Are Outlets and Discounters Killing Full Price Retailers?

It’s been a banner year for outlet stores and malls. Not long ago, they were lonely outposts on a stretch of highway offering last season’s — or even a season from several year’s ago  — fashion collections for those starved to own at least one designer item. Once in awhile you found something you missed out on, or simply refused to pay full price for.

But all that has changed. Now not only are outlets getting closer to downtown shopping districts, but they’re offering this season’s fashion. On a recent trip to a Nordstrom Rack, I saw a pair of Ralph Lauren driving shoes that were still selling for full-price in a fancy downtown shoe store. Another visit to a Loehman’s prompted the discovery of several recent pieces from Yves Saint Laurent’s fall collection. Coincidence? Not at all.

Retailers, in their franticness to move merchandise, appear to be getting reckless in how they disperse their unsold or overstocked goods — to their own detriment. Shoppers now know that what they see at Barneys or Saks could potentially be found down the street at a discounter. Where once goods were held back before ever appearing in a discounter — if at all — now it’s a free-for-all. Discounters and outlet stores are enjoying their moment in the limelight. TJ Maxx and Marshall’s are each running television advertisements that boast of their unique access to current designer merchandise (click here to watch one example of TJ Maxx’s. Click here for Marshall’s — both are owned by the same parent company). That access is essentially blamed on how major retailers and designers have horribly miscalculated consumer demand, resulting in your “Shopportunity.”

Some retailers are unabashedly opening their own outlet stores and stocking it with whatever is not selling in their regular stores. Retailers like Kate Spade, Lucky Brand Jeans, Puma, and Juicy Couture have all jumped on the outlet train. Last year Saks Fifth Avenue launched a 24,400 square-foot “Off 5th” outlet in the Prime Outlets International Center in Orlando, Florida. Retail property managers are seeing outlets as an opportunity to fill holes otherwise left by mid-level brands. Indeed the outlet mall is having something of a heyday. Woodbury Common Premium Outlets in Central Valley New York has 220 outlet stores and 840,000 square feet, with a virtual laundry list of top brands, from Bottega Veneta to Valentino. Other brands at Woodbury like Helmut Lang and Judith Ripka took the pop-up approach , with mini-outlet shops opening for only a few months at a time.

The result being that consumers are not only learning to live with less in a down economy, but learning to pay less and get more for their money in terms of designer merchandise. While full price retailers shoot themselves in the foot, discounters are enjoying a boom in business that may last much longer than most people think. When the recession is over, will old habits die hard? Maybe… for a price.

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