BALTIMORE -- Shoppers with upscale tastes but shallow pockets are finding more shopping choices with a recent resurgence in outlet and off-price stores being rolled out by major retailers.
Discount shopping isn't new. Bargain shoppers have trekked out to outlet malls for decades seeking discounts. Stores like TJ Maxx and Marshalls, who buy leftover goods from department stores and other places and sell them at a markdown, have prospered during the weak economy.
But retailers are discovering new opportunities in discount and outlet shopping as frugal consumers are being more careful about what they spend and retailers are looking for ways to grow.
Neiman Marcus opened a new concept it calls Last Call Studio in Rockville, Md., last week. The off-price boutique offers this season's designer goods at up to a 65 percent discount. It is able to offer the prices by buying overstock directly from manufacturers. It also recently launched LastCall.com, an off-price website.
The studio store is different from its outlet stores, Neiman Marcus Last Call, which also offer goods at bargain prices but are much larger and sell older merchandise.
Tom Lind, senior vice president of stores and store operations for Neiman Marcus, said the retailer is targeting shoppers who might not have time to make a regular trip to an outlet mall, which are typically 30 miles or more from major cities. Now, they can shop the discounts on a weekly basis rather than four or five times a year, Lind said. The company also hopes to tap into a whole new customer base that might not think they can afford Neiman Marcus.
"The off-price segment is one of the healthier retail segments, and we saw this void," Lind said.
Other retailers are also jumping on the outlet and discount trend.
Macy's launched an outlet for its Bloomingdale's chain this year and is exploring whether to open Macy's outlets as well. Ann Taylor Stores announced last month that it will expand its factory outlet footprint in 2011 with plans to open 35 LOFT Outlet Stores and five Ann Taylor Factory Stores. It plans to take over locations occupied by Liz Claiborne, which is closing stores. Ann Taylor now has about 110 outlet stores.
Men's clothier Jos. A. Bank opened five outlet stores this year, while Baltimore-based sports apparel company Under Armour will have opened 54 factory house stores by the end of the year.
Some analysts said that retailers are being driven by budget-conscious consumers that aren't spending big money on discretionary items like apparel and jewelry. High unemployment has left many people cautious about spending even as economists have declared an end to the recession.
"The recession is not over for the consumer. The recession is not over for real people," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail brokerage and consulting firm in New York. "We're in the biggest trade-down ever."
Richard Jaffe, a retail analyst with Stifel Nicolaus, believes that retailers are using outlets and off-price venues as new alternatives for growth. For example, Under Armour attributed much of its apparel growth in the second and third quarters to its outlet business, which it launched last year.
"It's a profitable venue," Jaffe said of the outlet business. "It's not about the economy. So Jos. A. Bank, which has saturated the market with its full-price stores, has found a separate retail venue that appeals to a different consumer and is quite lucrative in its own right."
Hampstead, Md.-based Jos. A. Bank had seven retail stores that it used to sell excess inventory, but this year announced a new outlet concept where it manufactures a new cheaper line just for those stores. It opened five of the stores this year.
"It's got a customer base that isn't shopping in our regular stores," said R. Neal Black, Jos. A. Bank CEO. "They probably feel they can't afford our brand on an everyday basis and aspire to own and look for it at a more affordable price."
Black said the outlets will also attract shoppers who want to get deals every day rather than wait for sales at the regular-priced stores. He said the retailer had explored an expanded outlet concept in the past, but only recently had the manpower to design a new line of clothing for the stores.
Analysts said the quality of the clothes at outlet centers often times isn't as good, which lets retailers sell it at a cheaper price. For instance, Neal said, the fabrics it uses might be "a little bit less luxurious," although the same manufacturing standards are applied.
Lind of Neiman Marcus said its merchandise at the off-price stores is of equal quality to the full-price stores. It also opened a studio store in Dallas and plans to open a third one in New Jersey later this week. They are able to buy leftover merchandise from designers who have canceled orders or have clothing made from extra fabric.
"They're making merchandise available to us at a discount that we can pass on to the customer that keeps us in the current fashion retail cycle," Lind said.
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