Oh, the outlet mall.
It gleams like an oasis of designer savings in the desert. It’s a day of promised savings, rewarding the dedicated shopper who will find a trove of off-price goods that were sold at luxury retailers—perhaps last season, but who’s counting?
That is occasionally still true. But over the last few decades, as retailers recognized the profitability of attracting Americans looking for a deal (yes—they will use this great quality about you against you!), they began to build an industry around outlet shopping that is completely separate from their regular business. And it's working--there are 13,000 outlet stores around the country, and every year outlets draw more tourists than attractions like Washington D.C.'s museums or Philadelphia's Liberty Bell.
The industry is based on some secret tactics designed to fool the customer--don't be suckered.
Dirty Secret #1: Going the Distance
Outlets are often located in the middle of nowhere, far away from cities. Originally this practice was for two reasons: (1) real estate and rental prices are more affordable out in the boonies, and (2) off-price merchandise needed to be located a geographical distance from its full-price counterpart—in other words, there’s no Prada factory store slated to open on Fifth Avenue in New York anytime soon.
However, businesses noticed a great side effect. Since customers often drove a great distance to get to the outlets, they would make a day of it, and thus feel compelled to buy things to “make the trip worth it.” What’s an outlet shopping trip without a slew of bags to show you made good use of your day?
Dirty Secret #2: This Was Bought … Especially for You
Outlets have gotten by on the reputation that they stock items from the main store that are overstock, last season’s, or perhaps slightly damaged or not production quality. It’s very alluring to think you’re scoring a designer handbag at a 70% discount when the seam at the bottom was just slightly off, right?
Actually, luxury department stores now have dedicated buyers that buy separate product for outlets. Designers have dedicated production to manufacture items separately for outlets. An outlet buyer for a luxury department store in New York, who wished to remain anonymous, told us, “I would guess that only about 10-15% of our outlet’s stock was actually items that the main store carried. The rest of it was merchandise we bought or produced for the outlets—and truth be told, the main store would not find its quality worthy of the brand. We even use different labels for outlet merchandise so that distinction is there.”
Dedicated outlet products typically feature less edgy fashions at lower quality—shoddier construction, more synthetic materials. Some retailers use tactics such as weaving polyester into a natural fabric, but marketing the item as if the full price reflected a 100% natural fabric. Which leads us to dirty secret #3…
Dirty Secret #3: Faux Price Tags
Wait a second: If merchandise is being bought and produced especially for the outlet, that means… Yes, you guessed it, that price tag’s exuberant slash on that “original price” is not authentic, which essentially means your savings aren’t, either.
Again, some of the merchandise is actually from the main store, so not all price tags are fake, but if we had to hazard a guess, we’d say around 75-80% of outlet merchandise these days carries “fake” prices built into the price tags. Our anonymous buyer told us, “When I bought merchandise for outlet, I not only determined the selling price as I typically would, I also created a fake 'full price' for each item that would get marked on the labels. But, of course, our markup was based on the selling price.” Which means that the “$250 shirt” that is selling for $50 was bought for around $20.
Tips on Getting the Most Out of Outlets
We are not saying that outlets are evil, or that you should necessarily stop frequenting them. Outdoor outlets can be a fun way to pass a sunny day. We are just arming you with the knowledge that outlets have become a $17 billion dollar industry that takes advantage of the fact that outlet shoppers want a bargain—so they will do anything to make money off your feeling that you are getting one.
Head to the outlets (if you must) armed with these tips:
- Know the value of a sunk cost. Even if you’ve driven for 45 minutes or more, if you don’t see anything you like, just walk away. Now that you understand the geographic strategy, don’t throw good money after bad to justify the road trip.
- Ignore the “full price.” It’s probably fake, and the only thing that’s relevant is whether the item is worth the selling price.
- Carefully check quality. Have a hawk-eye look at construction, stitching, potential damage. Check tags for fabric content and the country of manufacture. A Consumer Reports study said that 77% of people can’t tell the difference between outlet and regular merchandise. Don’t let that be you—if you favor a designer, regularly check their full-price merchandise at the store so you are familiar with its quality and will be able to tell the difference.
- Research ahead of time. If you know you want a pair of Nike shorts, for example, check out the price online or at your local store, so you know how the outlet price compares. The savings may not be as great as you think, especially after you account for lower quality.
- Check out Consumer Reports’ rankings. Top-rated stores include Mikasa, Lenox, and L.L. Bean. (Consumer Reports subscribers can access the full article at their website.)
- Beware regular retail stores. There’s no legal definition of an “outlet” in the US, so sometimes regular retail stores sneak themselves into an outlet.
Bottom Line: The designer outlet buyer suggests that the best way to snag a deal is to head to the department stores or designer retailers at the end of each season (March and August) when merchandise is all marked down. "It will only get marked down a little bit more, maybe 10%, before it gets transferred to the outlet." This way you have a nicer shopping environment and know you're getting real, full-price merchandise for a real deal.
Otherwise, if you head to the outlets, be armed with this knowledge: The best defense is to look at the selling price, check quality, ask whether it's worth it, and consider nothing else. If it's not worth it, walk away. There's always the food court.