Shoppers find better deals on markdown than in outlets
One of the arguments in favor of a retailer pursuing an off-price or outlet strategy is to help get marked down inventory off the floors of flagship stores. Another plus, according to a new study by Haynes & Co., is that the very same items sold at a markdown in flagships are priced higher in outlets. In short, a retailer can make more selling the item in its outlet. What’s not to like about that?
Store audits by Haynes, as reported by The Wall Street Journal, found numerous instances in which consumers spent more on an item shopping in an outlet than on markdown. For example, the consulting firm found that, over one weekend in February, prices at American Eagle Outfitter’s stores were cheaper 43 percent of the time than at its outlets.
This is not the first time a report has shown that consumers may not be getting the deals they expect when visiting an off-price store or factory outlet. Articles with a similar slant have been written for years by major newspapers and magazines, but the numbers of people shopping in outlets continues to grow. Macy’s decision, for example, to pursue its own off-price concept, Backstage, which will launch with four stores this fall, has been attributed to the success of Nordstrom Rack.
Most consumers do in fact head to outlets looking for a deal. According to a 2014 Consumer Reports survey, 34 percent believe outlet prices are much lower than the sale prices at regular stores. Sixty-four percent believe that their trips result in them getting "great value" for their purchases. Bon Worth, L.L.Bean, Haggar, OshKosh B’gosh and Izod were named by respondents as stores offering the best deals.
Some consumers, however, are losing some of their love for outlets. According to City Research, via the Journal, nearly one-third of consumers who previously only shopped at outlets are now shopping in full-price stores, as well.
- Retail Markdowns Often Beat Outlet Prices – The Wall Street Journal (sub. required)
- Outlet mall buying guide – Consumer Reports (sub. required)
- Macy’s Backtage seeks starring role in off-price retail – RetailWire
Should there be a concern that retailers have overplayed their hands when it comes to outlets? Is there a formula for retailers to determine the right pricing balance between their flagships and outlets?