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Loser
Location: who the fuck cares?
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Outlet malls - the truth
Factoring outlets
Outlet malls survive by offering value, new amenities
By Andrea Coombes, CBS.MarketWatch.com
Last Update: 12:03 AM ET May 8, 2003
Quote:
SAN FRANCISCO (CBS.MW) -- Since friends introduced her to outlet-center shopping two years ago, Lisa Getzinger has never gone back to a traditional mall.
Her one-hour drive to the North Georgia Premium Outlet near Atlanta is worth it for bargains she gets on upscale products from the likes of Nike, Liz Claiborne and Polo-Ralph Lauren, Getzinger said.
"It's kind of like going to Wal-Mart but getting name-brand stuff," said Getzinger, a 38-year-old medical-office manager. She was carrying 10 Ralph Lauren shirts she bought for $130. "I've seen them in stores for $97 each."
Shoppers like Getzinger are helping to keep outlets above water at a time when retailers in general are facing rough seas. Outlet sales have dropped, but they haven't fallen as much as other retail stores.
U.S. outlet shops sold $3.5 billion worth of apparel in 2002, down 2.2 percent from a year earlier. Apparel sales overall fell 6.8 percent to $163 billion in 2002, according to market researcher NPD Group.
When all products are counted, outlet sales hit about $16.5 billion last year, flat from the year earlier, according to Value Retail News, a trade journal.
The number of centers nationwide is down 20 percent to about 260 since the heydays of the mid-1990s. "During the same period of time, the number of regional malls has gone from 2,000 to 1,200, or down 40 percent," said Steven B. Tanger, chief executive of Tanger Outlet Centers, Inc., a real estate investment trust which operates 35 centers in 21 states.
Competition is stiff between outlets and regional malls for scarce consumer dollars, so customers may see ever-better outlet discounts. "The outlet centers are now having to learn how to combat" ongoing department-store sales, said Marshal Cohen, senior industry analyst with the NPD Group. "We may see a bigger increase in promotions" at outlet centers.
Scout the deals
Even without further reductions, consumers can find deals on most, but not all, outlet goods. Manufacturers with a presence at multiple outlet centers must make product specifically for those stores, because overstock from regular stores doesn't provide enough inventory.
Outlet-specific goods "tend to be not necessarily the best product at the lowest prices, but they tend to have the lowest prices," Cohen said. "The trick would be to look for those stores that have lots of centers as well as distribution in retail stores. A lot of times product is made for that (outlet) store and it's done at a lower price," he said.
Tommy Hilfiger, Nautica, Polo Ralph Lauren and Coach are just some of the manufacturers with significant outlet-center presence, he said.
While outlet-specific products may be more cheaply made, manufacturers are concerned enough about protecting their name that they're careful not to sacrifice quality to save on cost. A few years ago, manufacturers' subterfuge in stocking outlet stores with lower-quality products backfired among consumers, experts said.
The other side of outlet shopping is the closeout sale on goods that didn't sell at regular stores. Retailers at outlet centers, such as Sak's Off Fifth and Nordstroms Rack, are a prime source of these bargains.
"Several times of year they put the already reduced merchandise on additional clearance. That's when you get the most substantial bargains," Cohen said, such as leather coats that went for $700 at a department store selling for under $100.
But even stores with outlet-only product will offer closeouts, Getzinger said. "The best deals are the clearance items. Almost every store has them. That's the first rack I hit," she said.
Still, shoppers need to keep their eyes open: Not all outlet-center products are the cheapest around. For instance, discount music stores at regular malls will regularly match the 25 percent-off deals available at outlets' music stores. "Some of the stores are in the business of being there because that's where the traffic is," Cohen said.
And, in general, perishable goods -- including clothing styles and linen colors -- will drive steeper discounts than music, watches or sunglasses, which adhere to a slower fashion timetable, Cohen said.
Outlets grow up
The outlets' relative success is due in part to economic uncertainty: Consumers are willing to drive farther for a bargain, experts said. But it's also because outlet centers are coming-of-age.
Now, outlet retailers are filling their stores with items that better match the quality of their regular product lines, a far cry from the original intent of factory outlets.
"Manufacturers historically thought of an outlet store as a way to get rid of damaged or out-of-date merchandise. It was a peripheral part of their business," said Jack Plunkett, chief executive of Plunkett Research, publisher of Plunkett's Retail Industry Almanac.
Manufacturers "are now going out of their way to keep their outlets well stocked, to manage them well and make sure it's a good customer experience. It's not hard for the consumer to find goods at 40 and 50 percent off retail in these stores," Plunkett said.
These are no longer the factory-direct outlets that emerged in the 1930s and lasted through the 1980s, where customers would walk into "an old warehouse that had cardboard boxes of sweaters with three arms in fuchsia," said Value Retail News Editor-in-Chief Linda Humphers.
Instead, first-quality products are offered against a backdrop of new amenities, including full-service restaurants, children's play areas, and frequent-shopper discounts, experts said.
Still, clothes may well be last season's styles and customers may not find the same products they're used to seeing at regular retailers. For instance, the materials used may be slightly cheaper, said Michael Beyard, senior resident fellow for retail development at the Urban Land Institute, a nonprofit research center.
Regional mall versus outlet center
The competition between outlet centers and traditional malls is kept in check partly by a code of honor between manufacturers and department stores.
Outlet malls "are always a certain distance away from the city proper so the department stores can't claim (outlets are) cannibalizing the department stores' business, even though they are," Plunkett said.
As some regional malls struggle to compete, others are recreating themselves as outlets. "You may start to see some of these regular-price malls that are turning into ghost towns re-gentrify themselves by becoming indoor outlet centers," Cohen said. "We're already beginning to see it happen."
And some may try to capitalize on the name "outlet" without offering discount prices. Getzinger shopped at one so-called outlet center nearer her home, but was put off by higher prices.
"They claim to be an outlet mall and they have outlet stuff, but it's not that great of a deal," Getzinger said. "They're saying it's an outlet to get you in. It's a bait-and-switch type thing. If you're willing to drive a little longer, you can probably pay half the price."
Going upscale
Outlet centers are also changing their retail mix. "Ten and 20 years ago, the designer brands and upscale brands would not go into an outlet center for fear of diminishing the credibility of their brand," Tanger said. "Now we have the full spectrum. We have very expensive women's designers, such as Escada, down to moderately-priced" brands.
The largest outlet developer, Chelsea Property Group (CPG: news, chart), distinguishes between its "premium" outlet centers nationwide, some 34 in all, and its factory outlets, which have a greater mix of moderately-priced manufacturers.
The product mix is expanding as well.
Said Cohen: "They're now offering music, electronic products and furniture (and) catering to mom, dad, kids, fashion-ites and techies. It covers all ends of the spectrum today."
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We have a ton of these "outlet" centers where I live. Some are bargains while others are not.
What are your feelings? Do you like shopping at these centers? Or are they a waste of time and space in your area?
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