Originally created 08/16/98

Outlets retool for future

JEFFERSONVILLE, Ohio -- Unable to find Duck Head clothing on a visit to Ohio Factory Shops, James and Marty Kirby headed up the road a few miles to another outlet center.

And that was fine with the owners of Ohio Factory Shops because as of June, Baltimore-based Prime Retail Inc. owns both shopping centers.

Like the customers who travel an average of 45 minutes to search for bargains at the nation's outlet malls, Prime Retail has been on a buying binge.

The company views consolidation as the way to grow in an industry that is nearly a decade past its boom times.

Instead of dozens of developers crisscrossing the country with new Nike Factory Stores, Gap Outlets and Ann Taylor Factory Stores, two publicly held companies are now responsible for much of the new construction.

"It's a much more controlled development process," said Abraham Rosenthal, Prime's chief executive officer.

His company struck a deal worth nearly $1 billion for 22 shopping centers owned by Muskegon, Mich.-based Horizon Group Inc., the former No. 1 developer of outlet centers. Prime also snapped up 1.5 million square feet of outlet space in smaller deals over the past year.

Now, Prime Retail controls a quarter of all outlet space in the country -- nearly 14 million square feet spread over 49 malls in 26 states.

In Ohio, it recently renamed Ohio Factory Shops to Prime Outlets at Jeffersonville I and renamed the Jeffersonville Outlet Center to Prime Outlets at Jeffersonville II.

Such a behemoth can give shoppers a more upscale mix of stores with everyday pricing comparable to department stores' sale prices, Mr. Rosenthal said.

That assumes consolidation saves the developer money on marketing and overhead, and boosts its negotiating position with tenants.

The August issue of Consumer Reports estimates outlet shoppers save an average of 10 to 20 percent below the prices after sales and discount coupons at regular stores.

But many shoppers and retail analysts question whether outlet malls are the bargains they once were.

The Kirbys, for example, say they drive 45 minutes from Mason to Jeffersonville about two or three times a year, mainly just to kill an afternoon, although they do think bargains can be found.

"You have to understand what you're looking for," Mrs. Kirby said as she scanned the directory of more than 100 stores at the former Ohio Factory Shops, which sprawls along an otherwise sparsely populated rural section of Interstate 71 midway between Cincinnati and Columbus.

Jennie McCullough of Millville, Pa., was more skeptical.

"I find I do better in the regular stores," Ms. McCullough said while waiting for her tour group to resume its bus trip from Pittsburgh to the Grand Victoria Casino in Rising Sun, Ind.

Mr. Rosenthal says that if outlet malls didn't offer good value they wouldn't have combined for $13 billion in sales last year.

The problem is that people remember the early outlet malls, which were often dingy factory stores that sold overstocked or damaged goods for up to 80 percent off, he explained.

These days, outlet customers are wealthier, better-educated and want the latest fashions and more amenities, Mr. Rosenthal said.


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