How Outlet Malls Rip Us Off
Some travel long and far for outlet malls, but the it could cost you.
July 14, 2009 — -- I had come to Vegas to gamble, though in truth the casino was only a detour. My mission was to check out the retail gambit, which in Vegas seemed just as dicey as the slots. Scores of stores circle the hotel lobbies, and hundreds more line the Strip, hawking everything from tattoos ("Fresh needles for every new customer!") to Chopard Haute Joaillerie watches with an optional diamond wrist strap.
It is terra incognita for a bargain hunter, but fortunately I had a guide: Gillian Naylor, a professor of marketing at the University of Nevada, Las Vegas. Naylor's paper, "Price and Brand Name as Indicators of Quality Dimensions for Consumer Durables," in the Journal of the Academy of Marketing Science, had alerted me to her expertise in connecting the dots of brand name, price, and consumer perception. Our destination today was a premium outlet mall.
The New York Times once reported that outlet malls were not only the fastest growing segment of the retail industry but one of the fastest growing segments of the travel industry. The total distance that Americans travel to outlet malls each year equals 440,000 circumnavigations of the globe. If that number seems a little abstract, consider this: The distance to the moon is roughly equal to 10 trips around the globe. That is, we make 44,000 moon launches' worth of outlet visits each year. And all for what?
Factory outlets and Las Vegas casinos both play on the natural human desire to "beat the house." The difference is that when we lose in Vegas we know we've lost. At the outlets, our desire for bargains can blind us to what we really want, which is value. We believe we've won—no matter how badly we lose.
People travel celestial distances to outlet malls because until recently outlet malls were located celestial distances from people. On the surface this makes no sense; as a rule investors won't put money into malls without the requisite "threshold population densities" that all but ensure sales. But outlet malls are different. Resolute in their remoteness, they stand secure that, like Muhammad and the mountain, the customers will come to them.
The remote location of outlets is not merely a defensive, cost-saving maneuver. It is also a deliberate strategy. In the public mind, convenience is a trade-off for price, and price is traded off for convenience. Inconvenience connotes cheap, while convenience connotes pricey. In a very real sense, outlets are the anti-convenience store. Visiting the outlets demands an investment in time, deliberation, and energy beyond what we invest in most other leisure activities. We have to work to get there, piling up hefty "sunk costs."
