The words “outlet mall” or “factory store” make many shoppers envision marked-down designer bags, slightly damaged furniture or first-quality, last-season fashions at steep discounts. But a new study by nonprofit Consumers’ Checkbook found that many companies are simply churning out cheaper merch just for their “discount” locations. Checkbook staffers spent three months visiting 40 brand-name outlets, scrutinizing online terms and conditions, and trying to figure out what exactly off-price stores were selling.
We also scoured the internet for intel and rumors about who sells what and emailed company public relations staff for clarification on what their brands’ outlets sell, but only one of those 40 brands responded. Sales reps and managers at local outlet stores were more helpful.
What we found was that about half of the off-price stores we investigated — particularly mid-priced apparel stores like J. Crew and Banana Republic — are selling made-for-outlet goods, usually with cheaper fabrications and fewer fine details than mainline-store merchandise.
“Outlets are very different from what general folks perceive they are,” said Gonca Soysal, a retail expert who authored a study on outlet malls when she was a professor at the University of Texas at Dallas.
Other factory stores mix made-for-outlet products with clearance items from their original brands. Then there are houseware chains and some high-end designers that operate genuine clearance centers with discounted merchandise that once appeared in regular stores: a floor model Pottery Barn dresser; last season’s Burberry trench coat.
Outlets: Then versus now
Outlet stores started as small, manufacturer-run businesses — often near the factories making the rainboots, button-downs, or sofas. They sold past-season, overstock, or slightly damaged products at big discounts. Outlet malls began popping up in the late 20th century, fueled by big-name off-price stores from the likes of L.L. Bean and Coach.
“The appeal of outlets was that scavenger hunt aspect, the idea that you could buy something for $50 but think that someone else had paid $500 for the same thing,” said Kristin McGrath, a senior editor for The Krazy Coupon Lady, a bargain-sourcing website. Outlets were usually located at least an hour’s drive from major metropolitan areas, an attempt to keep these bargain boutiques from cannibalizing the customer base willing to pay full price at the local mall.
But the rise of fast fashion — and an increasingly bargain-hungry populace — meant shoppers wanted more deals. So brands like Ann Taylor, Gap and J. Crew opened off-price stores. These presumably became so popular that they were impossible to fill with leftovers or older goods. As a result, many retailers started manufacturing completely different, lower-quality, lower-priced merchandise for their “outlet” or “factory” locations. The dresses, shoes, and bags looked similar, but corners were and are being cut somewhere: shoddier construction, fewer stylish details, inferior materials. Many outlet stores bear signs with the company name but no mention of outlet, clearance, or factory. Some use different labels and logos on outlet merchandise, but it’s often an if-you-know-you-know secret.
“Companies are subtle about branding and labels for outlets because they don’t want to lose their magic,” said Soysal. “If they say, ‘This is a different product,’ then that illusion vanishes.”
Another hint that the stuff at outlets may never have been on the floor at your local mall? Many brands now operate more off-price stores than regular ones. For instance, there are 96 Ann Taylor stores — but 122 Ann Taylor Factory stores — across the United States, and just 93 Nordstrom department stores compared to 269 Nordstrom Racks.
Yes, prices at outlet stores are usually lower than those at mainline stores for similar items, but even a casual glance at a fabric composition tag or a look at the stitching on a bag reveals significant quality differences.
Figuring out the whole made-for-outlet code is needlessly confusing for shoppers. Consumer advocates have filed class-action lawsuits against brands including Samsonite, Coach and Oakley, accusing their outlets of deceptive sales practices by not disclosing made-for-outlet items or advertising fake sales or discounts. Most such cases have been settled out of court.
If you want to shop at outlets, arm yourself with a few tips.
Know which stores offer only made-for-outlet merchandise
Checkbook made a list of big stores that only (or mostly) stock made-for-outlet items (the full report is at Checkbook.org/WashingtonPost/outlets). If you shop at them, you’re getting a completely different product than you’ll find at department stores or mainline shops. “A brand you know at full price might have a certain standard of quality that isn’t the same at the outlet,” said Pamela N. Danzinger, an outlet-mall expert.
Don’t believe tags with “compare at” or “MSRP”
These are outlet and off-price marketing tricks and don’t mean anything. If an item came from an original store or maker, it’ll usually have a price tag reflecting that (i.e. a mainline Nordstrom tag), sometimes with little low-tech stickers planted over original prices.
Know your brand
Whether you’re bargain hunting for last-season or overstock stuff at a clearance center or a thrift store, it helps to be familiar with the mainline brand’s styling, fabrication, construction and quality. This can also help you separate made-for-outlet junk from better-made original items: For instance, the ballet flats we spotted at the Tory Burch outlet have plastic soles and retail for around $120; mainline Tory ballerinas cost $200 or more and usually sport leather soles.
Expect chaos at stores offering real deals
True outlets (a.k.a. clearance centers) are a mixed bag, stocking things people didn’t buy at regular price in regular stores, floor model furniture, and, in the case of Anthropologie/Free People’s Reclectic outlets, used rental garments. You should go into it knowing there will be limited sizing, restrictive return policies and possibly slightly damaged goods. Part of the reason off-price stores started producing made-for-outlet goods was that consumers got tired of this treasure hunt.
Compare prices
Check prices of similar items currently for sale at the mainline store. If Banana Republic’s regular store is running 40 percent off, you’ll probably get a nicer sweater or shirt there than if you buy the made-for-outlet version.
Similarly, when shopping outlet or factory stores for Nike, Polo Ralph Lauren, New Balance and other brands that also sell stuff in department stores, Amazon, etc., compare what you’ll pay in the brand-operated stores with what you’d pay elsewhere. Our researchers often dug up better deals by buying online, not from outlets.
Check for coupons
Outlet malls and stores often have discount coupons, usually digital but occasionally old-school paper. Sign up for outlet stores’ email and traditional mailing lists (some outlets send postcards with deals) and check with outlet mall offices; many offer coupon books for guests.
Consider secondhand instead
Dying for a Coach purse or a J. Crew jacket? Think about purchasing it at a local consignment store or online via ThredUp, Poshmark, TheRealReal, eBay, etc. If you know how to look for the mainline brand label or logo, you can probably land a high-quality item for less money.
Jennifer Barger is content director at Washington Consumers’ Checkbook and Checkbook.org, a nonprofit organization with a mission to help consumers get the best service and lowest prices. It is supported by consumers and takes no money from the service providers it evaluates. Until Sept. 1, you can access Checkbook’s outlets report and ratings of local businesses free of charge via Checkbook.org/WashingtonPost/outlets.
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