Anyone who’s ever been on a road trip knows that, just as surely as you see the signs for roadside oddities and cheap gas, as soon as you get a few miles out of any major city you’ll start seeing signs for outlet malls. Tons of bargains! High-quality designer merchandise at a low price! For many shoppers, this siren song is too irresistible to avoid, and they simply must stop to shop. In 2001, Consumer Reports found that about fifty-five million Americans visit an outlet mall each year, and many of them even drive two hundred miles or more to get there.
All that for a Bass shoe store and some Maidenform panties?
Outlet malls have exploded in popularity in recent years, becoming one of the fastest-growing segments of American retail. But beneath all the fancy sparkle and fresh spackle of the countless outlets popping up all over the country, do they really deliver all they promise? It turns out that outlets have a few sneaky ways of tricking us into thinking we’re getting a much better deal than we actually are.
Trick #1: The Merchandise Isn’t What You Think It Is
The original outlet and factory stores sold overstocked, discontinued items, and imperfect merchandise unfit for retail sale; that’s what made the prices so cheap. But nowadays, there are as many Gap factory stores as there are real Gap retail stores—how could they have that much extra or have so many irregular T-shirts on hand?
Some outlet stores still sell overruns and irregulars, and many more sell out-of-date items from seasons past, but the truth is that the majority of common outlet stores supplement their stock with merchandise created especially for outlet-store sale. These lines carry the brand name, but they’re made with lower-quality fabrics and cheaper construction techniques. The companies depend on customers’ inability to tell the difference between the quality of real designer merchandise and the lower-quality knockoffs carrying the same label. The knockoffs may be cheap, but that cheapness comes at the expense of quality.
Some outlet stores confuse the matter even further by interspersing regular retail products in with the knockoffs and overruns. These products are rarely marked down from the normal retail price, but due to their proximity to discounted items, customers tend to think that they must be a bargain, too.
Trick #2: It’s All About the Marketing
Merchandise at outlet stores usually comes with a price tag that prominently displays both the retail and the outlet price: “Manufacturer’s Suggested Retail Price $100, Our Price $25.” The tags lead customers to believe that they’re getting a huge discount. But the truth is that the listed MSRP is whatever the store wants it to be—there’s no guarantee that the item is really worth that much, or that it was ever listed for that price at a retail store. This trick, used by just about everyone that wants to sell anything to anyone, is called “reference pricing.” The outlet can quote whatever price it feels like in order to convince the customer that she’s getting a deal, and the bigger the difference between the two prices, the easier it is to make a sale. Many shoppers assuage their spending anxiety by reminding themselves of how much they’ve saved. Reference pricing lures people into believing that they’re saving more money than they’ve spent.
Trick #3: Location, Location, Location
Outlet malls are notorious for being located in out-of-the-way suburbs and off deserted interstate highways. While it’s true that the stores enjoy lower rents and more space than what they’d get in cities, the remoteness adds to the customer’s perception of value because as consumers, we associate “inconvenient” with “cheap.” After all, the gas station located conveniently on the toll road usually has much higher prices than the station located five miles out of the way on side streets. In her book Cheap: The High Cost of Discount Culture, Ellen Ruppel Shell says that another big advantage of the remote location is a psychological effect called the “sunk cost fallacy.” By driving twenty-five, fifty, or one hundred miles to the outlet mall, customers invest serious amounts of time and energy; it’d be a pity if they didn’t leave with something. Customers don’t like to feel like they made a bad investment, and making purchases justifies all that effort. Of course, behavioral economists know that it’s irrational to spend more time and money to justify spending time and money, but whoever said that shoppers were rational?
Tips of the Rag Trade
In reality, outlet malls promise something—high quality for a low price—that is very hard to deliver. High quality simply costs more, no matter how you slice it, but you can still find deals if you look carefully. The next time you’re tempted to swing through an outlet mall, consider these savvy shopping tips.
- Look at apparel tags. The tags of irregular or imperfect merchandise are usually sliced, marked on, or otherwise altered to show that the merchandise is unfit for retail sale. The items may have imperfections, but at least you’ll know that they aren’t knockoffs. Retailers’ lower-priced lines usually carry different tags than the ones sewn onto the real deal. At Gap Outlets, the tags are white with blue lettering, the reverse of the retail tags. At Banana Republic Factory Stores, the tags have three small diamonds indicating they’re not retail quality. Merchandise from the Brooks Brothers outlet line is labeled as “Brooks Brothers 346.” Get familiar with real retail tags, so you can spot the impostors at outlet stores.
- Know what an item is really worth. How can you know whether you’re getting a great deal at the Samsonite outlet if you don’t know the real retail price of a suitcase? Comparison shop for large purchases; don’t rely on the reference price quoted by the store.
- Think seasonally. It’s a good bet that any in-season merchandise is from an outlet-only line. Real retail overruns don’t arrive in outlet stores until after the season has passed.
- Remember that fewer stores = better quality. If you’re shopping at a store that has posts in every outlet mall in the country, you’re almost guaranteed to be getting outlet-quality merchandise. At an outlet with only a few locations, the merchandise is more likely to be true overruns, discontinued items, and last-season’s line because the company doesn’t have to fill hundreds of stores.
- Shop the sales. Outlet stores have sales at the same times that normal retail stores do, and customers can often get even better discounts at these times. But sales at retail stores can offer savings just as valuable as regular outlet prices.
Stores are in the business of making sales, and they’ll do whatever they have to do in order to loosen customers’ inhibitions and wallets. Outlet stores use consumer psychology to their advantage just as any other business does. Whether you’re at the mall, the outlet, or the grocery store, the most important tip to remember is that it’s the buyer’s responsibility to beware.