Do You Really Save at Outlet Stores?

Jan. 23 -- When 36-year-old marketing executive Mark Scott is ready to spend a lot of money on clothes, he drives past the two major malls just minutes away from his house, gasses up the car and travels 25 miles out of Atlanta to Lawrenceville, Ga., home of the Discover Mills outlets.

"I wouldn't go all the way out there if I need to buy jeans or a pair of socks," says Scott. "But there's a definite thrill about finding an Armani suit or Donna Karan shirt at a steep discount."

For many shoppers like Scott, the prospect of bargains at outlets are attractive, especially in light of today's economic downturn and the troubles facing other discounters, like the newly bankrupt Kmart. But although deals exist, experts warn that some expectations are overly high — or even downright impossible to fulfill.

When outlet shoppers see a reduced price tag, they assume they're getting a break, but most times there's a very good reason for the discount, explains marketing expert Arun K. Jain.

"Many times [the stores] are carrying out-of-season items, irregulars with minor or no visible flaws, seconds, or items that didn't sell at the retail store," adds Jain, professor and chairman at Buffalo University's department of marketing in Buffalo, NY.

Richard Laermer, author of the forthcoming book trendSpotting, argues that when it comes to lower prices, "Nobody's ever doing you a favor, least of all designers." In fact, outlet stores are his "favorite consumer scam. Outlets are just a big way for stores to get rid of old merchandise, and it's rarely a bargain at that."

Humble Beginnings to Trendy Destinations

The factory and outlet store phenomena started out as a place for department stores to sell their excess inventories, says George McGoldrick, former vice president for marketing at Levi Strauss and now head of Something Beautiful, a New York-based apparel start-up.

But as retail stores evolved, they passed the end-of-season inventory problem to designers and manufacturers who saw outlets as a way to patch up their bottom lines, he adds.