For Outlet Centers, It’s Boom Time

January 11, 2017

Last month, TORG’s David Hinkle provided the signature quote for a Chain Store Age article on the increase in outlet retailer locations and the related boom in outlet center traffic. “When you’ve got about 215 outlet centers spread around the U.S. and 12 new ones open, that’s significant growth,” Mr. Hinkle told the online magazine. “It’s the only form of brick-and-mortar retail keeping pace with e-commerce.”

What’s driving the growth? Essentially, the consumer focus on value.

Outlet prices can be 70 percent cheaper than retail. Who isn’t interested in savings? And while the Great Recession might have encouraged discount shopping, the main drivers to outlet centers today are Millennials. Young shoppers have less to spend but still desire the high-end brands. This theory is supported by TORG research, which shows outlets taking a 26 percent share of annual apparel sales compared to 46 percent for all other brick-and-mortar locations.  With only 1% of retail floor space, outlets are clearly punching above their weight.

A preponderance of young buyers is also attracting new brands to outlet centers, brands that target Millennials but haven’t previously reached them through the outlet channel.

But what about those high-end retailers? Are they concerned about their outlet locations compromising sales at their traditional locations? Their commitment to outlet centers says they aren’t, we believe it’s because outlets create new customers by introducing young buyers to upscale brands on an aspirational basis.

“Some of these brands are on Fifth Avenue and Rodeo Drive,” Mr. Hinkle told Chain Store Age. “Younger shoppers will go into them for the first time at outlet centers.”

Therefore, retailers who carry more expensive goods such as Neiman Marcus, Bloomingdales and Nordstrom benefit by creating new customers as well as profitable outlet sales.

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