Outlets Crash The Luxury Party

To follow up on the May 25, 2011 VCF Retail Bulletin posting about the luxury retailing market, You Can Never Be Too Rich Or Too Patriotic, if the luxury market is going like gangbusters, why are the luxury department stores opening outlet stores?

According to a Reuters article, Saks plans to open three to five Off Fifth outlet stores annually in the coming years, but not one Saks Fifth Avenue department store. Nordstrom is closing a full service store in Indianapolis but will open a Rack outlet nearby. Bloomingdale's will open four more outlets this year. And all the executives at said stores noted the only impediment to a faster roll-out of outlets is a lack of suitable malls. They don't want to put the outlets too near their flagships stores.

They also dismissed the notion that outlets drain shoppers and sales from their full-service offerings. According to Nieman Marcus, customer overlap between its full-service stores and outlets was only 15%.

Outlet malls, once the province of rejects, seconds, and ordering snafus, are now generating their own created-just-for-outlets lines of products. But noone should be surprised at this trend. Luxury retailers are also adept at taking advantage of the consumer idea that 'outlet' stands for items at massive discounts.