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The Truth About Outlet Malls: Success Fueled By Fibbing To Consumers

STRATFORD, ENGLAND - JULY 31: Shoppers peruse the outlets in the giant Westfield Stratford shopping mall adjacent to the Olympic Park on July 31, 2012 in London, England. Trading in the huge 1.9 million sq ft mall has been boosted by the footfall of spectators, volunteers and competitors from the Olympic Park; whilst shops and restaurants in London's West End are reporting up to 70% declines in revenue. (Photo by Oli Scarff/Getty Images)

Since the Great Recession, Americans have flocked to discount stores in droves, seeking out lower prices. This our new reality: we’ve cut back because the majority of us can’t afford to pay absurd retail prices, or we simply have no desire to squander our disposable income.

Welcome to the age of the savvy consumer, where bargain-basement culture is now mainstream. Retailers are acutely aware of the trend, and they are profiting handsomely off of our evolving consumer habits.

For many mall operators, burgeoning outlet malls are the rare bright spot in an industry that’s facing a death spiral. As online retailers such as Amazon chew a hole through the retail landscape, outlet malls are proving to be a saving grace for the industry.

Building discount paradise

You’ve probably noticed that many new malls we see sprouting up around the country are outlet malls, stuffed with stores that carry the brands we know and love. And they’re brimming with people, especially international tourists who bask in the glory of ultra-cheap American shopping.

Even amidst a strong dollar that’s making traveling to the U.S. more expensive for tourists, outlet malls are reporting strong sales and enjoying higher occupancy rates than traditional malls.

But underpinning the success of outlet malls is a dirty, poorly kept secret about their merchandise. Just like your mother told you, if it sounds too good to be true — it probably is, and “discounts” at outlet malls are no different.

Perhaps consumers just think they’re savvy but instead are falling victim to some deceptive pricing practices.

The lie of full price

Way before we were born, outlets were exactly what many people think they still are today. They used to be shops that carried surplus stuff from retail outlets. Much to many people’s collective surprise, outlets changed to something completely different a very long time ago.

A few years ago, Buzzfeed blew many people’s minds when they unearthed the inconvenient truth about outlets. Basically, the bulk of the merch that you find at outlets are especially made for outlets. Naturally, the wares you find at outlets are often inferior in quality and commonly were never, ever full price at a retail store.

Welcome to the world of real knockoffs, where retailers sell items in their outlets that are similar to their offering at their retail stores, but cheaply made.

For instance, Nordstrom Rack confirmed that a mere 20 percent of their stock came from regular Nordstorm stores. The rest was specifically made for their outlets. Industry-wide, it’s estimated that more than 85 percent of the merchandise sold in outlet stores is manufactured exclusively for outlets.

Buzzfeed’s exposé on outlets also pointed out that there’s no regulation of the word “outlet” or “factory store.” As a result, four members of Congress have asked the Federal Trade Commission to investigate “potentially misleading marketing practices by outlet stores.”

Takeaway: Be an informed consumer

We’re not suggesting that you give up outlet shopping all together but instead come to understand that, as a consumer, you’re buying a fundamentally different product.

The sweeping success of outlet malls has been paved by exploiting consumer ignorance. When you see fake full-price tags at outlets, don’t be fooled — that item was never that price.

We all shop at outlets, and probably will continue to do so. Nevertheless, be aware that in many cases, you’re not getting a discount at all.

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Header image: Getty Images

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