I still think "outlets" are a horrible idea for name brand retailers. If your product is high-end, high-quality, and high-margin, the last thing you want to do is provide your customers with a reason to doubt your product. Selling a computer for $1,500 in your high end store and for only $300 in an outlet store demands that customers carefully analyze the value of your products. Your brand is weakened, and even the most loyal customers will make your products a conscious purchase decision rather than a habitually programmed response.
Neale Martin puts it a slightly different way in Habit:
Similarly, exclusive brands that dump excess inventory by using discount chains to move last year's goods can see years of a product's positioning eroded overnight. An exclusive brand that is available at a discount store is no longer exclusive. (p 127)
This brings me to one of my favorite brands: Columbia Sportswear. I have loved this brand since I was a kid. It was exclusive, incredibly high-performance, and local. I've never had a problem shelling out money for Columbia's equipment ... until I found their outlet store in Lincoln City. The same products I was paying full price for at REI or GI Joes were half price or less at the beach! Just recently I found Columbia has outlet stores in the Portland area as well! My fancy ski coats don't seem quite as fancy now as they're more price-competitive with store brands at the big box retailers.
The other day I noticed a "loyalty" program that Columbia has started in the retail stores. This program boasts additional discouts for repeat customers and, according to sales staff, is the only way the company can communicate its outlet prices and sales to customers. Apparently they aren't allowed to advertise prices that might be substantially lower than MSRP or what the same product is selling for at the flagship store downtown.
I still buy and wear Columbia. It's a brand I've grown up with, and it will take much more for the company to lose me as a customer. However, I no longer make my purchases at the flagship store. I'll shop around, find what I want, and call the outlets to find out what their price is.
Competing with yourself on price should never be a business goal. What can Columbia do to reverse this problem?