The outlet business is terrible. I am referring to the outlet malls, the Tanger type, the Mills Group, etc. I am not talking about the off -price business. In addition to retail chains, which also have outlet stores, the big vendors also have a big presence. So why the drop off?
Based on my personal opinion and independent research:
- Many of the best locations are dependent on the foreign tourist consumer. The strength of the dollar has really hurt this business. Just like the Fifth Avenue luxury market, the foreign buyer is just not finding the deals with the currency exchange. Traffic at iconic locations like Sawgrass Mills and Woodbury Commons is way down. To give you an idea; a major off-price company has a small luggage department; not very significant. Near these type of locations, particularly in South Florida, they have luggage at the front of the store. The South American shopper buys the luggage upon entering the store to take their purchases home. Now not so much.
- The product at the brands in these outlet malls is simply not the same product at the department stores. One branded vendor makes a shirt of 60’s single yarns for the department stores and the exact same shirt for the outlet mall using 40’s singles. In another world I made huge quantities of goods for these outlet stores. The look and labels were the same as regular goods but the quality was all about the outlet price. I believe the consumer completely understands this charade. The outlet malls generally are not on sale. In most cases the lesser quality polo shirt at Nautica outlet becomes the same price or higher as the regular Nautica polo shirt at Macy’s after the one day sale, friends & family, etc. The consumer knows these are just not a great deal.
- In our new world, online is a huge part of the consumer world. Online has no place in this outlet world.
- Perhaps the most important reason is that I think the outlet business is a microcosm of the general retail world. By definition the outlet malls are filled with basic, core merchandise. Almost no fashion. Pile it high and let it fly….at made up values. So the consumer simply looks at this merchandise, thinks it’s boring. Already has it in their closet. Doesn’t need it…..and doesn’t buy it. They are simply tired of going to these locations.
So how does this differ from the off-price market? The off-price market is all about true value. It is about the treasure hunt for the consumer. The product might be basic or might be fashion. What it is, is changing for every visit and great deals.
Fred Rosenfeld is an industry consultant. He can be reached at firstname.lastname@example.org.