Jeanne Sheppard has her hands full. During the day, the Evanston resident works full-time as a recruiter for Northwestern University’s biotechnology master’s program. At night, she takes care of a husband and a 7-year-old son.
The last thing she wants to do is drive 50 miles to an outlet mall and schlep around dozens of stores searching for a bargain.
“I barely make it to regular malls. I never shop at outlet malls. Convenience is a priority for me,” Sheppard sighs.
Outlets turned her off from the beginning, she adds. “It’s not like they have Armani suits for $50. You can go to Nordstrom when they have a sale and get the same things.”
Those are words of warning for the nation’s outlet centers.
The industry sprang into existence only about 15 years ago, offering shoppers deep discounts on brand-name merchandise. The outlet centers were intentionally located in far-flung places so as not to threaten department stores or specialty stores that carried the same brands at full price.
But the demographics and behavior of U.S. shoppers are changing, and some of those changes spell trouble for outlets.
A growing percentage of working women report they have less time to shop. When they do hit the local mall, it’s often for guerrilla raids: Snap up the jeans and sneakers as quickly as possible and get out.
Many are avoiding malls entirely, choosing instead to shop at freestanding stores such as Kohl’s or Gap, where they can buy clothes for the whole family in one place. Shoppers on the cutting edge are trolling the Internet, never leaving home.
The retail competition for outlets has changed, too. Department stores are running sales more of the time, making the outlets’ standard offer of 30 percent off regular prices less appealing. Meanwhile, discounters such as Target and Wal-Mart are offering deals much closer to home.
“Discounters have done a very good job. The standard of excellence for outlets has increased,” said Cynthia Cohen, president of Strategic Mindshare, a retail consulting firm with offices in Florida, New York and California.
Some retail experts complain that outlet malls aren’t the bargain they once were, anyway. Originally, manufacturers’ outlets sold overstocked items or pieces that were damaged or returned by other shoppers at discounts as high as 70 percent.
Many still do, but a growing number of companies, including Saks Inc., the parent of Saks Fifth Avenue, have started manufacturing less expensive goods specifically to keep their outlet stores stocked year-round. Other so-called outlets buy leftover merchandise from third parties and peddle it in their stores.
“No one takes outlet malls seriously anymore. The bargains in outlet centers are few and far between,” said Bruce Kaplan, president of Northern Realty Group, a Chicago-based retail real estate brokerage firm.
The competitive pressure is taking its toll. At the end of 1998, there were 294 outlet centers operating around the country, 35 fewer than in 1996, according to Value Retail News, a trade publication that tracks the outlet industry.
A significant number of others are just hanging on, according to Barbara Ashley, senior vice president of retail services for Taubman Co., a Michigan developer and manager of retail real estate.
“Many of them are truly at risk,” Ashley said.
Despite the challenges they face, outlet malls are far from a dying breed.
Average sales per square foot at outlet centers rose 5.5 percent last year, to $232 from $220 in 1997. That trails specialty stores, which averaged $249 in sales per square foot, and department stores, which averaged $267.
Total outlet industry sales increased 9 percent to $13.3 billion in 1998, helped by the opening of seven new outlet centers.
Some outlet malls are being bailed out by tourists. Nearly 40 percent of leisure and business travelers said they visited a discount mall during 1997, according to a survey by the Travel Industry Association, a trade group that monitors U.S. tourism.
Other centers are benefiting from suburban sprawl. As residential development surrounds them, some outlets are being adopted as the community mall by local residents.
Gurnee Mills and Prime Outlets in Huntley–the two outlet centers closest to Chicago–admit it’s a challenge to keep up with changing consumer demands. But both say they have found strategies to stay relevant with today’s increasingly picky shoppers.
Gurnee Mills, owned by Mills Corp. in Arlington, Va., has embraced what it calls “shoppertainment.”
That means making the outlet shopping experience more fun by supplementing the traditional food court with themed restaurants such as Rainforest Cafe and Planet Hollywood. It also means adding movie theaters and building an indoor ice rink that will allow families to drop off kids for skating lessons or hockey leagues this fall.
