Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, September 5, 1993 TAG: 9309030038
SECTION: BUSINESS PAGE: D1 EDITION: METRO
SOURCE: Sandra Brown Kelly
DATELINE: LENGTH: Long
A week earlier, Leggett opened an outlet in Virginia Beach, and the customer response was phenomenal. In the state's largest city, where outlet shopping is nothing new, crowds flock to it.
A year ago, the company even put an outlet across the street from its department store in Fredricksburg. And it's looking for space for a Roanoke outlet; the former Brendle's store at Valley View Mall is a candidate.
Outlet-store extensions of regular department stores are a solid trend. J.C. Penney Co. and Sears, Roebuck & Co. have outlets at the gigantic Potomac Mills mall at Dale City in Northern Virginia.
And 30 years ago in Roanoke, Sidney's had a "basement" shop on Jefferson Street that was stuffed with out-of-season, discounted clothing from other Sidney's stores. Earlier this year, Roanoke-based Davidsons devoted part of its Valley View Mall store to an outlet.
With outlets, stores can discount to the bone and sell slow-moving merchandise without the stuff taking up space in regular stores. In turn, the regular stores have space for the new items that are constantly needed to entice shoppers.
At Leggett, merchandise gets shipped to an outlet after it's already been discounted to 50 percent at a regular store and sometimes marked down even more during a special sale.
At 50 percent off, the department stores aren't making any money on the items, said Bob Tysinger, general manager for Leggett's Virginia outlets. But when the discounted inventory from several stores is consolidated in an outlet store, which has a lower operating cost, even deeply discounted sales can be profitable.
However, not even half of the stock at the Virginia Beach Leggett outlet was from the company's own department stores. It was irregular items or merchandise bought especially to sell at the outlet.
The rules are that the outlets won't carry any regular Leggett brands unless the items are discounted. The stores might stock brands sold by a competitor, however.
There might come a time when Leggett will commission special labels for its outlets, just as it has for its regular stores. For example, Sweetbriar and Saddlebred women's apparel and Bug Off children's wear are made-for-Leggett labels.
So what's really going on? Are the stores' outlets really outlets?
Yes and no.
Stores can't afford to hang on to things that aren't selling, but if they sell them to liquidation companies they won't make any money on them. If a Leggett or a Sears or a Penney's can be its own liquidator, it can recover some of its cost for the merchandise.
But getting rid of slow-sellers isn't all of it. The outlets also serve as second-tier stores. They make a Leggett more competitive with discount merchants such as TJ Maxx and Waccamaw.
They allow a more upscale store to also sell cheaper brands of clothing and not blemish its reputation with its regular clientele.
An example of the trend can be found in Gap Inc.'s move last week to convert four dozen of its lower-volume and outlet stores to Gap Warehouse stores with a new format and with entirely different merchandise.
Gap has developed its own labels for the warehouse stores with jeans that will sell for $22 instead of the $34 tag for Gap jeans in other Gap stores. The denim weight for the lower-price jeans is less and buttons and stitching are different.
An executive with San Francisco-based Gap said "the new merchandising strategy is a test at this time to see if we can improve productivity and profitability and, definitely, to reach a new market, a segment of the population that perhaps we are underserving."
Translate that into Gap's effort to get more customers, which is what retailing is all about.
As companies like Leggett attempt the same with outlet stores, however, the competition for discounted and irregular merchandise needed to feed the outlets is now fierce.
"We just can't find home-store merchandise," said T.C. Leggett, who directs the regional chain's buying operation from South Boston.
Because of the scarcity of domestics, Leggett outlets don't carry a lot of it. And some items, such as hosiery, have to be regularly restocked as in a standard store.
However, Dick Arrington, a Franklin County native who manages the Fredricksburg Leggett, says the outlet, just a stone's throw away, keeps him on his toes.
The outlet gets items from stores in Manassas and Westminster and Frederick, Md., which carry much of the same merchandise as Arrington's store.
If something doesn't sell in one place, it probably isn't selling elsewhere, he said.
This means that if Arrington's staff doesn't pay close attention, it might be trying to sell something that's already priced lower across the street, where it has arrived from other Leggett stores.
But it also means that a customer can "follow" an item, he said.
"We call it accenting," he said.
For example, a customer might buy a blazer and a skirt at a discount in Arrington's store, but refuse to pay even the 50 percent off price for a sweater meant to complete the outfit.
The customer can take a chance and follow the sweater on to the outlet. There it has the potential of being discounted another 75 percent, which means it would sell at 12 1/2 percent of its regular price.
For customers interested in the trend, regular stores really shovel the discounted merchandise into the outlets after Labor Day.
\ AUTHOR Sandra Brown Kelly covers retailing and consumer issues for the Roanoke Times & World-News.
by CNB