TIME: Almanac 1993/TIME Almanac 1993.iso/time/121790/1217200.000

Text File | 1992-08-28 | 9.4 KB | 194 lines

                                                                                BUSINESS, Page 66

The Price Is Always Right


Outlet malls are hot, but other retailers see them as the Grinch
that's stealing Christmas

By CATHY BOOTH/MIAMI -- With reporting by Richard Woodbury/New
Braunfels


    Psssst! Want a deal on some Jordan Airs? Joan & David pumps?
A Donna Karan dress? The latest Sony tape deck? Without
slogging through the sales racks at five different department
stores? And in a place where the teenagers can hang out and Dad
can catch a football game on TV? Well, here's a concept in
shopping-till-you're-dropping, just in time for Christmas and
the recession: megamalls with maxi discounts.

    Step into Florida's Sawgrass Mills, the world's biggest
outlet-and-discount mall. Situated 15 miles west of Fort
Lauderdale, it boasts 2.2 million sq. ft. of name-brand
shopping at no-name prices. The parking lot alone covers 170
acres. Two miles of storefronts, 150 in all, include outlets
for such status labels as Ann Taylor, Maidenform, Van Heusen,
American Tourister and Athlete's Foot, plus such familiar
discount stores as Brands Mart and Marshalls.

    All offer goods at 20% to 60% off the usual retail price,
a requirement that is specified in the stores' leases and that
distinguishes such discount centers from ordinary malls. Try
on a $218 Ann Taylor dress, slashed to $69.90. Reebok Sole
Trainers that normally retail for $85, at $55. Anne Klein II
perfume at $17.95 instead of the usual $32. More than 1.5
million shoppers have done so since Sawgrass opened its doors
in October. "Everybody is looking for bargains these days,"
says William Cohen, 36, waving a pair of jeans selling at $30
-- half-price -- at the jammed Guess? outlet.

    Unlike dreary discount stores or outlets of the past, which
tended to be about as cozy as an airplane hangar, Sawgrass
Mills has a Disneyesque ambiance that offers fun along with
bargains. The innovative Coral Gables, Fla., firm
Arquitectonica designed the mall in a wacky alligator shape,
a nice touch considering its location at the edge of the
Everglades. The Florida theme extends from the logo, a
saw-toothed alligator, to parking-lot markers (a yellow toucan,
a pink flamingo, etc.), to a windswept-looking Hurricane Food
Court, complete with wind sounds and swirling banners. Shoppers
stroll under palmetto trees down four "main streets" with
themes ranging from Caribbean to Art Deco. And, for family
amusement, miniature golf, roller skating and a movie theater
are in the works.

    Upscale discount megamalls were perhaps inevitable, given
these cash-poor yet image-conscious times. Since 1978 the
industry has mushroomed from just seven outlet centers to more
than 280, with gross sales estimated at as high as $18 billion.
Last year sales for outlets and off-price stores rose 10% to
12%, about double the rate of increase at ordinary retail
stores.

    Many of the most popular direct-from-the-factory
establishments are individual stores, such as the L.L. Bean
outlet in North Conway, N.H., or the V F Factory Outlet in
Reading, Pa. But hundreds of outlet centers, ranging from
spartan shopping strips to swank malls, now cater to tourists
and travelers. Many are sited just off major interstate
highways or close to vacation spots. "For these prices, I don't
mind fighting the freeway," exults Houston housewife Laura
Freeman, two small kids in tow, as she balances a mound of
towels selling for $2.99 a pound at the Lone Star State Factory
Stores mall near Galveston.

    Sawgrass, perhaps the snazziest discount mall to date, was
built by Western Development Corp. based on the firm's two
earlier successes: Potomac Mills in suburban Virginia and
Franklin Mills on the fringes of Philadelphia. Each attracts
1 million bargain-hunting shoppers a month. "Western is doing
something daring and truly different, gambling that this might
be the future of malls in America," says Terry Dunham,
publisher of Value Retail News, which tracks the outlet
industry from Clearwater, Fla. Western has plans for four more
discount malls: near Chicago, Detroit, Pittsburgh and Ontario,
Calif. Not to be outdone, Benderson Development Co., Western's
main rival in megamall retailing, is building what it touts as
"the largest manufacturers' mall in the universe" near Niagara
Falls. The 200-store extravaganza, scheduled to open in 1992,
features a Fashion Avenue of stores of the most exclusive
designers and "Epcot-like life-size video games."

