In a Down Economy, Outlet Stores Take Flight
Retailers and manufacturers have operated these lower-priced spinoff stores, also known as "factory stores," for decades. But in this recessionary climate, the outlet business is getting bigger.
While other shopping venues are contracting, outlet malls are on the upswing. About 34 outlet projects, in the works over past few years, are expected to come on the market by year's end, according to a Kantar Retail report.
Retailers want to capitalize on this discount business, which has been a bright spot during the down economy as cash-strapped shoppers seek bargains.
Ann Taylor will open 40 Loft outlet stores this spring; Nordstrom and Saks Fifth Avenue, for example, are growing their Nordstrom Rack and Off 5th outlet divisions, respectively, faster than their full-line stores; and Bloomingdale's opened its first outlet division last year.
Champion, Juicy Couture and Cole Haan are among other retailers/vendors also "expanding into new outlets," Jody Rohlena, senior editor at Consumer Reports' ShopSmart, told WalletPop.
The good news is that retailers are increasingly opening stores in conveniently located, traditional malls. Indeed, a common complaint about outlet stores and outlet malls is their location: They are often situated in far-flung, hard-to-get places.
Savings Head to Head: Flagship Stores vs. Outlet Stores
Outlet stores sell merchandise from approximately 25% to 75% off retail stores -- "comparable to regular stores' deepest, in-season discounts and late/end of season clearances," Mark Cohen, professor of marketing in the retailing studies department of Columbia University's business school, and the former chief executive officer of Bradlees and Sears Canada, told WalletPop.
If you're skeptical that these deep discounts are indeed real, consider this: Much of the outlet business is about stores' needing to unload excess, unwanted merchandise.
The merchandise in these stores includes overruns from the full-line stores, discontinued merchandise, goods from prior seasons, items that flopped at the mother chain, irregulars, and increasingly, goods made expressly for the outlet division.
For example, Saks Fifth Avenue's Off 5th outlet concept is evolving so that 80% of the merchandise is new and made expressly for Off 5th. And the Gap's outlets only sell merchandise made for its factory stores. Hence, the merchandise sold at outlet stores "may be made of cheaper materials or have fewer embellishments," Rohlena says. "Look closely at details like stitching, buttons, lining, and fabric."
Nonetheless, the bargains can be steep, and the quality differences are often negligible, she says.
For example, ShopSmart recently purchased two similar outfits, one at department and specialty apparel stores and the other at an outlet store.
"The outlet-only outfit cost 60 percent less than the retail store outfit," Rohlena says. "But when we showed people the two outfits, many couldn't tell the difference."
All the merchandise sold at Bloomingdale's outlet store is 35% to 70% off, Arnie Orlick, senior vice president of outlet stores for Macy's, Bloomingdale's parent company, told me during a tour of the Paramus store the day it opened last fall.
At the same time, Nordstrom Rack sells high-end clothing and accessories from designers such as Marc by Marc Jacobs, Dolce & Gabbana and Nanette Lepore at 50% to 60% discounts, said Nordstrom executives at a press preview of the new Nordstrom Rack outlet store in New York City last year.
Perhaps percent-off promises from retail executives aren't enough to sell you on how big a bargain these supposed deals can be.
Our undercover shopping revealed just how much you can save at outlets in dollars and cents.
- A visit to a Nordstrom Rack store near New York City's Union Square turned up 7 For All Mankind, skinny boot-cut, and premium jeans for $119.17.
- Meanwhile, 7 for All Mankind's web site sells boot-cut jeans from $149 to $199, and one pair of skinny boot-cut jeans for $178. Most pairs hovered in the $160 range.
- A Gap outlet store in Philadelphia was selling its outlet-only version of the Long and Lean jeans for $39.99 to $44.99. A pair of Gap Long and Lean jeans, apparently the flagship store version, sold on Gap.com for $69.50.
- At the Coach store at the TangerOutlets mall in Riverhead, N.Y., Coach bags-- mostly totes--retail from $129 to $300.
And while the assortment is composed of last season's goods and bags made just for the outlet stores, it includes Coach's Signature line with the iconic "Cs", and leather bags. By contrast, a trip to Coach's web site turned up totes priced from $198 to $798.
More snooping turned up identical merchandise at significantly different prices.
- •Nordstrom.com was selling an Eileen Fisher petite silk jersey turtleneck for $81.90, 40% off the original price of $138, according to the web site.
- Simultaneously on Nordstromrack.com, the identical item, only this time, marked "new!" retailed for $54.97, 60% off the original price.
- On Last Call.com, Neiman Marcus's outlet store, Michael Kors' Congo sandals in yellow were selling for $191.00, down from the original $425 price. Zappos Couture was selling the identical pair for $207-- $16 more.
Sizing Up Outlet Bargains
All outlet bargains are not created equal. Often the best deals can be found on the most expensive items, Cohen says.
"Truly high-end, designer merchandise can be a great value since these manufacturers are not well enough organized or capitalized to drive a dedicated outlet strategy."
Home products such as housewares and kitchen appliances also tend to be particularly good outlet deals for the same reason.However, be careful not to buy products with signs of missing components, or without user manuals, Cohen says.
And there are some goods you should steer clear of buying altogether at an outlet store, such as swimwear and underwear, "which are not supposed to be offered for resale after initial sale," he says.
Sweetening the Deal
If you're planning a trip to an outlet mall, check the outlet mall's web site in advance for when they're holding special deals and seasonal promotions.
- If you can stomach the crowds and lines, shop during holiday sales for big savings.
- If you're a regular outlet store shopper, sign up for outlet malls' club cards. Premium Outlets offers a VIP Shopper Club card with member benefits such as exclusive online coupons, email alerts on outlet sales and special events, and target promotions such as 50 Plus Shopper Perks, where shoppers 50 and over can get 10% off their purchase on Tuesdays.
- These outlet malls also offer coupon books for about $5, but they typically require a purchase of $50 or more for percent-off savings to apply.
- You can also sign up for the rewards programs at individual outlet chains.