J.Crew and competitors like Gap and Off 5th, Saks’ outlet brand, have learned they can generate larger profit margins by selling cheaper, made-for-factory products, and so they are increasingly stocking outlets with such goods. But it’s spurred a heated debate in the industry over whether consumers are really aware of what they’re buying. Despite increased coverage of the issue in recent years, discussions abound online about how to tell outlet merchandise apart from the “real” stuff, an easier task with some brands than others. J.Crew Factory, for example, puts two diamonds under the “r” on its labels, while the Gap Outlet label uses three dots.
But it’s not always so visible. Executives from Off 5th, which carries brands like True Religion and Alice + Olivia, told investors last year its products are 10% leftover Saks inventory, 25% private-label goods, and the rest mostly merchandise created for the stores by “brand-appropriate” vendors. While price tags on outlet goods may list a manufacturer-suggested retail price (known as an MSRP) or, a “valued at” price, that’s little more than a number ascribed by the retailer and doesn’t mean it was ever sold for such a sum in an actual full-price retail location. (Giant discounters like T.J. Maxx and Nordstrom Rack also label prices this way.)
When there are authentic items in the mix, it’s not easy to tell because there aren’t any rules around that from the Federal Trade Commission.