    The labels-for-less malls may be the only bright spot in
what is shaping up as a singularly lackluster Christmas for
retailers. Last week Sears, Roebuck, faced with declining
sales, announced a salary freeze for 20,000 of its 330,000
employees; Macy's was combatting speculation that recent losses
might undermine its already precarious financial position.
Meanwhile, Child World, the nation's second largest chain of
toy stores, declared a six-week moratorium on paying its bills
so that it would have enough cash to keep its shelves stocked
through the holiday season.

    Many of the already battered retailers are howling about the
growth of cut-rate competitors, who happen to include a number
of their own suppliers. The 2,500 firms belonging to the
National Shoe Retailers Association went on record against the
proliferation of manufacturers' outlets; some are boycotting
brands that have opened their own shops. "It's impossible to
compete against them," complains association president William
Boettge. For small stores, outlets are "making a tough business
all the tougher," says John Cox, a recently retired shoe-shop
owner in Lawrence, Kans., who saw his business drop more than
15% after a Bass outlet opened nearby and undercut his prices
20% to 30%. The 21,000-member National Sporting Goods
Association also discourages manufacturers from opening
outlets, though their protests have had little effect.

    Leonard Berry, head of Texas A&M University's Center for
Retailing, sees a big risk in the "factory-to-you" approach:
"Manufacturers must be careful not to cut their own throats.
They run the risk of alienating their biggest accounts." The
manufacturers take that warning to heart. Most outlets and
malls are miles from department-store turf. Women's apparel
manufacturer Liz Claiborne placed its 22 outlets 45 minutes to
an hour from retailers selling its label. "We are very
sensitive to our department stores, since they are the nucleus
of the business," says Harvey Jones, ad manager at West Point
Pepperell, who won't even divulge the number of outlets the
brand operates. Others go to some lengths to disguise their
outlets: Izod Lacoste sportswear is sold at Fashion Flair
outlets, Escada at First Choice outlets, and Dior and Hathaway
at Warnaco.

    Established discounters like K Mart and Wal-Mart say they
are not threatened by the new invaders, partly because they
perceive the discount centers as out-of-the-way places,
suitable mainly for tourists or big-haul shopping. Luxury
department stores like Bloomingdale's and Saks Fifth Avenue
take an elitist approach -- at least publicly -- and shrug off
the challenge from outlet malls. "The competition in retail is
always fierce, but our customer is not attracted to an outlet
mall," says Carol Sanger, vice president of the Federated and
Allied Stores chain, which includes Bloomingdale's, Burdine's,
A&S and Jordan Marsh. She may be wrong about that. "I'd much
rather go to a fancy mall and shop a sale," admits Sheryl
Rolnick, 39, of Coral Springs, but one day recently she drove
out to Sawgrass to do a little bargain hunting. "The discount
malls are having an effect," she says. "Lately, my local Lord
& Taylor and Jordan Marsh are dead."

    Then there's the "if you can't beat 'em join 'em" approach.
Sears and J.C. Penney have placed catalog outlet stores at the
new discount malls. Upscale Ann Taylor has two clearance
centers at megamalls. Even Saks opened its first outlet in
Philadelphia's Franklin Mills. "Like it or not, it's the wave
of the future," says Sid Mayer, Saks' senior vice president of
merchandise liquidation. "Traditional department stores were
in trouble anyhow. Discount malls are a necessary evil."

    For shoppers, of course, they are a blessing, but not
without some pitfalls. Service can be spotty to nonexistent.
At Bass shoe outlets, for instance, the customer himself must
find the right size shoes. Often the latest styles and fashions
are not offered at outlets, and there may be a limited
selection of sizes. Nor is getting a bargain guaranteed. Prices
have edged up as yesteryear's bare-bones outlet stores full of
seconds and irregulars have given way to today's fancy discount
malls full of first-quality goods. "You need a good eye or you
can still get ripped off," observes Mark Trainor, an Austin
computer salesman browsing for clothes at San Marcos Factory
Shops, one of two outlet malls off the interstate highway
between San Antonio and Austin. "There are good buys at the
discount malls but not great buys," warns consumer advocate
Mona Doyle at the Consumer Network, based in Philadelphia.

    Indeed, as cut-rate malls turn themselves into theme parks,
with frills and flourishes and higher overhead costs, their
primary advantage -- lower prices -- just might start to
disappear. For now, though, did we leave the car by the talking
toucan, or was it the pink flamingo?