Thursday, June 3, 2010


Did you ever wonder why outlet malls always seem to be so out of the way? I always figured it had to do with the cost of real estate - building those big buildings in costly places would make the rents too high for all those low cost retailers...right? Plus, they can't be selling the discounted clothes and stuff right near the regular malls where they are selling the same stuff for full price...right?

Wrong. It is a psychological set up. Turns out we consumers believe those things, that the drive and inconvenience mean bargains - so we don't really question the prices.
In her book "Cheap: The High Cost of Discount Culture" Ellen Ruppel Shell's 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.

The reason I came across this information was my interest in understanding something I saw when I was shopping at a DSW store. The tags all showed their "discounted price" and then underneath it, there was another, higher price which said "compare to." And I wondered what that was supposed to mean.

It turns out that this is addressed in Shell's book. She calls it the "Meaningless Discount" because the numbers are largely fictional. The "compare" numbers are like the MSRP, (manufacturer suggested retail price) and manufacturers rarely set the retail price of goods sold. But the consumer thinks there is an original price and a discounted price and is thrilled with the mark-down. Marketing research shows that people are fairly easily swayed by perceived savings, I am sure I have been - or at least used it as an excuse to buy something!
Like the shoes I got for $29.00 compared to $65.00.


smalltownmom said...

My tourist town, which has a moratorium on chain stores and franchises, briefly changed its tune about 15 years ago and allowed an outlet "mall." It was far too small, and one by one the stores in it closed and now it houses a gym and some businesses.

Interesting book!

Jenn @ Juggling Life said...

My husband is a Ross/Marshall's shopper and he loves seeing the "original" price.

Nan said...

Interesting. I've noticed another marketing trick -- advertising something as being a special sale price and thus implying a markdown when the reality is the new price is actually a mark UP. You see that stunt pulled a lot in fast food so you won't notice that the hamburger that was 89 cents is now costing you $1.

My husband scoffs at outlet malls. . . right up until he sees a store claiming to have discounted power tools. Then he's suddenly finding bargains. (He has a serious Ryobi addiction.)

Suburban Correspondent said...

I'd always wondered about that - I never saw any amazing bargains at these places myself.