Are Factory Stores Cheaper? Here’s the Truth

Factory stores have long been perceived as destinations for significant savings on popular brands. This common assumption often draws shoppers seeking discounted prices on clothing, accessories, and home goods. However, the actual value proposition of these stores is more nuanced than a simple price reduction. This article explores the realities of factory store pricing and merchandise to help consumers make informed purchasing decisions.

Defining Factory Stores and Their Purpose

A factory store, also known as an outlet store, is a retail establishment where manufacturers sell their products directly to the public. This contrasts with traditional retail stores that typically purchase merchandise from manufacturers or distributors. Factory stores initially emerged in the 1930s to sell damaged or excess goods to employees at reduced prices. By the 1970s, multi-store factory outlet centers began to appear.

Manufacturers operate these stores for several business reasons, including managing excess inventory and reaching different market segments. They provide a channel to clear unsold items from previous seasons or products that did not perform as expected in regular retail channels. This direct-to-consumer model allows manufacturers to capture a larger portion of the profit associated with their brand names by eliminating intermediary costs. Factory outlets also serve to avoid cannibalization of sales at full-price retail stores, often by being located outside major metropolitan areas. This strategic placement creates a distinction between the customer bases for outlet and main retail locations.

Pricing Models and Merchandise Types

Factory stores employ various pricing models, often presenting items at what appear to be consistently lower prices than traditional retail. Many offer “Everyday Low Pricing” (EDLP) rather than relying solely on frequent sales. These stores also utilize promotional sales and bundle deals to attract customers and move inventory. Prices at factory outlets can be 20% to 50% less than retail store prices.

The merchandise found in factory stores typically falls into distinct categories, each impacting the actual value offered. One category includes overstock or past-season items, which are products originally sold in regular retail stores that are now being cleared out. These items are generally identical in quality to their full-price counterparts, representing genuine clearance opportunities. A second type consists of irregulars or “seconds,” which are items with minor cosmetic flaws or imperfections. These imperfections can range from slight stitching errors to small stains, and their reduced price reflects these minor defects.

A third, and often less understood, category is “made-for-outlet” merchandise. These products are specifically manufactured for the factory store channel, often using different materials, construction, or design specifications compared to the brand’s main retail line. While they carry the brand name, their lower production cost allows for the discounted pricing seen in outlets. This practice allows brands to offer lower-priced goods without undercutting their premium retail offerings.

Evaluating Value at Factory Stores

Determining whether a purchase at a factory store offers genuine value requires careful evaluation by the consumer. One practical strategy involves price comparison. Shoppers should compare the factory store price with prices for similar items at regular retail stores or online. This comparison should include checking model numbers, material composition, and specific product features to ensure an accurate assessment. Online research can reveal if a seemingly good deal at an outlet is genuinely the lowest price available for that specific item.

A thorough quality assessment is also important, particularly for identifying “made-for-outlet” items. Consumers can physically inspect items for differences in material, stitching, or overall construction. Many brands use specific internal tags or labels to denote outlet-specific production. Recognizing these indicators can help consumers understand if they are purchasing a product designed for the outlet channel, which may feature different quality standards.

• Banana Republic outlet merchandise may have three small diamonds under the brand name on the tag.
• J. Crew outlet items might have two small diamonds.
• Brooks Brothers outlet items are sometimes marked with “346” on the label.
• Coach outlet items may have a serial number starting with “F.”

Understanding return and exchange policies is another aspect of evaluating value. Factory store return policies might differ from those of main retail stores. It is advisable to review the specific return policy of an outlet store before making a purchase, as some brands’ factory store policies may explicitly state that online returns for in-store purchases are not accepted.