Tilted Forum Project Discussion Community - Outlet malls

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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

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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."

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?

Not any around me any more. Have to go to the one in Texas. I love it though. Thats where I go to buy shoes. I pay about 35 bucks for a pair of Nikes vs the 85 or 90 in the regular retail store.

Pet peeve rant coming on here:::::

For many, many years, the Russell Mills manufacturing plant (they make sports clothing) in Alabama featured a small shop within the plant that offered sale items. It was always, always, always stuff that had minor defects and flaws, and could be bought dirt-cheap.

Then, Russell Mills opened up several "outlet stores" around the Gulf Coast, and all of us guys were in heaven. We could browse through obscure jerseys and t-shirts at ridiculously cheap prices while our ladies went shopping. It was truly marvelous; where else could you get an official Slippery Rock baseball shirt for $3?

And then the inevitable happened; the women got involved. They started going into the Russell Store to see what all the fuss was about, and the bottom dropped out of our fun. Suddenly, MATCHING COORDINATES began to appear, and we knew it was all over at that point.

The Russell Mills Outlet Stores tried to cater to the women by offering full price crap and they phased out the defective merchandise (I guess it was unsightly). Soon, they all went out of business, and there are no more left.

Whenever I see an outlet mall, I get connotations of a place offering dirt-cheap slightly defective stuff, but it never works out that way. It's all been feminized.

Having worked in the garment center for several years and learning the craft and trade, I have a different opinion about outlet malls. Yes, the article is accurate in stating that manufacturers would make lower quality goods just for outlets. That is still true.

But here is something else that is happening. When a store like Macy's/May Co/etc places an order for goods they can reject the order if it doesn't arrive at the scheduled time, even if it's 15 minutes late.

Why? Because there is stiff competition in todays market place. From design to showroom floor has reduced from a couple of months to a couple of weeks to sometimes even a couple of days. The seller needs to respond to the buying public and what they want to buy now, not what they want to buy 2 weeks or even 2 hours from now.

So now, the manufacturer's 3rd party didn't meet the deadline but the product has been cut, sewn, labels inserted, and tagged. It's ready to be sold, but now there is no buyer. So the manufacturer takes it and brings it to the outlet centers.

Another scenario is that in order to keep the buyer happy, the manufacturer does a consignment deal, so that the buyer takes the least amount of risk. Whatever is not sold gets returned and the manufacturer has to get rid of the items.

I am sorry to break this to all of you but making clothes is CHEAP. It costs around US$3 per piece to manufacture and that is including most fabrics and all labor. Markup is HUGE! One of the reasons why I try hard to not pay lots for clothing.

Here's some tips. Look at the stitching, if ther is alot of material making up the seams, it's a good garment. Why? Because if you need to let it out, there is space. Most of the manufacturers can leave close to 1" of material in the seams, which if they were "saving money" they diminish that area as most people don't notice it missing.

Also stripes, plaids, patterns. They should all match up. If the lines match up in stripes and plaids, there's alot of wasted material in the manufacturing process. The best women's plaid suits line up the ALL pieces on the body and skirt, so that the effect is EVEN all around.

I have friends that swear by Gucci, Armani, DKNY, suits, costing them in the thousands. I however can find suits for around $100 each, italian designed and manufactured, and it looks just as good as theirs.

As far as getting items tailor made. Well, that's always going to be expensive since you are getting a one off.

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Originally posted by hrdwareguy
Not any around me any more. Have to go to the one in Texas. I love it though. Thats where I go to buy shoes. I pay about 35 bucks for a pair of Nikes vs the 85 or 90 in the regular retail store.

There used to be a big one on I-35 South but it closed - There have been several large outlet malls constructed in our part of the world - Some seem to do fairly well but most are standing empty. It seems like there are too many vacancies for them to be very profitable even in the areas where they are still open. I had to go to a meeting in Colby, KS last Sunday. They had a large outlet mall that was completely deserted. Colby is not a large town (maybe 5000 people) but it is on Interstate 70 - guess that is why they located it there. There is an outlet mall in Sante Fe that seems to do a fairly good business, or at least it was a couple of years ago. My theory of outlet malls goes back to caveat emptor. Some things are bargains - some are factory overruns and a lot of what they have is just flat junk.

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Hey, us too. With three girls we always went there for back to school clothes and shoes. Like anywhere there are bargains and not bargains but I have some pretty savvy shoppers that know cheaper means they can afford more. They like going to the one down by San Antonio when they can talk dad into it.

I love the outlet malls near us. You shouldn't be duped, know what you are buying. In other words, pick something up, try it on, and make sure it fits you.

I get absolutely wonderful designer jeans for 19.99 (and I have a tough size), nice LL Bean sweatshirts, Ralph Lauren polos, shoes from Bass, etc.

I'm not saying the stuff in the article is untrue. But if you look over what you are buying, even seconds are sometimes tough to spot why. Just cause something has a slight defect don't me you or anyone else will know.

