Outlet Malls: A Boon to Consumers and Retailers

Everyone loves a good deal.  That’s largely why the popularity of outlet malls has been steadily increasing across America.  Budget-conscious shoppers look to outlet malls for name brands at reduced prices.   As a result, retailers are opening more and more outlet stores to capture the shoppers who are less likely to pay full price at regular retail stores.It appears that there’s been a shift in shopping trends.  During the recession, Americans were more apt to shop at discount stores for less expensive brands.  Now, shoppers are back to shopping for brand names, but still want discounted prices.  Thus outlet mall popularity is gaining.  According to the NPD Group, apparel sales at factory outlets rose 17.8 percent for the 12 months ended April 2011.  That’s a large increase considering that industry-wide apparel sales only rose 1.4 percent in the same study.

Shoppers like outlet malls because they offer 30 to 70 percent markdowns on high-quality brands.  Some other reasons for the increased popularity are:
  • Luxury stores are opening more and more outlet locations, taking away any previous stigmas of outlet shopping.  NordstromNeiman Marcus, Barneys and Saks all operate outlet stores.
  • Vendor selection is increasing.  New vendors are now also opening up outlet stores.  Newer brands such as Vince Camuto shoes and Under Armour are aggressively expanding to outlet stores.
  • Location is getting better.  Many outlet centers are now opening closer to towns and cities.
  • Marketing of outlets has increased.  To attract tourists to the mall, coupons are offered at hotels and tourist centers.  Bus tours and hotel shuttles also typically include a trip to the nearest outlet mall.
Retailers like outlet malls too.  Here are some reasons why:
  • Retailers, too, save money with outlets.  It usually costs less to open an outlet location because of cheaper rent.  Common area assessments and staffing costs are also lower than traditional malls.
  • Outlets provide a way to offer lower prices and clear excess inventory.  Damaged items or items that didn’t sell in the regular store are sent to the outlets.
  • Outlet stores are typically more profitable than the traditional stores.  This is because retailers often produce outlet-only inventory.  At Gap Outlet and Banana Republic Factory Store, all merchandise is designed, produced and manufactured specifically for those locations — meaning the items were never offered at the chains’ full-price stores.  These items typically are not of the same quality as the regular store merchandise, and cost less to make.  Also, the same level of quality of service isn’t expected at the outlet mall, so retailers can spend less on labor.
  • Outlet stores see bigger purchases than regular stores.  Because the outlet mall is usually out of the way, shoppers tend to make larger purchases to “stock up” while they are there.

Everyone loves a good deal, and with all the benefits for the shopper and the retailer, it’s no surprise that outlet stores are increasing in popularity.