What is a Factory Outlet?

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  • Written By: wiseGEEK Writer
  • Edited By: O. Wallace
  • Last Modified Date: 30 September 2019
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Originally, a factory outlet was a store attached to a factory or warehouse that sold clothes or other merchandise directly to consumers, instead of selling them to another retailer who would then mark up the price. This way manufacturers could get rid of overproduced stock, or stock with small flaws that wouldn’t be accepted by a third party seller. A number of stores also rose up to take such stock off the hands of manufacturers, including places like Ross® and Marshall’s®, which are third party sellers that buy overstock or slightly irregular items.

Some manufacturers decided to create their own stores that sold these types of items, instead of selling them only from a store connected to a warehouse or factory. Manufacturers created specific stores to handle their excess or irregular merchandise and were thus able to reach a variety of patrons who enjoyed their clothing, but wanted good bargains on it. Eventually these factory outlet stores were grouped together, and while it is still possible to find stores in a single location that are alone, it is now far more likely to find such stores at factory outlet malls. These specialize in grouping a number of stores together that offer discount prices on usually fairly high quality merchandise made by desired design companies.


Some of the ways that factory outlet stores save money is by being in malls that are located in areas outside of a main town. This can help reduce cost of renting a store. There’s also some cost reduction in being able to get rid of merchandise that might otherwise go to third party sellers for very low prices. Though customers may still get a deal at factory outlet store, they usually pay more than would third party sellers for the same merchandise, so the manufacturer makes a little more money. Other factory outlets are operated entirely online, which saves additional money since they can operate directly from a factory or warehouse, and there is no need to pay the cost of running a brick and mortar store.

One of the trends that may be noted at some stores of this type is that "factory outlet" doesn’t necessarily refer to items that would have been purchased in other stores. Some outlets make a line of items specifically for their outlet stores, and they may not represent the same quality as the items be sold to third party sellers. Thus any proposed discounts are not necessarily discounts on high quality merchandise a person might buy elsewhere.

Instead, it may mean cheaper prices for poorer quality or quickly made products that aren’t as representative of quality as the original factory made items of a certain brand name. This can be something to look for and ask about in stores. Are they selling overstock, or do they make their own line of merchandise for the outlet store? Despite this trend, factory outlets remain popular and there are now outlet malls located in many parts of the world.


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