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A business success
“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.
“Some consumers want the latest and greatest, but then you have shoppers who only seek out bargains,” said Anthony Dukes, associate professor of marketing at the University of Southern California Marshall School of Business. “Manufacturers recognize they must have different price points.”
Outlets often tout prices of 25 percent to 65 percent less than full retail. But the discounts are not an apples-to-apples comparison, since outlet goods are different both in quality and style from their regular retail counterparts.
“Given consumer psychology, retailers have an incentive to make the price look high at one point and reduce it to make the deal look big,” said Dukes, who specializes in retail and pricing strategies. “I wouldn’t be surprised if this plays out in outlets.”
The reputation of outlets as treasure hunts for brand-name goods fuels the sport of outlet shopping. And because outlets often are miles from urban centers, shoppers feel pressure to make the trip worthwhile.
“We don’t get the browsers; we get the shoppers,” said Maura Eggan, western region marketing vice president for Premium Outlets. “You expect them to leave with a lot of shopping bags.”
Among those confirmed to be selling made-for-outlet products are: Ann Taylor, Banana Republic, Coach, Gap, Juicy Couture, Loft and Polo Ralph Lauren, representatives for the brands said. Many more brands did not respond to inquiries about their outlet business.
Tommy Bahama, the Seattle manufacturer famous for its Hawaiian shirts, is one company bucking the trend. It continues to use outlets to liquidate unsold merchandise from its flagship stores.
“You can’t trick the guest,” said Doug Wood, president and chief operating officer of Tommy Bahama, in an interview. “If you’re going to put your name on it, the product shouldn’t be of lesser quality.”