Walls between outlet stores and full price stores are coming down. Chains are beginning to put outlet stores near their mainline stores and are considering putting full price stores in outlet malls.
Retail stores are desperate for growth, and outlet stores offer a rare bright spot in the market. Saks Fifth Avenue and Neiman Marcus are two stores following this strategy in major markets like New York, Dallas, Houston and New Orleans. Retailers believe there is low risk due to the notion that there is little crossover between outlet customers and mainline customers. Between 2004 and 2013, distance between outlet stores and full-priced stores decreased from 100 miles to 30 miles. With more outlet malls opening in metropolitan areas, outlet centers are becoming more accessible.
Outlet centers are also becoming popular, but some retailers believe moving the two types of stores closer could delude the brand by “cutting off [their] own water.” Having stores too close together can create cannibalism between the two brands. Since Coach has opened more outlet stores, their full price sales per square feet have fallen 27 percent since 2012. The growth in the outlet sector is also a contributing factor to the increased pressure on retailers’ sales and profits. Despite objections, retailers are moving forward with the plan to open more outlet stores close to their full-priced stores.