Why Are Discount Stores Full of XS and XXL Clothes?

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My former Ph.D. student and frequent co-author Erik Snowberg sends along an interesting question:

Why do discount clothing stores (like Nordstrom Rack — and clothing sales in general) have an excess of really small and really large sizes?

I have to admit, I’ve always wondered. Erik continues:

The typical answer seems to be that there are more medium [people] in the world than XXL’s. Duh.

But the problem with this idea is that clothing buyers for stores obviously know this. And if they didn’t at first, they should have figured it out by now.

Hmm. He’s right — it is important to think about the supply side as well as demand. If there are twice as many mediums as XXL’s, then twice as many should be produced; and so it should be about as likely that a store will be left with excess mediums as XXL’s.

Here’s Erik’s explanation:

My best guess is that for some reason small and large people are, in general, less willing to pay for clothes. Maybe because they are outside of the norms for physical beauty, they believe that sharp clothes won’t help them that much.

Whatever the reason, a clothing store can’t set lower prices for different sizes, so it price discriminates by waiting a little bit and putting remaining stock on sale — which happens to be (surprise!) in the large and sometimes small sizes.

That’s a pretty interesting story, and it may well be right. But there must be readers with better information, or competing theories.

What are your thoughts?

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  1. MattV says:

    I’ve always wondered why stores and manufacturers can’t seem to get their act together when it comes to clothing sizes. For instance, would it be that hard to make pants in one-inch increments for inseams? In jeans, 32s are always just a bit too short for me after drying, and 34s are usually a bit too long. I am right at 6 feet tall, so there have to be millions of guys who have the same problem. I was just at Target yesterday where there are sales racks full of S, M, and XXL. One has to wonder why they keep making so many of those sizes if few buy them, regardless of the reason that few buy them.

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  2. Ryan says:

    Frankly I think it just has to do with having inventory everywhere. A store needs to make sure that it can make a sale to everyone that walks in. So it stocks a bunch of sizes, more in the middle than at either end, but they’re all still in stock. Now because of the large population of medium people, they’re fairly well represented and distributed in any geographical area. So there’s always someone to buy out the stock. Now consider the population at either end of the spectrum is big enough to buy out the stock of any one store in an area, but not all the stores in an area, so that despite every store being able to sell to either extreme, the distribution of the extremes doesn’t favor enough people of either extreme in every area to buy out the stock of every store. I’m sure someone can state that better than me….

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  3. walter wimberly says:

    I would have to say it is from poor planning on the (store) buyers part. If you look at the demand side of it, you cannot simply look at the population size and say that there are 2 times the number of mediums as XXL, and therefore buy 1/2 for the XXL size, and then still consistently have to mark them down.

    The buyer needs to look not at the population size, but the purchasing size of that market segment so that instead of buy 1/2 of what they would buy for a medium, maybe they buy 2/5ths. (With enough data on what is sold, this would be more accurate – not a random guess.)

    You also have to consider that while there are rarely stores that specialize in “medium” there are specialty stores for “plus size”, “big and tall”, as well as “petites”. Each of these affect the supply side of the market in a way which a regular store should account for.

    Regular excessive amounts of discounted items relate to nothing more than either a) original prices being too high, or b) the store’s buyer not understanding the market well enough to know what to order.

    As a side note, it would be foolish for a store to want to wait to discount an item. Not only does their profit margin decrease on the initial sale, but at that point, they’ve probably used up the time on any of the net+30 agreements, and now have to either “rob peter to pay paul” or pay interest to the manufacture/distributor on that item.

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  4. GS says:

    Working for a corporate retail entity, there are lots of reasons outlets have off sizing like those mentioned.

    The main one is merchandising and sell thru – although buyers do buy things in less quantity for the less popular sizes, those sizes don’t necessarily sell – yet are needed in store for product presentation (retail merchandising calls for having a full size run) If every Nordstrom has a few extras in these low styles, they can then send them to the Rack. There are 105 Nordstrom and 51 Racks. I’m sure other retailers build their outlet partners based on a similar understanding of their sell through on off sized clothing. It’s a natural part of the business.

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  5. MNMike says:

    If the original clothing buyers estimate the distribution of sizes correctly but buy a bit too much then the full retail store will be left with the same number of each size. They’ll pass this inventory along to the discount store and the medium items will sell out immediately, leaving a rack full of XS and XXL clothes.

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  6. JamesM says:

    Yes, they CAN and DO have different prices for different sizes. I don’t see it a lot, but I do see it from time to time. Generally it’s a slightly higher price for a larger size. I guess you can justify this because of additional material cost. Different size = different product so it isn’t size discrimination, even if it is.

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  7. Otter says:

    This situation could make the average size customer (their main profit center) be more willing to pay full price. I know I’m discouraged when I go to discount stores and never find my size. I tend to immediately buy full priced or regular sale items that fit because I know they won’t be in my size when they’re on close-out.

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  8. Jeff H. says:

    My intuition is to look at the markets or XXL clothes and XS clothes separately. Nonetheless, I think price discrimination has a lot to do with both.

    For XXL clothes, I like Adam’s explanation that fat people are more demand inelastic for clothing because of wishful thinking.

    As for XS clothing, it’s worth keeping in mind that small sizes often blur the lines of segmentation. An XS men’s shirt on sale might, for example, entice larger young males or even women who for whatever reason aren’t willing to buy at the normal price.

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