Savvy shopper's guide to outlet shopping

In January, several members of Congress called on the Federal Trade Commission to investigate the “potentially misleading” marketing practices of the outlet industry. The lawmakers’ contention: That some merchants were selling “lower quality” goods made specifically for outlets without informing shoppers about the differences between those goods and “higher quality” ones made for regular retail stores.

The FTC followed up by releasing a consumer guide to outlet shopping, which covered the basics. We’ve reported extensively on outlets, including Ratings of brands such as Ralph Lauren, Coach, and Aeropostale, based on tens of thousands of subscriber shopping experiences. Our Ratings contain judgments of key attributes—merchandise quality, value, selection, and service. Later this year, we’ll be publishing the results of a brand-new reader survey with new outlet Ratings.

If you’re unfamiliar with outlets, here’s how they work. In the beginning, outlets were situated near the factories and mills where the goods were made, providing manufacturers with a convenient and economical way to dispose of excess or distressed inventory at discount prices. While many companies continue to use the outlets to move older or unpopular stock, blemished or cosmetically flawed items are a miniscule part of today's mix.

What you will typically find is in-season merchandise, though it may be a year or two behind the current trends and not always a brand’s latest designs.

Outlets sell a mixed bag of goods, and every manufacturer has a different philosophy. Designer and luxury goods makers, for example, often feature older items that didn’t sell out at the company’s boutiques. Mass merchants such as Guess and The Gap carry lines made exclusively for its outlets. Still others, such as Under Armor, sell a combination of the two.

Goods made specifically for outlets are designed to sell for less than those at retail counterparts, so it’s reasonable to assume they’re not exact copies. When Consumer Reports analyzed clothing and accessories made for the outlets and similar items manufactured for distribution at regular retail stores, we confirmed that the outlet items were tweaked.

In general, the full-price products were a trifle better because of construction details or materials that could bolster comfort, appearance, or longevity. But in most cases, the outlet versions were fine; some were superior to their retail counterparts. Whether you find an outlet version acceptable may depend on how hard you are on your clothes, how finicky you are about styling—or how happy you are about saving money: We saved as much as 61 percent on our outlet items.

Compared to many other retail sectors, the outlet industry is thriving largely because shoppers feel they’re getting their money’s worth. Consumers can get brands they know and trust at substantial savings over what they’d pay for the same names at fancy stores.

When we surveyed 17,753 readers, 60 percent of respondents thought they got exceptional bang for their buck. Three of four respondents rated outlet merchandise equal in quality to the same brands sold at regular stores; 25 percent judged outlet goods slightly poorer, but said the differences were barely noticeable. Less than 2 percent thought outlet lines were “substantially poorer” than goods sold elsewhere.

Many consumers might be surprised to learn that not all stores in an outlet center are actual outlets. By the industry’s definition, an outlet center is a shopping center in which at least half of the tenants are owner-operated outlets. That means half of the stores can be regular retailers, although the percentage is typically far lower.

If you’re unsure what merchandise your favorite outlets are selling, simply ask. We found the sales help and the operators staffing the company’s toll-free customer-service hotlines very upfront about it.

—Tod Marks