Luxury Brands Turn to Outlet Stores as Consumers Cut Back

With their sector facing a downturn, luxury brands are reportedly pinning their hopes on outlets.

As The Wall Street Journal (WSJ) reported Monday (Dec. 16), retailers, and landlords and real estate investors are all banking on the idea that shoppers still want higher-end goods, as long as they can pay lower-end prices.

So while foot traffic remains at pre-COVID levels, retailers have begun leasing more space at outlet shopping centers, where designers can sell surplus at steep discounts.

According to the report, there are more than 200 outlet shopping centers in the U.S., many offering “affordable-luxury” brands like Coach and Marc Jacobs. Tanger, a landlord that owns 38 properties in the U.S. and Canada, was 97% occupied as of the third quarter, the report added.

There’s also a smaller group of outlets offering discounts on brands like Gucci and Prada, the WSJ notes. Many luxury outlets rely on global tourism and thus have bounced back more slowly from the pandemic compared to other types of retail, said Vince Tibone, who heads U.S. retail and industrial research at real estate analytics firm Green Street.

However, some luxury outlet owners have begun expanding and opening new locations, confident in long-term demand. Luxury sales have slipped recently but are above pre-COVID levels, the report said, while high-end retailers now attract a younger, more economically diverse group of consumers.

“You have a much wider group of people that are buying luxury,” said CBRE broker Joe Hudson.

As noted here earlier this month, consumers are spending more on more expensive items, partly because of increased confidence, and partly over worries that prices will jump next year when the Trump administration’s tariffs kick in.

At the same time recent research by PYMNTS Intelligence shows consumers dealing with cash flow shortages, especially those who live paycheck to paycheck.

“It might be no surprise to see those pressures firmly entrenched, given the consumers making less than $50,000 annually spend nearly 60% of their income on food and shelter, according to PYMNTS data,” that report said. “Additionally, over three-quarters of consumers in this income strata define themselves as living paycheck to paycheck.”

Credit remains a popular payment method to offset those pressures There’s also been incremental use of payment options like buy now, pay later (BNPL) to stretch out payments and take care of them over a period of weeks or months.