Discount outlet shopping

Huge off-price shopping malls could become the victims of their own success.

You're driving on an interstate heading out on vacation. You've been on the road for three hours. You're tired. Suddenly, you get the urge to pull over and--do some bargain shopping?

Discount malls, also known as outlet centers, are often situated far from residential communities. They are a strange but successful phenomenon in the troubled world of retailing. America's 294 outlet centers anchored total outlet sales of $11.4 billion in 1994, according to Value Retail News. In 1990, there were just 183 centers and sales of $6.3 billion.

What makes a huge shopping mall in a rural area so appealing to consumers? It isn't just the promise of great deals. In fact, there are three general rules for the successful development of outlet centers. First, successful outlet centers are located at least 18 to 20 miles away from the manufacturer's major wholesale accounts. This rule keeps ordinary shopping malls happy. It's one reason why large outlet centers exist at vacation spots like Freeport, Maine, or Lake Tahoe, Nevada. These sites don't have traditional retail malls, but they do have millions of affluent visitors. "You'll shop because you want a break from the lakes or beach and you want to experience commerce," says Mark Kissel, a retail consultant for Kissel Consulting Group in Rockville, Maryland. "Or the weather is rotten, so you go to the outlet mall to do some shopping."

Second, outlet centers are located at "pass-by" locations. They are found on major highways between metropolitan markets, or between a market and a tourist site. One major outlet center is in tiny Barstow, California, midway between Las Vegas and Los Angeles.

Third, outlet centers are often located near metropolitan markets if they have no traditional regional mall competition nearby. The Mills Corporation, developer of Potomac Mills in Woodbridge, Virginia, and Franklin Mills in Philadelphia, thrives on this strategy. Franklin Mills is in the extreme northeast corner of Philadelphia, several (inconvenient) miles away from traditional regional malls. "When you're so large, people can't deny your size and one-stop shopping ability," Kissel said. "It's a tradeoff. When you go to a Mills property, the main reasons are for selection and value, not convenience."

Traditional retailers are fighting back with sales and lower everyday prices of their own. "Department stores are doing better now than five years ago," says Kissel. "They've consolidated, of course, but they've priced their stuff accordingly and they're giving off-price people a run for their money."

So what makes an outlet center different from a traditional mall? It's an important question. "I can see [the public's perception] becoming an issue," Kissel says. "It behooves the outlet center and its stores to be savvy about their position in the market. Consumers are smart about these types of issues. They particularly understand time. If you're going to invest the time to drive 25 miles to realize selection and value, you'd best find it when you get there."

Kissel thinks an even bigger potential problem for outlet centers is saturation. "Like most things in retail, we will get to the point where there are too many of something," he says. "The most vulnerable ones are in the rural areas and tourist areas, because they have no residential population to support them. Also, their real estate is not easily reusable for something else. We will get to the point where some will have to close."