I like outlet malls. They are outside (I HATE being contained in malls), and I get HUGE props from the girlfriend just for spending the day there. She gets to shop, I sit outside and read the paper. And then, I get sex once we are home. Outlets are great.

I rarely go to the outlet closest to me..It is in Grove City about 40 minutes away...I usually find deals of some sort there, but it is really not worth it...Except for they have a Pittsburgh Steelers store and I don't know of any others, so that is why I go!

I love the outlets. The outlet mall is the only place i even think about getting cologne or vitamins/supplements and ive been getting all my clothes at the bealls outlet lately. How can you beat $5 polo shirts or $20 designer jeans

A shopping thread? Shouldn't this be in the Ladies' Lounge? :p

Damn, Cynthetiq.

Thanks for the info. Can I go shopping with you?

We have a 3 different outlet centers about an hour out of Denver, going north, south and west.

As stated, you can get some great deals, but you have to pay attention. Just because a store is in the Outlet mall, doesn't mean it sells at a discount. (Nike comes to mind, as I didn't see a huge savings there.)

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Originally posted by BoCo
A shopping thread? Shouldn't this be in the Ladies' Lounge? :p

Too funny, BoCo! I was just about to skip making a comment here, as I never go to any mall of any type. I'm a woman and I hate to shop. I make almost all purchases (other than groceries) on-line and scrounge around re-sale/consignment shops for most of the rest. So-there.

Thanks for the post.

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Originally posted by Lebell
Damn, Cynthetiq.

Thanks for the info. Can I go shopping with you?

We have a 3 different outlet centers about an hour out of Denver, going north, south and west.

As stated, you can get some great deals, but you have to pay attention. Just because a store is in the Outlet mall, doesn't mean it sells at a discount. (Nike comes to mind, as I didn't see a huge savings there.)

Yeah sure anytime...one time all this info saved me from a slap where I was staring at this hottie's camel toe at a bar and I was cold busted staring. She started in a tone with me for staring and luckily she was wearing plaid pants, I was able to tell her that i was admiring the craftsmanship of her pants since all the pieces of the pants all lined up perfectly. We ended up chatting for most the night.

never been to one :( liveing up in canada an all

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Don't forget Colorado Mills Mall. The basterd child of the outlet malls.

If it weren't for factory outlets where would I get my quality Sorny or MagnetBox stuff... I usually opt for the Carnivale... I really like to watch tv

/simpsons reference

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Originally posted by jets
Thanks for the post.

You're welcome, but didn't you have something else to say? Is there a reason for posting this? This is a thread in General Discussion... not in General Thank People.

Ok.. back to the topic at hand...

It's funny BoCo should mention (jokingly) this thread needing to be in the Ladies Lounge... Mostly men have responded to it. Some men shop just as much as some women do, and not all women shop.

We have a ton of these outlets centers. Everywhere you look, they are building plazas and malls of nothing but outlets. Sometimes I find great buys. And I am not one who needs to wear today's fashions. I have my own style of dress.

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Originally posted by JadziaDax
You're welcome, but didn't you have something else to say? Is there a reason for posting this? This is a thread in General Discussion... not in General Thank People.

Ok.. back to the topic at hand...

It's funny BoCo should mention (jokingly) this thread needing to be in the Ladies Lounge... Mostly men have responded to it. Some men shop just as much as some women do, and not all women shop.

We have a ton of these outlets centers. Everywhere you look, they are building plazas and malls of nothing but outlets. Sometimes I find great buys. And I am not one who needs to wear today's fashions. I have my own style of dress.

Wife hates to shop. HATES to shop. read again... HATES TO SHOP!

She always hates the fit, design, style of most clothing. It took about 2 years to help her find a manufacturer and clothing style that she does like, and now it's not so painful.

Funny because any time we looked at apartments or homes, the realtor would comment on the closet space being ample for the lady and I'd have to tell him that I have more clothes and shoes than my wife does.

I don't just go browsing. I know what I'm looking for when I'm shopping and I buy them, usually in an assortment of colors all at the same time. It may sound excessive but then again, when I need another one as the first is worn out the style is no longer sold, so stock up already, especially when it is on sale.

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Originally posted by Lassus
never been to one :( liveing up in canada an all

Do you live in Nunavut or something? We have factory outlets in this country, too.

I work for a major shoe retailer that uses the whole outlet/liquidation centre approach. Families love to shop there for good prices/convenience.

Personally, I don't buy a lot of clothes. When I do, it's pretty much out of impulse, so I end up buying them in whatever store is closest to me at the time. I don't go for stuff that's too expensive, but since I'm a t-shirt n' jeans kinda guy, I'm not hard to please.

I live about 5 miles from one of (probably the) largest outlet malls in Texas.

I never really go there because I don't really buy anything that isn't computer or video game related. Unless of course I need clothes, but then I go to a thrift store. Oh, and I've also been known for the occasional grocery shopping.