Think you’re saving on high-end stuff at outlet stores? Think again

With the holiday season upon us now is as good a time as any to review what we’re really getting at outlet stores.  This isn’t meant to discourage people from shopping at outlets, it’s just to advise and to make us better shoppers.

Overall, you can save money at an outlet store. The same principles that apply to regular shopping apply at an outlet store. You need to know what your buying and how much it should cost.

Outlet stores of days gone by

Once upon a time, when you went to an outlet store you were getting the factory overruns,  unsold items, out-of-season items and damaged merchandise that once hung in the retail store. Shopping at the outlet was a hit-or-miss proposition. The racks were filled with sometimes only one or two of an item. All the tags were clearly “marked” down with multiple price stickers layered on top of each other with increasingly lower prices. Sometimes the clothing tags were cut to indicate that it was outlet merchandise.

Most major retailers had a few outlet stores scattered around the country. Many were located far outside metropolitan areas, often in nearly unmarked and not-so-glamorous strip malls. These outlets were purposely placed in out-of-the-way places so they would not compete with the retail stores. Despite the almost rundown quality of some of these stores, you really got a $60 jacket that was once hung on a rack in the retail store for $20.

Modern outlet stores

Somewhere along the line that all changed.  Computerized inventory management helped retailers better manage their inventory. This reduced the amount of excess inventory that would end up being sold at outlets. Also, according to Consumer Reports, most good are now made overseas and the damaged goods are never shipped to the United States. Finally, retailers realized that there was a market for their brands, at a lower price point. Nowadays retailers have multiple “outlet” stores in every major metropolitan area of the United States and even overseas so they have to fill the racks with something.

Where does outlet store merchandise come from?

One source is called made-for-factory merchandise. Outlet stores are stocked with goods manufactured specifically for the outlet stores. The retailers are making lower cost and lower quality knockoffs of their own full-price merchandise using different fabric, stitching, buttons and zippers.

Another type of outlet merchandise is private label. This is merchandise manufactured with the retailer’s name on the label but you will never see it in the full-price retail store. Again, the quality is lower and that’s why it costs less.

The Federal Government says that “upwards of 85%” of all outlet merchandise falls into these two categories. Most people do not realize this. In fact, it’s such an issue that the government is investigating it as a deceptive practice.  You think you’re a great deal on full-price merchandise when in reality you’re getting a lower quality knock-off.

Some stores readily admit to what they’re selling.  Neiman Marcus Last Call Studio is upfront about selling almost entirely factory-made and private label merchandise.

How much are we saving?

When you look at an outlet store price tag what does it mean? If this poncho (price tag in picture) was never sold at the retail store, then what does the “Compared To” price really mean?  How much money are we really saving?

To some extent that depends on where you live, since some states have laws about what can appear on a price tag.  In reality, and in most cases, the MSRP, Compare To, Suggested Retail Price, etc. is a made-up estimate.

Marshalls and TJ Maxx

These stores actually approximate what an outlet store used be. They do carry actual discounted designer goods but with more than 2,100 stores they have to be selling other merchandise as well. According to Buzzfeed they carry “order cancellations, manufacturer overruns, closeouts and special production direct from brands and factories (made-for-factory).” The parent company TJX admitted as much in this 2011 USA Today article.

A word about “Outlet” Malls

An outlet mall is a shopping center in which most of the individual tenants are owner-operated outlets. What that means is that some of the stores in an outlet mall are actually regular retail stores. When an outlet mall is being developed, the developers require tenants, through their leases, to sell a certain percentage of merchandise at a discount compared with retail-store prices. This means that at some outlet stores only a small percent of the merchandise is being sold at a discount to full-retail.

What are we to do?

• Understand what you are buying. Be aware that the product at the outlet is probably not the same quality as the merchandise in the full-price retail store. Visit a full-price store before the outlet to examine the quality of the full-price merchandise.
• Know what things cost. Visit a full-price store before the outlet to check prices. Do not rely on the tags on merchandise at the outlet store. You are may be saving money but the MSRP price on the tag is only an estimate.
• Shop discounters but be aware that they are selling made-for-factory items also.
• Be patient and shop traditional retailer sales. Shop at holiday, clearance and end-of-season sales.  When shopping sales  use store coupons and discounted gift cards. You can save you as much or more than at the outlet.
• Subscribe to retailers’ newsletters. Sign up for emails from retailers to get in on regular sales and flash sales. Set up a secondary email address so these don’t clog up your regular email.
• Shop designer flash sales at Beyond the Rack, Rue La La, Gilt, Zulily and more.
• Consider buying less clothing and invest in higher-quality (still buy on sale) clothing and take proper care of it so it lasts longer.
• Shop at high end resale and thrift shops I have bought Ralph Lauren pants with the tags still on at a thrift store.

Other ways to save on shopping:

• Check the mall website for current sales before you go.
• Join the mall VIP club to receive special coupons and sales information.
• Most outlet malls offer a free coupon book.  Download it before you go so you don’t have to find the visitor center.
• Macy’s offers a 10% off visitor’s pass from its customer service office. If you’re traveling to another state and want something at Macy’s, it’s very likely you can get this. I’ve done this many times at the Macy’s on the Las Vegas strip and the Macy’s in Herald Square in NYC, which offers an 11% off pass. Just be sure you know your prices.
• If you ever go to Oregon, Alaska (there may be city sales tax), Delaware, Montana or New Hampshire, leave room in your suitcase because they have no state sales tax. I’ve bought high-ticket items like Bose Headphones, my current laptop and clothing in Oregon. Depending on your local sales tax you are saving 6% to 10%, and more if you catch a sale. Portland, Oregon, also has the only airport I’ve seen that doesn’t allow price-gouging so you can pick up some Oregon wine and carry it on the plane.  They also have a Kiehl’s store.

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