Nordstrom Rack, Macy's Backstage, Off-Aisle by Kohl's, Saks Off 5th — the list of outlet stores being opened by retailers has picked up in recent years. The main concern in launching these formats has been whether they will cannibalize a retailer's full-line format. The answer, at least in one case studied by researchers from the University of Texas at Dallas and Northwestern University, appears to be that it will not.
The researchers studied a specialty apparel retail business with more than 400 stores and 100 outlets. Instead of finding that outlets drew business away from the retailer's core business, the study found they served as a gateway for new customers into full-line locations.
"If there's a price-sensitive customer who is not very experienced with the retailer, they might come in and experiment with the brand at the outlet channel," said Dr. Gonca Soysal, an assistant professor of marketing at UT Dallas, in a statement. "Since the products have similar designs and similar fits across the channels, once they gain experience with the brand, they might feel more comfortable purchasing more from the higher-priced channel."
As the study points out, retailers such as Coach and Nordstrom have avoided cannibalization by offering products created specifically for outlet locations.
Nordstrom has been among the most prominent in using outlets to drive incremental sales. Very early on in the development of the company's Rack concept, management insisted that cannibalization was not a concern as 60 percent of those shopping in the discount concept also shopped in the chain's full-line stores. In 2012, Nordstrom opened a Rack store a crosswalk's distance from its flagship store in downtown Seattle.
Photo: Nordstrom