It wasn’t long ago when outlet malls were thought of as a place to buy slightly damaged goods, cheap knock-off brands and other items that simply couldn’t sell in traditional retail stores and malls. You may not know, however, that today an estimated 85% of all items sold at outlet malls were never sold in full-price stores. Outlet malls today have become a distinct and thriving business segment autonomous from traditional malls.
No longer do the Gap's, Nike's and Pottery Barn's of the world look to outlet malls to dump excess inventory - they have in many cases developed distinct strategies around outlet locations designed to drive business, increase revenue and profitability and ultimately add to the bottom-line.
As discussed in a recent article in Time, outlet malls are thriving due to low operating costs, low rent and, of course, a struggling economy. And it’s not just happening in rural areas of the country. Several large outlet malls are currently under construction and/or in development in major cities like Los Angeles and Chicago.
What does this mean to economic developers given the backdrop of today’s struggling economy? Whether it’s an entire outlet mall or an outlet store such as Marshall’s or TJ Maxx, savvy economic developers are seeking to capitalize on this growing market segment by working with developers who specialize in retail outlets. Gone are the days when a trip to the nearby outlet mall was nothing more than a once a year shopping trip. According to an article in the Chicago Tribune, large outlet malls today can attract up to 10 million shoppers per year. Even more importantly to economic developers, traditional malls with full-price stores generate annual sales of $400 to $500 per square foot. Premium outlet malls, in comparison, can generate more than $1,000 per square foot.
The benefits to the local economy are numerous – more visitors to the area means more money spent at local businesses/restaurants and ultimately more money to local governments in states where cities receive a portion of all retail sales tax collected by local businesses. Whether it’s a small, local development in a rural part of the country, or a large regional development in a metropolitan area, economic developers would be wise to consider an outlet mall and/or outlet stores as a strategic component of its long-term, economic growth.