> Suppose Big Brand X fails to sell all of this year's design and offloads them as discount brand Y.

Does that actually happen? What I see happening instead in the bike clothing market is that either after the season, or if a new design is to be unveiled after several seasons, the items gets heavily discounted (often more than 50%). It's just your decision if you need the most expensive newest items right now or you buy possibly older or out of season designs much cheaper. But the branding is also very much integrated, so it would be hard to change the branding on an existing item.

There are a few brands that try to limit this and keep the discounts in check like Assos, but that only means it's harder to find a heavily discounted item, still possible.

> When you produce quality a policy of not having sales or setting limits on sales makes a lot of sense.

Sure, if you can find customers that accept that, why not. In that case just manufacture fewer items.