Outlet stores do not need a loyalty programs if they consistently offer value to consumers. The focus should be on value and price, not collecting points or getting into the store early. Most retailer loyalty programs are designed to collect data or bring down the price of merchandise. They are costly to execute and difficult to change or end.

The price conscious, value oriented, deal motivated shopper that frequents outlet centers cares not for a differentiated program vs. what they earn at the mall, strip center or traditional brick and mortar location. The consumer purchasing merchandise from American Eagle Outfitters, Famous Footwear and Dress Barn, to name a few, expects to get the same “reward” regardless of channel. The merchant elected to place the goods in the outlet location and mark it down/clear it out before it moves to a consolidator and winds up at Marshalls or TJMaxx.

Tanger Outlets for example has a coalition type program in place to reward frequent value-oriented customers of their tenants. While J.Crew attempts to differentiate the value of “loyalty” at their outlet locations vs. traditional stores, I’m highly skeptical as to the economics supporting the business case. Providing incremental value in hard and/or soft benefits plus resources to communicate and fulfill on the value proposition create a significant hurdle to deliver a positive return on investment.

Loyalty programs have become powerful chips in today’s ever-proliferating marketing processes. And outlet stores don’t want to be left out of any possible profitable spoils therein. But in today’s acquisitive world, loyalty comes from stretching the power of consumers’ pocketbooks more than from what the heart of gratitude allows.

If outlet store owners have studied well at Crew U and believe they can give consumers more and better gratification via a loyalty program and a multi-channel approach, then do it.

Factory outlets have evolved a great deal over the last 25 years. Originally, these stores (outlets) were designed to help move out-of-season items or items with a minor defect. This is no longer the case. In fact many Factory outlet stores design specific merchandise for their outlet stores (branded, but less expensive and possible lower quality). Three options in my opinion: 1) One loyalty card across all formats (same value when you purchase and redeem) Benefit – Simple Downside – cuts in on margins2) A card for each format – J.Crew model Benefit – better for margins, not all that complicated Downside – further separates your customers (Outlet vs Full Price formats)3) One card across all formats (different values when you purchase and redeem) Benefit – Simple, one card and you can help customer move from outlet to full Price formats Downside – not sure I like option three. Reminds me of Marriott’s rewards model. When I stay at a full service hotel, I have more amenities and I earn more points (based on price… Read more »

Outlet stores loyalty is based on getting bargains when the items do not sell well in the flagship stores. If the price is right, the loyalty will follow.

The only opportunity for outlet store loyalty programs would be if the programs promote the full-price retail locations. The shoppers at outlet stores are looking for bargains and deals. Why not drive them to the full-price retail stores with some sort of loyalty reward redemption offered there?

I’m not sure I agree with (what I perceive to be) the premise of this article: that the Great Recession has caused many shoppers to simply downgrade their efforts and move from a given store’s flagship to the corresponding outlet:
1) the popularity of outlets long predates the Recession, and while the latter may have accentuated the trend, it has hardly “caused” it;
2) many — or even most — outlets offer different merchandise, and often have different customer bases and even names, so the issue of cannibalization is likely irrelevant;
3) Given that many loyalty programs offer perks found only at the full-price divisions, and are tied into dollar volumes commensurate with them, how much crossover potential is there? Would it make any sense, for example, to offer a free Spa visit at Saks for someone who spent $40K at Off Fifth…is that plausible?

Great article. Outlets are a huge part of many retailers’ business, but they are often overlooked or under appreciated by others in the industry. As a result, there are a lot of misconceptions about the outlet business. Here’s what we have found in our work with clients: The frequent outlet shopper is a unique segment and the outlet mall is their primary place to shop for apparel. In many cases, there is little overlap with the full-price channel so cannibalization concerns should not stand in the way of a loyalty program. The most successful outlet retailers focus on two things: raising planned production to be a higher percent of outlet sales than clearance merchandise and increasing the average ticket in the store (with number of items in the basket being a key driver). Smart use of a loyalty program combined with an outlet web presence like the J.Crew example is an excellent way to incent shoppers to spend more on each visit and gives them access to outlet-grade planned production anytime, anywhere while minimizing any… Read more »

Based upon the huge droves of shoppers at outlet malls here in Los Angeles, including the very upscale, and huge Camarillo Outlet Center, I would suggest a loyalty program for outlets. A true loyalty program, not a mass, untargeted discount for simply frequent shoppers, but a program that drives a compelling reason to repeatedly select the brand.

Such a program could include incentives to shop at the full-retail units of that retailer. Why not drive shoppers to full-price locations and tempt them with exclusive offers, perhaps around potential services, rather than discounts of full-retail products?

The goal, of course, is to get shoppers to buy products at full price, and in the end, virtually eliminate the need for outlets altogether, right?

As a family we have for many years vacationed at Dewey Beach in Delaware. For the past two decades I have noticed an amazing change in the nearby outlets. When the depression started in late 2007 and early 2008, visitors and sales fell to very low levels and a large number of outlet stores were forced out of business. Over time and as the need for high value low cost merchandise increased business grew back to business sustaining levels and is now in slow growth, but not nearly at FY 2006 levels. This information is freely given to me by the many shopkeepers I have befriended over the years…the ones still in business that is. It is my observation that the ownership or executive leadership is in no way going to expose margins from these stores to erosion from e-commerce sales, large scale advertising and marketing gadgets like loyalty plans or rewards programs. It was the original intention to use the outlets as another means of selling down overstock without below cost clearance sales. It… Read more »

I wish loyalty programs never started. Yet, I am one of those moms with a key chain full of them. I already pay an annual fee to belong to Costco. But now, they mail out coupons, which I don’t get. Why wouldn’t I just get their club pricing? I find it very annoying. It makes people feel like it’s no longer worth the annual fee.