Posted on: Sunday, July 13, 2003
Outlet prices not the main draw, experts say
By Michele Chandler
Knight Ridder News Service
SAN JOSE, Calif. — When Christine Gomez took her teenage daughter to shop for shoes recently at the Gilroy Premium Outlets mall, the potential for rock-bottom prices wasn't the main lure.
A more compelling reason: Gomez was in a rush and the 135-store outlet center isn't far from her Gilroy, Calif., home.
"Overall, I don't think that things cost less here," said Gomez, as her daughter Larissa studied a tableful of strappy sandals. "It just depends on what you're looking for, and if you happen to run into a sale."
Although markdowns were the hallmark of outlet malls in their early days, no longer do shoppers consider them automatic low-price lairs.
As retailers routinely scramble to attract customers, discounts are so commonplace that the best deal might be found right at the local mall, not miles away at a collection of manufacturers' outlets.
So today's outlet malls rely on their outdoor ambience, locations en route to popular tourist destinations and a wide selection of upscale and moderate brands to keep customers coming back.
"When you go to an outlet mall and you like Izod, you will find more Izod at that company's store than you will find in any other retail location, and usually at a decent, discounted price," said Sally Socolich, author of "Bargain Hunting in the Bay Area." "I often feel frustrated that I don't see as big markdowns as I would like, but I never leave empty-handed."
Outlet centers are also diversifying. High-end retailers including Chanel have appeared at some outlet malls, while Crate and Barrel carries furniture at some of its outlet stores.
"The different types of retailers entering these malls is becoming quite diverse," said Ellen Tolley, spokeswoman for the National Retail Federation. "You'll have people selling knock-off Tide next to people selling authentic alligator purses. It's become a melting pot for retail."
As outlet centers increasingly battle conventional malls for customers, outlets also are offering unexpected services including shopper discount cards, liberal return policies, nail salons and a broader array of eateries, industry experts said.
In today's outlet malls, "You are starting to see entertainment, day-care centers, food courts," said Marshal Cohen, senior industry analyst for NPD Group. "It's much more like the mall environment than it was in the past because they are competing now against shopping malls."
Outlet centers hope their new offerings will continue to propel them through tough economic times. Both conventional malls and outlet centers have seen sales decline as the uncertain economy prompts shoppers to pull back on spending.
Outlet malls reported sales remained flat at about $16 billion in 2002, according to the International Council of Shopping Centers trade group. Comparable-store sales in factory outlet shops fell 2.9 percent last year, following a 4.3 percent drop in 2001.
During the same period, revenue for conventional malls also declined. Mall sales per square foot fell 1.3 percent in 2002, on top of a 1.9 percent slip in 2001, the council said.
Overall, the number of outlet malls has dipped nationwide to 265 this year, since peaking at about 330 in the mid-1990s. Some weaker outlet malls found the going too tough and reopened with nonmanufacturer-owned shops in their retail lineup to broaden their appeal.
But the outlet malls that remain are expanding, to an average of 50 stores per mall, up from 35 a few years ago.
"It's hard to say if the bigger or smaller ones will be more successful," said Cohen, the NPD analyst. "But the wider the variety of products and stores, obviously the more enticing the mall will be."
While many outlet mall customers drive from an hour away, outlet malls are courting locals, too. For example, the owners of Prime Outlets Tracy, an hour or so drive from San Jose, are considering building a service-oriented shopping strip complete with a dry cleaners and coffee shop on company-owned land next to their 34-store manufacturer's center.
Although the mall's stores, including Casual Corner & Co. and Van Heusen, draw vacationers bound for Lake Tahoe and Yosemite, the proposed shopping strip would be geared to nearby residents.
"It's nice for them to have an area where they can buy new towels, pick up their dry cleaning and get a sandwich," said Elaine Yager, general manager of the mall, which is owned by Prime Retail, a real estate investment trust and the nation's second-largest public operator of manufacturer's outlet malls.
