Behind the Outlet Veil: Shedding Light on Outlet Pricing
Scenario 1: As you rifle through the racks of delicately, and often indelicately, hung items you search for that perfect item. Your eyes spot your favorite brand hanging casually amongst many others. You immediately think to yourself, “how did this end up here?”. As you touch the fabric, it feels less soft than you remember in stores.
Scenario 2: Imagine that you are casually perusing the local outlet mall. You see a designer store with red sticker prices that are surprisingly low. Signs like “75% off!” and “40% off with an additional 20% off!” flood your sightline and you begin to wonder why anyone would shop at any of the other store locations that do not have the same fantastic sales. You chuckle smugly to yourself, thinking you have found a retail loophole.
It may come as shocking to most, but much of the merchandise that is found in outlets of major department stores is “made or bought specifically for those outlets, with designers and vendors creating familiar looking pieces at a lower cost that often indicates inferior quality.” 1 It is a common misconception that the items at the outlet versions of major stores like Neiman Marcus, Nordstrom, Bloomingdale’s, etc. are simply last season’s items and overstock. In fact, however, Nordstrom Rack confirmed to Racked that “only 20% of what it sells is clearance merchandise coming from their stores and website, with the rest is bought expressly for the outlet.” 2 It may also come as a surprise to consumers that some stores sell items that were specifically made for outlets. Neiman Marcus, for example, “works with designers like Equipment, Theory, Stuart Weitzman, Tahari, Furla, Kate Spade New York, and Vince to design and produce merchandise for their outlets.” 3
The purpose of these items is to make the brand available at a lower price point to a more aspirational consumer. The difference may be in the finishings or embellishments or fabrics. But how is the consumer supposed to know that? The price tags can be deceiving as they may use a ‘compare at’ price point that compares the made-for-outlet design’s price to the original retailed item that the outlet design was inspired by. It is arguable that this comparison is misleading as it is not a true comparison of the two items. It deceives the consumer into thinking that they are getting the same item that is found in retail stores, at a huge bargain. Although there are many consumers who think it is obvious that severe discounts would indicate a different product, the deceptive practice has caught the attention of Congress. In 2014, “four members of congress…called on the agency to look into claims that merchants may be selling lower quality items produced specifically for outlet stores without properly informing consumers about the difference between those items and higher quality products found in regular retail stores.” 4 Later that year, the Federal Trade Commission published an article titled “FTC Advice: How to Shop Wisely at Outlet Malls.”5 Author of the article and Consumer Education Specialist, Colleen Tressler, provides a few tips to be a smarter outlet shopper:
- Try to be familiar with the retail prices to determine if you are actually getting as much of a discount as you think. There are apps to help with that!
- If the outlet item looks brand new and undamaged, the price may be lower for a reason. Check the fabric and stitching.
- If you are not sure if the store is selling “made for outlet” items or regular retail merchandise, ask the store’s staff
- Off-season merchandise usually comes at bargain prices
- Know the return policy6
Outlet shopping is not all secrets and deception, it can truly be an enjoyable experience if you are aware of what it is that you are shopping. However, an informed shopper is a smart shopper, and it is always better to lift the veil and know what you are getting into.