You feel pretty good heading to work wearing that designer outfit you picked up at a bargain price over the weekend at the local outlet center. But what if that deal you got wasn’t a deal at all? Questions have increasingly been raised about the potentially deceptive marketing practices related to the quality and source of products sold by fashion retailers in their outlets or factory stores. Further, concerns over outlet pricing is not only an American problem. This past month, the British tabloid Daily Mail conducted its own investigation into outlet retailer practices in England, warning consumers to beware of lower quality merchandise manufactured purely for outlet stores.
Back in the day, outlet stores were a place where manufacturers could sell discontinued products or inventory left over from last season. However, outlet stores are now big business, growing from an estimated $12 billion in 1997 to $25 billion this year. Increasingly, national clothing retailers are creating separate, lower-quality product lines to be sold exclusively though their outlets.
This issue has caught the attention of some federal lawmakers. Earlier this year, four members of Congress called upon the FTC to investigate potentially misleading marketing practices by outlet retailers. In their letter, the members of Congress noted that they did not take issue with the potentially lower quality of the outlet merchandise. Nor does it seem should they; after all, many consumers may be more than willing to purchase lower-quality brand-name merchandise at a steep discount. Instead, the senators voiced concerns about the potential for outlet shoppers to be misled about whether the outlet product lines were ever sold (or intended for sale) at a regular retail store, and whether the products were ever sold at the advertised “retail price” used as reference pricing at the outlet stores. (Reference pricing, in case you’ve actually never been to an outlet store, occurs when a product’s “retail price” or “list price” is advertised next to the discounted outlet price.) The letter inquires whether outlet store reference pricing is deceptive when “made for outlet store” merchandise has never been sold at regular retail locations—making the “retail price” impossible to substantiate.