Retailers like Loft, American Eagle, and Saks Fifth Avenue are continuing unprecedented sales both in-store and online in an effort to get rid of excess inventory

• Retailers like Loft, American Eagle, and Tom's Shoes are offering massive online discounts, continuing the trend of brands launching major sales early in the pandemic to get rid of excess inventory.
• Meanwhile, at recently reopened physical stores, like Saks Fifth Avenue in New York City, designer goods are on sale for as high as 70%.
• Jonathan Treiber, CEO of offer-management platform RevTrax, told Business Insider that deep discounting may have long-term damage for apparel companies. "Consumers want a fresh start with reopening for current season fashion and want to forget about the awful past few months," he said.

Though retailers across the country have started reopening their doors, many are still struggling with piles of excess inventory — prompting continued deep discounts both online and in-stores.

Following unprecedented online sales at brands like Gap, Victoria's Secret, Madewell, and American Eagle early in the coronavirus outbreak in April, several others have followed suit, both on their e-commerce sites and at reopened physical stores. However, while these deals may look appealing to consumers, retail experts warn of the lasting reputational and long-term damage of deep discounting.

According to Jonathan Treiber, CEO of offer-management platform RevTrax, major sales of last-season apparel are starting to lose its luster to consumers, who were already shopping online at high rates early in the pandemic and now are looking for something new.

"The old playbook isn't going to work going forward," Treiber told Business Insider. "They've been running these deep discounts for a while now because consumers don't want last season inventory. Consumers want a fresh start with reopening for current season fashion and want to forget about the awful past few months."

Still, that hasn't stopped brands like Loft, for example, which recently launched a 70% off sale online, selling items like jumpsuits for as low as $10 at final sale. Others, like Tom's Shoes, implemented a 65% flash sale, with a section on its website dedicated to footwear under $25, significantly lower than its average prices.

At the same time, companies that were quick to deep discounting like Gap and Madewell have scaled back their lofty flash sales in favor of risking packing-and-holding clothes until next year, while others like American Eagle are still running an "up to 60% off everything" on its website.

This current state of deep discounting isn't relegated to e-commerce, however. At the Saks Fifth Avenue's flagship store, which reopened in New York City on Wednesday, a significant portion of its designer goods were discounted at up to 70% off. Many of these items included last season looks, making the store feel almost preserved in amber from the last time it was open in early spring.

Angela Hwang, a fashion industry professional and one of the first shoppers at the store when it opened, said that while she was glad to be back inside a department store, "the product is pretty much still the same." She added that she anticipates the fashion industry to struggle moving into the fall, given many designers have canceled collections of pulled inventory.

"All of this is pretty much going into the past season already," Hwang said of the Saks Fifth Avenue assortment on Wednesday. "I'm curious to see what the store's going to look like in September. I'm sure they'll find ways to fill the store but they're not going to have as much product because a lot of designers were canceling."

Treiber said brands should be cautious about what heavy sales may do for brand reputation, and warned that they could signal signs of distress that may turn shoppers off in the long-term.

"The other obvious problem is that Loft, among others in the same boat, may have already done lasting damage to their brand equity by showing consumers they are in the deep discounting business permanently," he said. "The beginning of the end for retailers are when consumers begin to associate the brand with 70% off for most of the store every day."

Ultimately, Treiber said retailers should consider offloading inventory through other channels like outlet malls of off-price companies like TJMaxx and Marshalls in order to stay in the game. Of course, selling goods through these retailers isn't as easy as it once was, as these companies simultaneously attempt to clear out their own overflowing inventory.

Still, TJMaxx stocks spiked 9% last week after reporting "pent-up demand" from shoppers rushing back to store, which bodes well for the off-price companies.

"Brands need to innovate in new approaches to protect the short-term financials with preserving long-term viability and competitive differentiation," he said. "Ongoing 70% discounts nearly storewide are a clear signal to consumers and businesses alike that the retailer is suffering, may not be around for much longer, and desperately lacking for innovation for how to operate, let alone compete in a post-COVID-19 environment."