Are outlet malls an outlier?
While obituaries are regularly being written about traditional malls, outlet malls by all indications are thriving.
According to a report last week in The Wall Street Journal, “Surprise: Outlet Malls Are Hot,” outlet malls are still seeing high levels of occupancy and income gains. Over the last five years, sales at outlet malls have doubled to about $50 billion, according to Green Street Advisors. Tanger Factory Outlet Centers said its 36 outlet centers were 98 percent full at of the close of 2016.
“The strong performance is partly due to the lack of department stores such as Macy’s, Sears or J.C. Penney in outlet centers, which cater to individual brands such as Coach Inc.,” the Journal reported. The centers are also avoiding the markdown pressures stemming from the rampant closing of department stores and other chains.
Outlet malls have always stood out with the promise a treasure-hunt experience. A Journal article that ran Sunday noted how even high-end retailers are having to offer more deals to reach their loyal wealthy customers. With nearby hotels promoting free-shuttles, tourists have become a major supporter of outlet malls.
Open-air environments and their ability to provide an all-afternoon adventure for family or friends are also key traffic drivers.
“The dwell time is longer,” David Hinkle with the Outlet Resource Group, told Marketplace.org.
The big knock, however, is whether outlet malls offer real deals as much of the product is specifically made for the locations. Critics also complain about over saturation as more centers open, including many close to urban sectors. Reebok, for one, is closing most of its outlet stores to reestablish demand for its wholesale business.
But with rents less expensive than temperature-controlled, enclosed malls, outlet malls can be profitable for vendors.
Steven Tanger, CEO of Tanger Factory Outlet Centers, recently told CNBC that with the 35 to 50 percent return rate on apparel and footwear bought online, outlet malls are more profitable for vendors than e-commerce. Said Mr. Tanger, “The dot-com or e-commerce part of their business is not cash flow positive. The outlet stores are cash flow and very positive.”
- Surprise: Outlet Malls Are Hot – The Wall Street Journal
- WSJ: Shoppers Flock to Outlet Malls Searching for Bargains – Newsmax
- Outlet malls thrive as shoppers search for bargains and experiences – Marketplace.org
- Outlet Malls Move Closer to Cities in Upending of Rules – Bloomberg
- Neiman Marcus Finds Even Wealthy Shoppers Want Better Deals – The Wall Street Journal
- Tanger Factory Outlet CEO scolds retailers: ‘Amazon is a convenient scapegoat’ – CNBC
- Outlets launch shuttle service to hotels – Orlando Sentinel
- Tough times in retail? Not at Palm Beach Outlets, off-price malls – Palm Beach Post
DISCUSSION QUESTIONS: Are outlet malls largely immune to the challenges currently facing traditional malls? What challenges may they face in the years ahead?