season markdowns
Brand-owned outlet stores
Third-party discounters (e.g. TK Maxx)
Charity, recycling, or destruction
The lower down that list your product ends up, the worse your margins look, and the more out of control your planning probably is.
So yes, building for the outlet can be smart. But depending on the outlet? That's a different story.
Positioning matters
Acne calls theirs an "Archive." Burberry called theirs a "Factory Shop" The product’s the same, but the positioning isn't. If you want to sell outlet stock without diluting brand equity, these details matter.
That said, no amount of clever naming can hide the real issue: a bloated range, poor buying discipline, or lack of planning coordination.
Final thought
Outlets are great when used deliberately. But they should never be your insurance policy.
If you find yourself designing for the outlet every season, it might be time to stop looking at your markdown calendar, and start looking at your merch plan.
You might not have a discount problem. You might have a process one.