Factory outlets move in on traditional retail
Colonie Center is the ultimate survivor among Capital Region retail centers. It was the area’s first enclosed mall, opening in 1966. It was built by Homart, a development company operated by Sears, Roebuck Co. with the goal of developing suburban locations for Sears.
And it has outlasted most of its competitors.
But Colonie Center may be changing. It now has at least three factory outlet stores, as well as a couple of deep discount chains and Nordstrom Rack, the off-price unit of the Seattle department store chain featuring deeply discounted inventory. The Sears store, meanwhile, is history.
Factory outlets “are the bricks and mortar equivalent of online shopping,” said Ted Potrikus, president and CEO of the Retail Council of New York State. Consumers shopping at a factory outlet are essentially buying direct from the manufacturer, whether it be Brooks Brothers or Hanes.
“People are looking for the label, looking for the brand,” Potrikus said. “When you go into Brooks Brothers, you know what you’re there for.”
Outlet centers have appeared to be more resilient in the wake of the threat from online shopping. In many cases, they combine the appeal of a vacation destination with the discounted prices shoppers expect from factory outlet stores.
“The malls have been struggling. The outlet centers have not,” observed Jose Romero, director of marketing at Lee Premium Outlets, just off the Massachusetts Turnpike in neighboring Berkshire County, Mass.
Simon Property Group, which operates Lee Premium Outlets, also has outlet centers in a number of resort destinations, including Orlando, Fla., and Williamsburg, Va., and outside major cities, such as the Wrentham Village Premium Outlets outside Boston and the Pleasant Prairie Premium Outlets between Milwaukee and Chicago.
The Lee center has another big advantage, said Potrikus: no sales tax. But while New York has done away with its state sales tax for apparel that costs less than $110 per item or per pair, local governments can continue to levy their own sales tax.
In Massachusetts, “zero tax means so much more to people than half tax,” Potrikus added. “And Lee is an hour away.”
Other outlets have clustered in Manchester, Vt., and in Queensbury, just south of the resort village of Lake George.
In most cases, a retailer’s outlet store is at least an hour or more away from its full-price store. L.L. Bean opened an outlet in the Adirondack Outlet Mall, an hour’s drive north of its store at Colonie Center.
Lake George tourism officials see the outlet centers as an added draw for a vacation destination that otherwise would be heavily dependent on the weather.
Now, when it rains, people go shopping, one official said last year.
Growing mall vacancy rates could depress rents, attracting the more cost-sensitive outlet stores.
Retail vacancy rates declined nationally in the third quarter, while mall vacancy rates edged higher, according to figures from Moody’s Analytics REIS. Retail spending has remained strong even as business spending has fallen.
Simon and other mall owners aren’t counting just on outlet stores.
“Simon has been doing very well with mixed-use properties as well,” said Romero. “Restaurants, entertainment, and we’re offering online shopping.”
“Retail,” said Potrikus, “is an industry of followers.”