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Outlet malls: Not what they used to be

The Sacramento Bee

December 12. 2013 12:10AM

Shoppers browse the outside of Merrimack Premium Outlets during its grand opening last year. UNION LEADER FILE 

Harinder Kaur, center, and her sister Rupinder Kaur, right, shop at the Folsom Premium Outlets in Folsom, Calif., on Nov. 22. MCT

When you buy something at an outlet mall, do you know what you're getting?

If you think it's a top-quality, brand-name product at a deep discount, think again.

Ten years ago, that may have been true. But most brands now sell lesser-quality merchandise made just for their outlets.

Whether you're still getting a good deal depends on whom you ask.

Some consumer advocates liken it to a bait-and-switch.

"It's an abuse of the brand. Most consumers don't realize what they're getting," said Jamie Court, president of Consumer Watchdog.

But outlet mall owners argue that the stores are only giving the public what it wants — brand-name goods at bargain-basement prices.

"Sometimes (retailers) tweak production of the items so they're slightly different in terms of quality, but it's acceptable. I don't think this is a dirty little secret of the outlet industry," said Coleen Conklin, senior vice president of marketing at Premium Outlets, a division of Simon Property Group.

Premium Outlets is by far the largest player in the industry, with 65 locations in 29 states, including New Hampshire, where it opened Merrimack Premium Outlets last year.

Upscale fashion icons, including Coach and Juicy Couture, maintain a separate product line for their outlet stores, representatives for the brands said. Clothing retailer Gap Inc., which owns Banana Republic, also manufactures products exclusively for its outlets or "factory stores."

"There's no cross-pollination. Retail stuff never ends up here," said Daryl Higgins, manager of the Gap Outlet store in Folsom, Calif.

Several outlet store managers said the difference between outlet and retail products can be so subtle that they are rarely discernible to the everyday shopper.

Hagen Thompson, manager of the Loft Outlet in Folsom, explained that a sweater in a regular retail store with a 12-bow embroidery might have just seven bows in the outlet version, along with a cheaper fabric. Loft Outlet is a subsidiary of Ann Taylor.

"It's a way to cut cost, but you lose some of the details," she said.

To be sure, outlets are big business. Since 2006, 39 outlet centers have opened, compared with only one regional mall, according to Value Retail News, the outlet industry's trade publication.

When outlet malls first appeared nearly 40 years ago, they didn't make much money, serving mostly as a channel to get rid of goods no one wanted.

But their popularity has exploded; there are now more than 300 of them in the United States.

"The retailers have made it into a pretty profitable business. Outlet space at current levels is fully occupied. It's an appealing business for others to get into," said D.J. Busch, a mall analyst at Green Street Advisors of Newport Beach, Calif.

Spending at outlet malls is expected to top $25 billion this year, up from $19.9 billion in 2009.

But as the industry grew, the concept evolved and outlets became a distribution channel in their own right. The tough economic times in the past five years accelerated the process.

"People started watching their budgets because of the recession, but weren't necessarily ready to give up their favorite brands," said Linda Humphers, editor-in-chief of Value Retail News.

Separate product lines allow brands to appeal to shoppers with different priorities.


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