Wednesday, November 3, 2010

5 Things Outlet Malls Won't Tell You--With a Bonus

From MSN Money.

1. "Recession? We hardly noticed."..."Outlets weathered the downturn by attracting cost-conscious shoppers. "There's been a resurgence of people looking for value," says Mark Libell, an outlet executive and the author of the blog Factory Outlet Insiders. In 2009, Simon Property Group's Premium Outlet Centers, the nation's largest collection of outlets, saw sales dip only slightly, to $500 per square foot from $509 a year earlier. And outlets could continue to thrive, because they give fashion labels access to millions of shoppers who otherwise wouldn't shell out for designer duds."

2. "We're inconvenient on purpose."... "Ready to make your holiday-shopping pilgrimage to an outlet mall? One reason outlets are out of the way is that distant land is cheaper, says David Ober, the president of the Council of Developers of Outlet Centers & Retailers.

It also makes sense for outlets to be in a spot that's accessible from multiple cities. And some remote towns offer tax breaks for the promise of new jobs and revenue. In addition, a brand's outlet needs to be far from its full-price stores, competitors and wholesale customers, like department stores."

3. "Sure, our stuff's cheaper, but not always in a good way."..."Retailers have gotten better at forecasting demand, experts say, which has led to fewer production overruns. And because most manufacturing is now done overseas and damaged goods are weeded out before being shipped, fewer arrive in the U.S.

These changes mean outlets are no longer a place to "dump the crummy stuff," says Anne Coughlan, a marketing professor at Northwestern's Kellogg School of Management. In fact, 82% of products at outlet centers are made specifically for the outlets, says NPD Group retail analyst Marshal Cohen.

Unfortunately, made-for-outlet products aren't always on par with their regular-store equivalents. They can be made of cotton instead of wool or lack details such as reinforced buttonholes. Shell recommends inspecting tags for the letter F (for factory outlet) and checking the model number of small appliances online (a product modified for the outlet may have a different model number)."

4. "Our big markdowns are often big fibs."..."Signs, price tags and coupons touting big discounts (think "60% off") are common at outlet malls. Researchers say these visual cues plant so-called reference prices -- what folks think something is worth -- in the minds of shoppers. Because outlet shoppers pay less than the reference price, they end up feeling like they got a bargain. It's a powerful psychological effect.

"Buyers perceive more value when something's discounted," says Kent Monroe, a pricing expert at the University of Richmond's Robins School of Business.

But reference prices can be misleading: An item with a suggested price of $150 may never have sold for that amount. While the Federal Trade Commission and the Council of Better Business Bureaus have detailed pricing guidelines and many states have pricing laws, Monroe says inflated reference prices are still common. Mallory Duncan, the National Retail Federation's general counsel, says the problem exists but reputable retailers make a good effort to establish credible reference prices."

5. "Not all our stores are necessarily outlets."..."In the U.S. there is no legal definition of the term outlet mall. The industry generally uses it to describe centers where at least 50% of the shops are outlets. Indeed, experts say, there are many cases where stores at outlet centers don't actually sell discounted products, which can be bad for the industry if it turns customers against outlet malls in general."

Now for the bonus: 5 More Things Outlet Malls Won't Tell You--from


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