Napa and Petaluma offer shopaholics an outlet for their obsessions.
Hi. My name is Bill, and I’m an outlet shopper. (No, that’s not me in the picture; but believe me when I tell you she looks a lot better in a miniskirt than I do.) It started out innocently enough. It was a business trip, and I spilled something on my shirt during the flight to Ontario. Driving to Palm Springs, I bought a new shirt at an outlet center. It was just one shirt.
Next time, it was the holidays at the Petaluma outlets. I walked past the Puma store with my wife, and a pair of red and white suede tennis shoes were flirting with me. All of a sudden, I had a holiday vision that had nothing to do with sugar plums. I could put green laces in the shoes and they would be Christmas sneakers. Nothing says “Happy birthday, Jesus,” like Christmas kicks.
But as the new year dawned, I began to wonder: Did I have a problem?
I was on the way to the annual NCAA March Madness Picking Pool, Dinner and Drinking Extravaganza my friends and I have when I realized my pal Matt’s birthday was the next day. I stopped in Vacaville at the Tommy Bahama outlet and bought him a shirt. And myself a shirt, and a sweater, and another shirt. And then I went to the NCAA party and wound up with UCLA as my top pick.
They say you have to hit rock bottom.
For many consumers, rock bottom is what outlet shopping is all about, as in rock bottom prices. According to no less an authority than Consumer Reports, outlet shoppers should expect average savings of 25 percent below normal retail, perhaps a bit more. The bible of the well-informed consumer hedges by also saying that 30 to 50 percent savings can be achieved, depending on sales and time of year.
Where it’s at
North Bay bargain hunters have two outlet centers in which to stalk bargains, both owned by Chelsea Property Group, the dominant player in the business. Petaluma Village Premium Outlets is just off Highway 101 outside of auto row, while Napa Premium Outlets is off Highway 29, before Napa gives way to wines and vines. There’s a third place that brand name shops can be found, the St. Helena Marketplace, one mile north of St. Helena. In a previous life, the center was known as St. Helena Premier Outlets, and had as many as a dozen stores. But Chelsea sold the property to Bayside Capital, a Burlingame company that also owns the Mount View Hotel and Spa in Calistoga. The Marketplace now has just four stores in it and seems destined for a future as something else. (See sidebar.)
If shopping is a contact sport, outlet centers are the NFL. And if you consider the way the Raiders played last year, the metaphor makes even more sense. Outlet centers are different than Coddingtown in Santa Rosa or the Village in Corte Madera, which are built around traditional anchor stores and the lineups don’t often change. Shoppers know what to expect and, more often than not, go to the malls with specific items in mind.
But shopping at outlet malls is different, according to Michele Rothstein, media relations ace for Chelsea Property Group. “People who shop outlets are adventurous, they’re looking for a bargain, something they can tell their friends or family about.”
Given her nearly two decades in the outlet industry, I have no reason to doubt Rothstein. But if adventure is the hook, then clearly Chelsea—and rivals Prime Retail and Tanger Stores—aren’t too concerned with drawing men as core shoppers. When men want adventure, they go on safari, start a new career or even try marriage.
A sense of adventure isn’t the only thing separating outlet shoppers from those who frequent lifestyle centers or malls. To begin with, outlet shoppers, on average, spend three times the normal amount of time shopping compared to your average mall rat. This goes a long way toward explaining the whole Chris Columbus thing: apparently shoppers are boldly sailing the Santa Maria toward the Coach outlet, then suddenly tacking for Barneys New York. Circumnavigating uncharted waters is not done with a stopwatch.
In fact, the average outlet shopper, according to industry breakdowns, is a 30- to 50-year-old woman who’s willing to travel to shop for a bargain or the perfect gift. She’s also willing to brave the elements, as most outlet centers are outside. The core shopper identifies with brands and is drawn to quality—but doesn’t like to pay full retail price.
Though Chelsea’s Rothstein is unwilling to talk about her company’s target demographic, she will talk about another thing that sets outlets apart from their other retail relatives—buses. Actually, she calls it “the motor coach trade.”
The thing about outlet centers is they’re very seldom found in the heart of a city. It’s not unusual for outlet centers to draw from as far away as 150 miles, nor is it unusual for buses (at NorthBay biz we call ’em as we see ’em) to drop shoppers off for four hours of retail hedonism before the bags are stowed away, the credit cards are hosed down and shoppers are bussed home. “The group business is important to us,” she says via the phone from New Jersey. “The people who come in groups are provided with extra coupons and have planned ahead knowing which stores they want to shop at first. They’re very organized. They make a day of it.”
Some centers have taken the bus thing one step further. In Las Vegas, a bus picks up from the MGM Grand Hotel three times a day to carry passengers 30 miles to the Fashion Outlets of Las Vegas in Primm, Nevada. The shuttle carries 40,000 passengers a year and the outlets are attached to, what else, a casino.
Go for it
This brings us to another trend separating the normal retail customers from outlet shoppers—vacations. “People plan their vacations around the opportunity to shop an outlet center,” Rothstein assures me. “I’m not saying they pick the destination strictly based on shopping, but going to an outlet will be one of the major planned activities on the vacation.”
