Outlet malls are often in the middle of nowhere, in places that are hard to get to, or in places that you wouldn’t think of as retail magnets. For instance, you’ve got the outlet mall in Barstow, California:
Barstow is roughly mid-way between L.A. and Las Vegas, so locating it there might be a smart move to try to get some of the weekend traffic between the two cities. And there are some logical reasons you might want to locate outlets in places like Barstow: by putting them in outlying cities, you make sure they don’t overlap too much with the customer base for the main stores, potentially stealing customers who would otherwise pay full-price for new products rather than going to the outlet. You want the outlet to be complement the regular store, not compete with it.
And aside from that, surely real estate is cheaper in Barstow than in either L.A. or Las Vegas, which would keep costs down for building or renting retail space.
That’s part of the story. But there’s some interesting psychology going on, too, as Ellen Ruppel Shell explains in Cheap: The High Cost of Discount Culture. It turns out that being difficult to get to is, in fact, part of the appeal of outlet malls. The fact that they often require a drive of an hour or more signals to consumers that they must have really good deals. That’s the payoff for inconvenience — it’s harder and more time-consuming than going to your local mall, but in return you’re getting a great bargain. Right?
Well… not really. I remember driving two hours once to go to this outlet mall I had heard so much about — friends would go and come back with bags full of clothes, telling me about all the money they’d saved. I got there and was shocked by the prices; they didn’t strike me as particularly cheap at all. I ended up going home without buying anything, trying to figure out how I had missed the great sales racks.
According to Shell, though, that’s pretty typical of outlet malls: they often don’t really provide great bargains. Instead, they provide the illusion of bargains, and a motivation for thinking you’re finding them.
It turns out that the more trouble people go through to get to an outlet, the more they overestimate the amount of savings compared to prices at regular stores. The very fact that it was hard to get to convinces people that it must provide something fantastic; if you aren’t saving a lot of money by going there, why on earth would it be so far out of the way? And the more remote it is, the cheaper the products must be!
Our efforts to understand the placement of outlet malls actually leads us to think we’re getting better deals than we are, because we must be. Otherwise it doesn’t make sense for them to be where they are. And so the location of outlet malls becomes proof that they’re cheap. Why else would they be there?
We have another powerful motivation to believe this. If you’ve driven an hour or more one-way to get great deals at the outlet mall, you are primed to believe you’re getting bargains because otherwise you just wasted a lot of time, effort, and gas for nothing. Once you get there, you’re psychologically motivated to believe your effort was worth it, and you do that by buying stuff and thinking the price is a steal.
As a result of these two factors, research shows that people perceive merchandise found at out-of-the-way outlet malls as being more of a bargain than they do if they see similarly-priced items closer to home. We overestimate what the original value of the item must have been and focus on the difference between that hypothetical price and the outlet price, rather than on the objective price itself. And consumers tend to discount the cost of getting to the outlet, not including the cost of gas and their time into the price of the items they buy.
So the placement of outlet malls isn’t just a simple reaction to real estate prices or an effort to not compete with the regular-priced store. The placement itself is an important element of marketing, signaling to consumers that wonderful bargains await those who are willing to accept a little inconvenience. When you combine this with the meaningless discount, you have a powerful marketing tool, a way to convince consumers they are saving more money, or getting higher-quality products, than they actually are.
Originally posted in 2010.
Gwen Sharp is an associate professor of sociology at Nevada State College. You can follow her on Twitter at @gwensharpnv.