Outlet malls thrive as ever-thriftier shoppers seek out bargains

Max Jarman / The Arizona Republic

Outlet stores are going to be on more shoppers’ radar this holiday season as they look for higher-quality products but continue to keep a tight rein on spending.

Many consumers turned their backs on higher-priced brand names when the recession hit in 2008. Now, three years into the economic downturn, analysts say shoppers still are watching their pennies, but they want more than low prices.

“Now is a great time for outlet stores,” said Jeff Green, a Phoenix-based retail-feasibility consultant. “They offer better-quality merchandise at the discounts that consumers are looking for.”

Margie Massimo and her daughter-in-law Tava Kerlin, both of Phoenix, got a jump on their holiday shopping last week at the Outlets at Anthem in north Phoenix. They were enticed to make the 30-mile drive by the discount prices and brand-name stores, particularly the new Coach outlet.

“We probably spent too much, but we got some fantastic buys,” Massimo said. She was particularly proud of the Coach diaper bag they bought in anticipation of a new grandchild in the family.

Outlets generally sell name-brand products for 25 to 75percent below regular prices and are one of the fastest-growing retail concepts today.

Retailers and manufacturers who have watched sales soar at their outlets during the down economy are scrambling to open more off-priced locations.

In metro Phoenix there are four new outlet malls on the drawing boards to accommodate the new stores.

“They are the only retail projects that can get financed,” Green said, noting the difficulty in funding conventional retail developments.

Many outlet stores started out as vehicles to unload seconds, blemished goods and returns. But instead of carrying odd selections of outdated, or slow-moving merchandise, outlets now also carry an array of new merchandise similar to that found in mainline stores, only for lower prices.

It’s hard to tell the difference between classic oxford shits sold at Polo Ralph Lauren’s traditional stores for $90 and those sold at their outlets for $45.

By broadening the inventory at their outlets, retailers can boost sales and profitability and move the stores closer to population centers, giving them more customer traffic. Initially, outlets were located far from population centers so as not to compete with retailers’ traditional stores. But with the fresh inventory, the outlets can be moved closer in without threatening the mainstream locations.

One proposed outlet mall would be at Scottsdale Road and Loop 101, a relatively close-in location.

Cassie Rollinger of Phoenix often finds the merchandise at the outlet stores more appealing than that in the retailer’s mainline store.

“They have stuff the regular stores don’t have,” she said.

Some examples:

Luxury-handbag maker Coach Inc. uses its outlets to move out last year’s models, but also designs and promotes special products that are exclusive to its outlets.

“Outlets have been an important part of our strategy for a long time,” said Coach spokeswoman Andrea Shaw Resnick.

At Saks Fifth Avenue’s Off 5th outlets, most of the merchandise is now produced expressly for those stores instead of being handed down from its higher-priced department stores.

Gap Inc. stocks new merchandise at its outlets that is similar to the products at its mainline stores, but sells at lower price points.

Besides stand-alone outlets such as Nordstrom’s Last Chance, Sears Outlet and others, the off-price stores in the Phoenix area are clustered at two outlet malls — the Outlets at Casa Grande, 40miles south of downtown Phoenix, and the Outlets at Anthem, about 30miles north of downtown.

Outlets at Anthem has about 65 stores and food outlets, including Polo Ralph Lauren, Nike, Banana Republic and Guess factory stores. Coach and Coach Men factory stores just opened and G by Guess is coming soon.

The Outlets at Casa Grande are much smaller with about a dozen retailers and restaurants, including Levi Strauss, Guess, Gap and Izod outlets.

While not a traditional outlet mall, Arizona Mills shopping center in Tempe has a number of discount stores including Last Call by Neiman Marcus and Saks Fifth Avenue Off 5th.

Retail growth market

Outlet stores also have emerged as important growth vehicles for retailers who are opening new outlets while holding the line on new traditional stores.

Coach opened 22 outlets during the past year compared with only three traditional stores. One of the company’s newest stores just opened in Phoenix at the Outlets at Anthem.

American Eagle Outfitters CEO James O’Donnell said on a conference call with analysts in August that 90percent of the new stores planned by the company would be its Off Campus outlets. He noted the stores have been producing strong sales with relatively low overhead.

Gap Inc. also has increased the number of outlets it plans to open in the near future as it closes some of its underperforming mainline stores.

Macy’s Inc. entered outlet fray last year with its Bloomingdale’s Outlet Stores .

Michele Rothstein, a spokeswoman for the Premium Outlets division of Indianapolis-based mall developer Simon Property Group, said the down economy has attracted a “whole new group of shoppers” to outlet stores which have been “doing very well.” Simon has a number of new outlet projects on the drawing boards, including one near Chandler, but no new traditional shopping centers.

“Our traditional malls are being refurbished, but new construction is limited to outlet malls,” Rothstein said.

Consumer benefits

Even with their own merchandise that is not handed down from higher- priced stores, outlets are a good deal.

“The bottom line is that outlet shopping is worth the trip,” said Consumer Reports’ researcher Tod Marks in a news release. “The merchandise quality in most instances is fine. And on our shopping trip, we saved as much as 61percent.”

That’s what Nick Lovato and Melanie Goodman of Flagstaff have concluded. They regularly make the trip from Flagstaff to shop at the Outlets at Anthem.

“They have lots of sales and good prices,” Goodman said.

Off-price expansion

There could soon be more outlet shopping opportunities for metro Phoenix shoppers.

There are four new outlet malls proposed for the area, in various stages of development.

Macerich Inc., parent of Phoenix-area mall developer Westcor, has teamed with Florida’s AWE Talisman Co. to build the Fashion Outlets of Scottsdale, a 350,000-square-foot project at Scottsdale Road and Loop 101. While no tenants have been announced the company reports strong interest in the project that is tentatively scheduled to open in early 2013.

Simon Property Group’s Premium Outlets division plans to build a 360,000-square-foot mall, with about 90 stores, called the Phoenix Premium Outlets. The mall is proposed for a site adjacent the Wild House Pass Hotel & Casino near the Interstate 10 and Loop 202. Like Macerich, Simon reports strong interest in the project, but has not announced any tenants. The company has also set a projected 2013 opening date.

Tanger Outlet Centers Inc. based in Greensboro, N.C., has announced plans for two metro Phoenix outlet malls, in Scottsdale and the West Valley.

The company is said to have secured a 42-acre site at Loop 101 and Indian Bend Road near the Talking Stick Resort and has looked at sites in the West Valley, including Westgate City Center in Glendale.

No tenants have been announced for the malls.