It even involves going against one of the most revered tenets of outlet shopping: Never charge full price.
Gurnee Mills is particularly proud of Bass Pro Shops, a giant sporting goods retailer, that offers shoppers the chance to fish in an indoor trout pond or try out a new bow on an archery range. In exchange for the interactive experience, Bass Pro expects them to pay regular prices for everything from Tommy Bahama silk apparel to fishing rods to rifles.
“We’re trying to create an environment, an experience, an atmosphere that goes beyond just price,” said Maryellen Lovell, director of marketing at Gurnee Mills.
Mills Corp. decided to make similar changes at its seven outlet centers after customer surveys showed that shoppers’ priorities had changed.
When Gurnee Mills opened in 1991, the recession had transformed shoppers into “value” hunters. But by the late 1990s, consumers said they were most interested in unique merchandise in a fun setting. Convenience had become more important. Low price had dropped to No. 4 on their list.
Some say Gurnee Mills and it sister centers have evolved so extensively that they’re not really true outlet malls anymore. Instead, they are a hybrid of outlet centers, traditional malls and theme parks.
Today, between 30 percent and 40 percent of Gurnee Mills’ non-anchor tenants are true outlet stores that sell overstocked merchandise. They include such names as Lord & Taylor, Abercrombie & Fitch and Nautica.
Another 30 percent are retailers that manufacture less expensive goods specifically for their outlets, such as the Ann Taylor Factory Store and Off 5th, Saks’ outlet chain.
The remainder are entertainment tenants such as restaurants and movie theaters.
The mall also includes discount stores such as Marshalls, Syms and Value City as anchor tenants.
The new mix appears to be working. Twenty-one million people visited Gurnee Mills last year, up 15 percent from 1997.
Still, Gurnee Mills lacks many of the upscale outlets that attract more affluent shoppers.
Because of so-called radius restrictions that keep manufacturers from opening outlet stores close together, Gurnee doesn’t have access to some of the hottest outlet chains in the country, including Tommy Hilfiger, Polo/Ralph Lauren or Donna Karan. Those chains have outlets just a 15-minute drive away in Kenosha, Wis.
Still, Gurnee is fighting back with some new outlet names that aren’t restricted, such as hot teen retailers Abercrombie & Fitch and Pacific Sunwear.
Prime Retail, which owns an outlet center in far northwest suburban Huntley as well as the former Lakeside Marketplace in Kenosha, says it has no intention of following Mills Corp.’s foray into shoppertainment. Instead, it is working to boost the quality of true outlet stores in its open-air centers, such as Huntley.
“People still want the brand names and popular merchandise, but they don’t want to pay for it,” said Jarrod Walpert, spokesman for Baltimore-based Prime Retail.
Some of the biggest attractions at Huntley include outlets for Gap, Mikasa dinnerware and Bose stereo speakers. The mall experienced double-digit sales growth in 1996 and 1997. That slowed to a 5 percent increase last year, said Deborah Wodrich, marketing director for Prime Outlets at Huntley.
Still, it’s been hard to keep all of the storefronts full because of retail bankruptcies and consolidations, she admitted. Huntley’s occupancy rate hit an all-time high of about 92 percent this year.
One of the surprising things Gurnee and Huntley have discovered: Both centers draw a bigger chunk of shoppers from the local community than they expected. Heavy residential development around the malls has contributed to that.
“They’re treating us more like a convenience center,” said Huntley’s Wodrich.
SHOPPING CENTERS
Outlet center: At least 50 percent of stores are manufacturers’ outlets.
Traditional mall: Anchored by major department store chains. Rest of the space is occupied by specialty stores, restaurants and, occasionally, movie theaters.
Power center: Anchored by category killers–stores dominant in particular kinds of merchandise, such as Best Buy and Bed, Bath & Beyond, or discounters such as Target. Few small tenants.
Hybrid: A combination of outlet stores, traditional discounters and entertainment retailers.
