Bulletin E-Edition:
A retailer's outlet
Factory stores adapt to changing economic climate
By Anna Sowa / The Bulletin
Published: April 29. 2009 4:00AM PSTThe iconic clock tower stands in the 17-year-old Bend Factory Stores, where name-brand apparel is sold at a discount.
Photo by Melissa Jansson; photo illustration by
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On a cool, sunny day last week, Salem resident Darlene Warden shopped with her family at the Bend Factory Stores.
The self-proclaimed bargain hunter regularly shopped at the outlets before she moved away from Bend six years ago. Now, she shops on family visits.
“I got this $29 shirt for $9,” she said, holding up a bag from Dress Barn.
In the chilling retail industry, outlet malls have become a sunny spot for many retailers.
Historically, outlet malls were places where shoppers could get 25 percent off regular-priced clothing, housewares, beauty products and other items.
The idea was that these stores stocked goods that were leftovers from the retail store, sent to an outlet or factory storefront adjacent to the main store.
Now, however, outlets have evolved into a larger extension of the main brand.
“Outlets have changed,” said Sherry Short, the general manager of the 17-year-old Bend Factory Stores. “They have specific lines designed to go to the outlet stores.”
These outlet lines are designed to look similar to the full-line brands, but with a lower price point. That way, the clothing can be current and have a greater selection of sizes, Short said.
In Bend, 19 outlet stores provide a family-friendly collection of shopping choices in the mall — from Kitchen Collection to Izod to Factory Brand Shoes. Two others will soon join the mix, Short said: Tuesday Morning, which is moving from its former spot at 694 S.E. Third St., and Halloween Headquarters, a costume store that previously opened only around Halloween.
According to Short, clothing stores tend to do well at the outlet mall — Nike Factory Store, Columbia Sportswear and the Eddie Bauer Outlet are her biggest stores — and the mall overall is seeing even sales over last year.
And flat sales in a sagging economy are better than declining sales, Short said.
Why outlets work
Nationally, outlet stores are feeling consumers pinching pennies, but not as dramatically as other retailers, says Aravindh Vanchesan, program manager with California-based retail market research/consulting company Frost & Sullivan.
“Typically, (outlets) are specialty stores, so they are the first to get hit when the economy is struggling,” Vanchesan said. “And, because outlet malls are not located in (big) cities, people have to travel to them, so gas prices can affect that, too.”
However, some companies are now seeing their outlet stores outperforming their retail stores, Vanchesan said.
A wave of high-end retailers recently announced they would invest more in their outlet brands. Nordstrom is expanding its Nordstrom Rack outlet stores, and Saks Fifth Avenue and Neiman Marcus also are expanding into the outlet market.
“What you have today is a customer who focuses on satisfaction rather than loyalty,” said Donald Jones of Kairos Capital Partners, a private equity fund that invests in retail companies. “Certainly, the outlet has been the phenomenon because it gets people value and entry to designers and status apparel that they may not get otherwise.”
The bottom line, according to Vanchesan, is that outlet stores are currently “en vogue” because they drive sales for a brand. But in the long term, they might get phased out once the consumer has more spending power again.
“In the short term, all (high-end) retailers are looking at these outlets as a buffer for losses at the full-line stores,” he said. “But (shoppers) could get used to the discounted rate, so it could be a trend that’s here to stay.”
How outlets operate
Most outlet stores have a few things in common, according to Vanchesan and Jones:
• They are located in areas at a distance from the full-line stores, so sales won’t pull from their main brand and shoppers can differentiate between the full line and its outlet.
• They are typically smaller in size and selection than the full-line stores.
• They are fewer in number than the full-line store.
• They are driven by foot traffic, so are typically located close to major highways or interstates.
• They stock a combination of excess merchandise and articles made specifically for the outlet brand.
Despite the lower pricing on brand labels, some consumers aren’t convinced that outlets are a great deal. Teri Gault is the CEO and founder of smart-shopping Web site, TheGroceryGame.com.
Gault says that although outlets now have a big selection of brands and sizes, they are only marginally marked down from the retail price.
“It’s usually 10 to 25 percent, at best,” she said. “I get better deals on great sales in department stores or even online.”
But to find those deals at full-line stores, she has to wait until the end of the season, when stores are trying to clear out their old merchandise. And she’s not guaranteed to find her size.
At Columbia Sportswear, company spokeswoman Leslie Constans said their merchandise is about 25 percent discounted from the full-line stores, but products will continue to be discounted until they are sold.
Roughly 25 percent of the items Columbia Sportswear stocks are made specially for the outlet, she added. The rest of the merchandise is excess product sent from other stores.
Still, with more retailers investing in the outlet malls, it appears that stores are betting that shoppers wanting in-season discounts will continue to head to their regional outlet mall.
“Smart merchants have found a way to extend their brands into communities where they typically would not be,” Jones said. “It’s a better shopping experience for the customer everywhere.”
Anna Sowa can be reached at 541-383-0304 or at asowa@bendbulletin.com.
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