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Outlet Shopping vs. Retail: A Shopper's Guide

We started the holiday shopping by compiling a list. We conducted our research ahead of the holidays, so we selected items that would make good gifts for a variety of recipients: a handbag, iPhone case, and Le Creuset pot for a wife, mother, or sister; a polo-style shirt, sweater, and wallet for a husband, father, or brother; PJs for a niece or nephew; socks and underwear for stocking stuffers; hand soap and lotion for friends or hostess gifts; and a carry-on suitcase for a gift or for holiday travel.

We also included a few other things consumers might need for the holidays: towels and sheets for out-of-town guests and new holiday outfits for growing kids.

For summer, we focused on warm-weather merchandise. This list included summer staples like T-shirts and shorts, light button-down shirts and pants, running apparel, hiking gear, swimsuits, sunglasses, sandals and flip-flops, outdoor cushions, and assorted items fit for balmier times.

Each shopping expedition involved a visit to the closest outlet mall, where we had 110 stores to choose from. We found the holiday items we were looking for at Gap, Banana Republic, Gymboree, Carter's, Kate Spade, Coach, Restoration Hardware, L'Occitane, Samsonite, Le Creuset, and Calphalon. For the summer goods, we returned to Gap, Banana Republic, and Restoration Hardware, and also stopped by Tommy Bahama, Quicksilver, Nine West, Columbia, Nike, and Sunglass Hut. At each outlet, we took note of not only the prices but also the quality of the items on display. The outlets we visited were generally well-organized and had a high-end feel. Salespeople were friendly, helpful, and well-informed about their products. We chatted them up about where their stock originates and asked about return policies.

Purses at the Coach outlet.

Then we headed over to the local mall for a similar walkthrough at each outlet's retail counterpart. For labels without a local retail presence (such as Tommy Bahama, Quiksilver, Nike, and Columbia), we visited Nordstrom, Macy's, PacSun, and Foot Locker and/or sorted through the brand's online site. The shopping experience at the retail mall was a bit different from the outlet mall. For one thing, the traditional mall was a fully covered, indoor space. The outlet mall, by contrast, had open-air corridors with shops on each side, a setup that lowers the cost of heating, cooling, and maintenance. Outlet malls also tend to be developed in out-of-the-way locations, so outlet chains pay lower occupancy charges than stores in regular shopping malls. Prices often reflect these lower operating costs.

At the outlet mall, the items on our holiday shopping list came to a grand total of $1,240.15, including sale prices and excluding taxes, which vary from state to state; the bottom line for our summer shopping list settled at $2,906.43, after discounts and before taxes. Granted, sale prices also vary day-to-day and mall-to-mall, but we factored them in because seemingly constant sales and promotions account for much of the savings from outlet shopping. Similar items from the retail mall set us back $1,756.62 for holiday goods and $4,453.41 for summer fare, also after figuring in sale prices but before tax. That means shopping at the outlets shaved $1,546.98 off the summer total (for savings of nearly 35 percent over retail) and $516.47 off our holiday total (about 30 percent savings). When we compared an even larger selection of merchandise suitable for holiday gift-giving that we found at the outlets and the regular mall (see chart), the percentage was almost exactly the same. In all cases, the savings were less than the average of 38 percent reported by the trade publication Value Retail News, based on an annual survey of outlet executives, but sizable nonetheless.

A computer briefcase from the Tumi outlet.

Price obviously isn't the only consideration in comparing an outlet mall to retail, however. Sure, outlet shopping will save you money, but will it buy you value? The answer is yes, it can, but you have to do your research if you want to spot diamonds in the rough.

First, understand what you are buying. Where does the merchandise come from? Is it offered at a discounted price because it's lower quality -- which might be OK, if the price is right -- or because it's simply a season behind? Next, try to get a sense of what an item is really worth. Familiarize yourself with the prices of retail merchandise so you can spot a bargain when you see one. Don't be misled by the manufacturer's suggested retail price, or MSRP, listed on the tag or rush into a purchase because of a limited-time discount. Finally, leverage coupons to get the best price, and always ask about the return policy before you buy.

Read on for a rundown of what to expect from outlet shopping, and some tips to help you find the best deals.

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