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Outlet malls changing shopping values
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Toronto Star- LOS ANGELES—At Citadel Outlets, the sounds of jack hammering and the whir of electric drills are as common these days as a can’t-miss deal.
The City of Commerce shopping center has been in expansion mode, building a wing last fall that brought 36 stores and an additional 152,000 square feet to the mall. Construction workers are currently putting the finishing touches on half a dozen more stores, including Coach Factory Store and Not Your Daughter’s Jeans, and getting ready to build another wing that is slated to open by the holiday season next year.
At a time when the rest of the retail landscape is still in recovery mode, a rising star has emerged: the outlet mall.
Budget-minded shoppers are flocking to outlet centers in search of name brands at reduced prices. Retailers, which are struggling to persuade discount-trained shoppers to pay full price at their regular locations, are increasingly looking to open outlet stores.
Apparel sales at factory outlets rose 17.8 per cent for the 12 months that ended in April, according to estimates by market research firm NPD Group. Meanwhile, apparel sales industry wide rose a meager 1.4 per cent.
“What outlets have been able to do is touch the core of the American consumer,” said Marshal Cohen, chief industry analyst at NPD. “There’s no question that what we’re witnessing is the transformation of how and where consumers are shopping. The recession really kicked it into high gear for outlet centers.”
Outlets have become top of mind for many shoppers because of their strong focus on value—but that doesn’t necessarily mean the lowest price, Cohen said.
Outlet shops typically offer 30 per cent to 70 per cent off retail prices for popular, high-quality brands that usually resist heavy markdowns. Although the prices still aren’t cheap, it’s considered a bargain when shoppers can score a Coach handbag for less than $100 (U.S.) or a J. Crew cotton cardigan for $19.99.
At Citadel recently, Nicole Foster, 34, emerged from Two Lips, a shoe shop, with a pair of black chunky heels and a pair of red peep-toe platforms. She bought them for $5 each.
“I have three kids to raise, so I’m going to go where my dollar lasts,” the lawyer from Whittier said. “Sure, I’m not getting the brand-new styles, but I’m still getting the name brands for half off, sometimes even more than that.”
Her friend Rhonda Rivera of Montebello lost her job in sales at a manufacturing plant during the recession and had to scale back her spending.
“I don’t go to Macy’s and pay $80 for a pair of shoes anymore; I’ll come to the outlets and look around,” said Rivera, 31, now a stay-at-home mom. “To me, it’s better than going to the mall.”
That change in perception has been a welcome one for outlet mall executives, who say their centers used to face undeserved stigma in highbrow shoppers’ eyes.
“Ten years ago if I said, ‘Come shop at an outlet,’ they’d say, ‘Oh, no, I shop at Neiman Marcus,’” said Steve Craig, chief executive of Craig Realty Group, which owns Citadel. “I don’t get any nose cringes anymore. Clearly the times have changed.”
The trend is even showing up online, with eBay Inc. announcing that it would launch the eBay Fashion Outlet—a virtual outlet mall featuring brands such as Brooks Brothers, Neiman Marcus Last Call and William Rast—in September.
For retailers, outlets provide a way to offer lower prices and clear excess inventory.
To properly stock the growing number of factory stores, companies are increasingly ordering outlet-only merchandise, with analysts estimating that 85 per cent of the products at outlets were never carried in full-price locations. Other merchandise might be damaged or returned items.
“In today’s world, the outlet business is a business upon itself. The average consumer cannot tell the difference between a golf shirt made for an outlet center compared to one made for a full-line retail store,” Cohen said. “The difference mainly is cosmetic—you’d see a little less embroidering or a little less detail.”
Because so many products are unique to the outlets, there isn’t much overlap between those locations and their full-price counterparts. Without the fear of sales cannibalization, and because outlets serve as destination centers that reach a broader geographic customer base than traditional malls, retailers have focused on opening more outlet stores.
Although luxury spending has surged back since the recession, most shoppers can’t afford the sky-high prices at full-line stores—but they still covet the designer goods.
The success of outlet stores at the luxury level—Neiman Marcus, Nordstrom, Barneys New York and Saks Fifth Avenue all operate outlets—caught the attention of executives at Bloomingdale’s, which for years had held off on entering the market.
Last year the upscale department store chain introduced Bloomingdale’s Outlet by launching four stores around the country. The company plans to open three new outlet stores in the fall and is scouting sites for additional locations.
“The idea is to serve a customer that has a Bloomingdale’s sensibility but with a heightened value proposition,” spokesman Jim Sluzewski said. “Customers don’t shop in neat categories—they go where the merchandise and value is right.”
Industry experts say retailers, too, save money at the outlets: It typically costs less to open a factory location because rents are cheaper, and many companies that pay salespeople commissions at traditional stores don’t do so at outlets.
Many retailers are using those savings to renovate and remodel their outlet locations by updating the fitting rooms and installing more attractive fixtures and lighting, said Michele Rothstein, senior vice president of marketing for Premium Outlets, the outlet division of mall owner Simon.
Retailers “now recognize that the outlets can be the very first experience a consumer has with their brand, so the experience has to be a true extension of the brand and the company’s image,” she said.
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