This surprised me for a moment, the idea that somebody might be thinking of a week in New Orleans or Lahaina and at the same time jonesing for a little Off 5th or a Nike factory store. Then I remembered a family reunion perhaps 10 years ago in Santa Cruz. While my brothers and I tested the scientific effects of mixing copious amounts of saltwater and SPF 50 sunblock on pale humans body surfing, the women of the family went bargain exploring at the Gilroy Outlets. I remember them proudly displaying bags of deep discount swag—and also our bitter disappointment in finding they’d neglected to visit the Sierra Nevada Pale Ale outlet.
Travel has almost always been a part of outlet shopping. In the 1930s and ’40s on the East Coast, manufacturers would sell overruns and seconds to employees and their families to bump the bottom line. Eventually, the practice was extended to the public. In the 1970s and ’80s, outlet shopping began to get serious, thanks to the combination of a recession pushing the public to stretch dollars and a renewed brand recognition. Real estate developers were finding land cheap and putting outlet centers on the map to stay. They were careful to build the centers far away from traditional retailers, and to bring complementary brands together.
Part of the explanation was that developers understood big-name stores would be unwilling to compete against wholesale clients. In many cases, the developers would require a minimum of 60 miles to the nearest retail center to buffer from competition and ensure cheaper land prices. Centers were set up along major highways to take advantage of the travel trade and to ensure high visibility.
As the centers drew well-known brands out, everybody got into the act. In 1996, there were 329 centers across the country with 54.5 million square feet of leasable retail space. Today, there are 260 centers with 55.5 million square feet of space. The precipitous drop in total centers owes much to consolidation in the industry as well as increased competition from regional malls. The slight bump in space is a tribute to the success of some of the outlet centers that have seen as many as five expansions since opening.
For retailers, the stores were seen as a way to extend customer loyalty and build brands. It also represented an alternative to selling off excess goods to discount retailers such as Marshalls or Ross, where the brands feared their wares would either suffer a loss of status via deep discounting or poor merchandising. At the very least, the brands were giving up control. On the other hand, by having their own stores in centers, they could not only control how their goods were sold, but stood to increase margins even with pricing for outlet shopping. Big name retailers have seen such an upside to outlets that the Gap, Banana Republic and Old Navy now produce goods specifically for outlets. The same can be said for Coach. And retailers such as Eddie Bauer, Brooks Brothers, Polo and Tommy Hilfiger often offer goods quite similar to what’s carried by regular retailers in addition to overstocks.
Major players
Today, the business has matured with three different real estate trusts dominating the industry. Chelsea owns 53 different centers in whole or in part, including Petaluma and Napa. Chelsea was acquired for approximately $5 billion in October 2004 by Simon Property Group, the largest owner of retail real estate in the country. Chelsea does business in 27 states, and as of year-end 2006, its domestic centers were 99 percent leased and generated same-space sales of $471 per square foot.
The other two big players are Tanger Factory Outlet Centers and Prime Retail Inc. Tanger has 35 centers and had sales of $211 million last year. Prime, which was acquired in 2003 by private equity specialists the Lightstone Group, has 26 centers and is headquartered in Campbell, Calif. It is worth noting that Prime just sold its Tracy Outlets to Northwest Outlets of Walnut Creek for $20 million. The sale includes 40 stores built on two acres. The kicker, however, is that the deal included 18 acres of raw land, which is zoned for retail.
Closer to home, the Petaluma Center is trying to upgrade. The center, which is located in a flood plain, has had some weather-related challenges during rugged winters. This isn’t the kind of thing you want when you own an outdoor center that needs local customers.
Chelsea can’t do much about the weather. But if it could, you can be certain it’d charge more for rent. What it can do is bring in higher-end and more popular retailers. Toward that end, Banana Republic now calls Petaluma home and Tommy Hilfiger opened a store in June. Men’s retailer Van Heusen also moved into the center.
Petaluma Village has a decidedly family feel to it, with a playground and four different outlets aimed squarely at shoppers pushing carriages. Carter’s, K*B Toy Outlet, OshKosh B’Gosh and Stride Rite all pack in the family set; Motherhood Maternity has a shop there as well. And it’s easy enough to include Rocky Mountain Chocolate Factory in the group, though there are clearly customers in the store who are merely treating their inner child. By comparison, the Napa Outlets has just one kids’ store, Gymboree.
Chelsea’s Napa center has a clearly more sophisticated feel to it and boasts more stores and more designers. Where Petaluma has Haggar and Lane Bryant, Napa is top heavy with Calvin Klein, Ellen Tracy, Barneys New York, Ann Taylor, Cole Haan, Nautica and Kenneth Cole.
Chelsea is also trying to keep shoppers longer at Napa, giving them a food court with five dining choices. While none of them hold a candle to Bouchon, Mustard’s Grill or Tra Vigne a bit further up the road, nobody at Subway bats an eye when you plop down with enough bags to give Santa present envy.
It’s telling that both centers remain pure to their root formula of brands and bargains. In recent years, the lines in retail have begun to blur. Traditional retailers like Macy’s have turned to a constant sale mode, and value discounters like Target and Marshalls have gained more market share. Big Box retail like Costco and Wal-Mart have remained powerful and the new retail flavor has become the lifestyle center. More often than not, this retail beast is found outdoors, and the store mix often has a theme such as home furnishings/kitchens/gourmet food. It also contains entertainment such as a multiplex and upscale public spaces with serious landscaping, fountains and benches that take 10 minutes, instead of five, to hurt your butt.
For now, at least, Petaluma and Napa are dedicated to separating you from your discretionary income the old fashioned way, by offering enough shoe stores to give Imelda Marcos a stroke.
