At the close of each month we all see the comparable store sales numbers. Looking back at the last year it’s clearly the off-price business that consistently outshines any of the regular priced retailers. I suspect December will be no exception. Both The TJX Co.s and Ross Stores are bucking the trend, reporting positive numbers and sometimes reaching double digit increases over last year.
Competition is now surfacing for that value driven customer in the near future from a very unlikely source. WWD reports that Lord & Taylor, the oldest upscale department store in the United States is entering the outlet business. The first will be a 15,000 ft. sq location in Elizabeth, N.J. It may come as no surprise after the retailer has struggled with a series of ownership shuffles, store closures, and it's new identity. This is the same Lord & Taylor that for decades advertised through fashion illustrations when everyone else was using modern photography. At one time couture fashion designers such as Balenciaga, Dior, Chanel, and Givenchy were on display in the Lord & Taylor 5th Avenue flagship. Now just a few of these names remain in the Bridal assortment and the dress department is made up of very modestly priced ready-to-wear pieces from American names like Calvin Klein and Ellen Tracy. As for those new price points ads targeting a younger shopper- seems like they took their cues from Old Navy.
This news comes as Macy’s acknowledged that they are also looking into the possibility of opening outlet locations but have yet to announce any specific sites.
In an interesting move Simon Property Group announced in a December 8th press release that it would buy out 22 new mall locations from Prime Outlets for a price of $2.3 billion. This acquisition will result in a total of 63 off price centers for Simon comprising approximately 25 million square feet.
Burt Tansky, the Chairman & CEO of Neiman Marcus recently acknowledges that the “Last Call” outlet stores were out performing the regular price locations. He said the number of outlets would be expanding beyond the current portfolio of 28 and they are working on finding "more central locations" as well.
Some free advice for these retailers entering into this new territory; Do not open more locations that you can adequately stock and do not supplement the merchandise assortments with lower quality goods that would never be sold in the full prices stores. I was a bit shocked to see this trickery from one luxury outlet when it was quite clear that this retailer would have never sold a rough poly-blend dress shirt but yet here it was piled high posing as an over-stock with a very inflated comp. price. This could really turn off the more affluent educated shoppers who will not return unless the bargains are real and honest.
Much of this shift is really about the consumer re-evaluating what prices should be. With so many prestige brands being offered up at mass retailers it leads us all to question the rational of why name brands are at such inflated prices. Many retailers have been hitting the discount panic button so quickly. First through a sale of 20-40 off, then 50% and higher discounts sometimes just weeks after arriving in shops.
I foresee that all of these changes could result in better shopping experiences in off price location and outlet malls. They may start resembling some of the better shopping mall formats. They could be built in more convenient areas where people actually live and work. They will include welcoming landscaping & convenient parking facilities (valet maybe?). The architecture will be more appealing and might incorporate children’s recreation spots and spacious seating areas, and maybe nice, healthy restaurant choices. If all of that happens, the whole business model and price structure of retail could change dramatically.
As we go into this new decade change is in the wind and it’s certainly not going to be business as usual anymore.
www.WWD.com
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