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Express Launches First Factory Outlet Store; 30 More to Follow

In step with the retail trend toward heavy discounting as a sales strategy, Express just launched its first factory outlet store ever.

The retailer debuted a factory outlet store at the Tanger Outlet mall on the outskirts of Washington, D.C. Express intends to open approximately thirty more such discount stores over the next year. The locations will offer both men’s and women’s apparel and accessories at “factory prices.”

Michael Weiss, chairman and chief executive officer of Express said, “We are particularly excited about our outlet initiative which represents a new format for EXPRESS.” He added, “I’m very optimistic about this new part of our business and the associated growth potential.”

Express executives are hoping the new factory outlets help them to capture a demographic they’ve struggled with: “the twenty-something, fashion-conscious, yet price-sensitive customer.” The new locations will be scattered across the U.S. in major urban centers including Chicago, Dallas, Detroit, Las Vegas and New York.

Andrew Buck, vice president and general manager of outlets for Express, said, “Factory outlets are an important growth initiative for EXPRESS, offering us a unique opportunity to acquire new customers by offering great fashion and quality at an amazing value. We are thrilled to present the EXPRESS Factory Outlet as an accessible shopping experience for young fashion-forward women and men.”

Despite an aggressive growth strategy that has led to 630 stores nationwide, Express has struggled to remain relevant among the younger shoppers it so heavily relies upon. According to a report issued by the Cowen Group, entitled “Fast Fashion Headwind Will Grow for Retailers-Ahead of the Curve Series,” the rise of fast-fashion, with its emphasis on steep bargains, has forced retailers like Express, Forever 21, H&M and Zara to appeal to teens, especially female teens, for two primary reasons. First, the apparel is so inexpensive shoppers can buy a garment, wear it several times and then discard it or give it away, allowing them to experiment more with their attire and stay on top of new trends as they emerge. In some cases, female teens will buy a product with the intention to wear it only once. Additionally, these chains are packed with an enormous amount of inventory, offering a startling variety of offerings, especially attractive to young consumers hungry for diversity and novelty. “The core of Fast Fashion’s strategy is to quickly turn low-priced apparel and accessories to entice consumers to consistently update their wardrobe in line with rapid and sometimes unpredictable fashion trends.”

Many retailers find outlet development irresistible since it typically flourishes in both strong and weak economic circumstances. Outperforming a sluggish full-price shopping retail sector, discount outlet development has been experiencing powerful growth. With 220 retail outlets operating in the U.S. and plans for nearly another fifty to undergo construction, the industry is poised to grow by a brisk 25 percent.

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According to Lisa Wagner, a partner in EWB Development LLC, speaking to Bloomberg, outlet centers are more resilient than their full-priced counterparts. “A strong outlet center will always outperform a strong regional mall. Some of these outlet centers are performing double what typical malls do,” Wagner said. “If you look at certain brands, their outlet business is exponentially huge compared to their full-price stores.”

Steven B. Tanger, president and chief executive officer of Tanger Factory Outlets, sees the allure of the outlet center as recession proof. “The value proposition is embedded in the lifestyle of today’s consumer, and outlets are the natural destination of choice for branded apparel,” he observed in an interview with the Wall Street Journal. “The old adage is true: in good times, people love a bargain and, in tough times like these, people need a bargain.”

A perfect confluence of multiple factors set the stage for discount chains to replace traditional big-ticket retailers as the shopping destination of choice for American consumers. First, a rebounding commercial realty market has sent prices soaring, favoring those retailers in good enough fiscal shape to afford expansion. Vacancy rates in U.S. shopping centers dropped to 8.6% at the close of 2013, compared to 9.5% in December 2012. According to a report issued by Cassidy Turley, a commercial real estate services firm based in Washington, D.C., that means a whopping 38 million square feet of retail space has become available and it’s largely getting occupied by bargain chains.

Express has been in business for about thirty years without opening a factory outlet, so the decision to quickly open dozens of them represents a marked shift in its traditional strategy.