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Sometimes though, factory outlets sell irregular, rejected or outdated items, also at a discounted price. So, not all goods bought from factory outlets are of inferior quality, and I personally find buying from such outlets a good way to save some extra cash. If, say, an expensive brand sweater is missing something as slightly insignificant as a button and is being sold for much less than its normal retail price, I’d readily buy it. If it is the Factory Outlet store from a premium brand then you will get clothes/shoes that are of same quality as ones bought from the retail store. The reasons for cheaper prices: Stock Clearance: A collection/range not sold as it was initially planned and the new collection has arrived. It is better to sell them at outlet stores to clear the stocks and recover the costs+little margins Minor Variations discovered after receiving goods. It happens at times when the stocks are received and some complain is received about the zippers or missed lace or little variation in the quality which is not significant to common users but it is not good for the brand image.

At times, it is much expensive to return the goods then to sell them cheaply in outlet stores Supplier oversupplies: Sometimes, there are overstock items… supplier has shipped goods and found defective. Supplier agrees to re supply the goods and allows the brand to keep the old stock as returning would be more expensive in terms of shipping costs and disposal. All such trades are negotiated between the two and agreed upon. Yes, in such case, there is a possibility that the goods you buy at outlet may have some minor defects. The outlet store shall tell you if that's the case upon enquiry Design Variations: Sometimes, there are very minor design variations not noticed by common buyer but the merchandisers and designers can make that our. Minor color variations, minor details like colors of buttons/buttonholes/zippers/etc. Incorrect labels: At times, there are mistakes by the supplier on the wash/care labels, style name, sizes, etc. and the costs of such corrections are higher than to resupply.

Such good also go to outlet stores Cancelled orders: Supplier send the goods and buyer cancels the order or decides not to sell a particular style/material. So such items also goes to outlet stores. I recall an incident where the collar fusing was inferior and there were complains from few customers about it. The Brand (Confidential) removed all those shirts from the shelves and sent the defective pieces to supplier for action. Now, although the supplier agreed to re supply the defective lot; the time it would have taken to get those shirts on the shelves would have taken months and the season would be over. So, the buyer agreed on the compensation from the supplier and moved all that lot of shirts to outlet store. Another incident with a Sports goods brand where a particular collection was endorsed by a sportsperson. By the time the goods arrived, the sportsperson got into a controversy and brand decided not to sell that collection in the shop. Such collection was also sent to outlet store.

These goods were in perfect quality but in order to recover the costs, it was sold in outlet shop. Further, there are overheads of sales staff, packing, repacking, shelving, returns, exchanges, warranties for goods sold in branded stores. While these overheads are much lower in case of outlet store and hence lower prices. You can easily assume a gross margin of approx 40–60% on branded garments and shoes, etc. and the brands markdown their prices for outlet stores to recover costs and make smaller margins in case there are overstocks. Usually goods bought from Outlet stores are without warranty and sold on as is where is basis with usually no returns accepted. There's a chain for all the goods. Certain profit % is added by the wholesalers & retailers (intermediaries) which increases the price. This is the cost plus concept. Poducer - Wholesalers - Retailer - Consumers But when this chain gets shortened to Producer - Consumer (Factory outlets) the profit % is reduced as there are no intermediary and hence the prices turn out to be low.