Outlet Malls Adding Square Footage
At least in terms of real estate, outlet malls are the stars of retail. The channel appears to be the only one witnessing noticeable square footage growth.
A series of articles recently detailed the appeal of factory outlet malls while pointing to expansion efforts in markets around the country. The first ever outlet opened in Oklahoma City in August. A new outlet shopping center is being built in San Clemente, CA.
The expansion comes as apparel sales at factory outlets rose 17.8 percent for the 12 months that ended in April, NPD Group told The Weekly Herald in Washington.
“Americans are so focused on price,” Lee Peterson, executive vice president of creative services at WD Partners, told the Chicago Tribune.
But a number of factors besides budget-shopping are driving outlet center’s growth:
- Overcoming stigma: Outlet centers over the years have lessened the perception of a bargain-bin atmosphere. Steve Craig, chief executive of Craig Realty Group, which owns Citadel Outlets in Los Angeles, told the Los Angeles Times, “Ten years ago, if I said, ‘Come shop at an outlet,’ they’d say, ‘Oh, no, I shop at Neiman Marcus.’ I don’t get any nose cringes anymore.”
- Luxury appeal: Nordstrom, Neiman Marcus, Barneys and Saks are also all opening up more outlet locations. Bloomingdale’s and Lord & Taylor are opening outlets for the first time.
- Vendor expansion: Newer vendor brands such as Not Your Daughter’s Jeans, Vince Camuto shoes and Under Armour are aggressively expanding outlet locations.
- Marketing ramps up: Bus tours and hotel shuttle packages are often now offered to attract tourists to the mall. Coupons and radio ads are being used to drive nearby traffic.
- Hybrids: Hybrid malls combining full-price and outlet stores are opening. Macy’s recently announced plans to open its first traditional department store in an outlet center.
- Location! Location!: With limits, many outlet centers appear to be opening closer and closer to towns and cities.
- Economics: It’s not only lower rents, but common area assessments (no elevators/escalators, no collective heat/air conditioning) and staffing costs are lower than traditional malls. At the same time, Chicago Premium Outlets in Aurora generates $700 a square foot while Simon Property’s top-performing outlet mall, Orlando Premium Outlets in Florida, generates $1,300 a square foot, according to the Chicago Tribune.
While the heap of recent articles exploring outlet centers growth were overwhelmingly positive on the channel’s prospects, it was stated that location remains a drawback for consumers not fond of driving far distances. Although many appear to be opening closer to traditional mall towns and cities, brands are still said to worry about opening outlets too close to their full-price department store or mall customers.
Another issue is merchandise quality, although it appears to be a minor complaint. While outlets in the early days did sell a large quantity of the prior-season liquidation goods formerly found at full-price locations, an estimated 85 percent of apparel — even at luxury stores — is made specifically for outlets at inferior quality to offer the needed lower prices. Outlet shoppers either don’t know or don’t care. But Boston University professor Ellen Ruppel Shell, author of Cheap: The High Cost of Discount Culture, warned in The Oklahoman, “It’s really a case of buyer beware to know what you are getting. And the sales clerks don’t always know.”
- Outlet malls are growing bigger, more popular – Los Angeles Times
- Outlet malls push further into Chicago area, shoppers’ routines – Chicago Tribune
- The Outlet Shoppes at Oklahoma City promises a different shopping experience – The Oklahoman
- Seattle Premium Outlets plans a major expansion at Tulalip site – The Weekly Herald
Discussion Questions: What’s your assessment on how the factory outlet channel has evolved and its future prospects? What limits do you see for factory outlet center growth? What warnings, if any, would you offer brands?