Bargain Hunters’ Delight : Newport-Based Company Plans a 50-Store Expansion in May of Desert Hills Factory Center
In the latest salvo in the increasingly competitive factory outlet wars, Desert Hills Factory Stores in Cabazon will add 50 new stores in May, making the center in the heavily traveled Palm Springs corridor one of the nation’s largest outlet malls.
Desert Hills’ 52 existing stores drew 2 million customers last year, 75% of whom drove from Los Angeles and Orange counties. The new 190,000-square-foot expansion, which will include Burberrys Limited, Crabtree & Evelyn and Bose Corp., the hi-fi speaker manufacturer, will open May 1.
Chelsea GCA Realty Inc., which owns Desert Hills, the Camarillo Factory Stores in Ventura County and 15 other outlet centers nationwide, is one of several developers betting that shoppers seeking bargains want bigger centers with more choices.
“The consumers have voiced their opinion,” said Steven Craig, president and chief operating officer of Newport Beach-based Chelsea. “Effectively, they want it all.”
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Shoppers’ wishes dovetail nicely with a growing recognition among manufacturers that outlet malls serve a purpose, said Kris Hundley, executive editor of Clearwater, Fla.-based Value Retail News. “They give manufacturers a place to move dated products out of the full-price store and into their own outlet.”
The number of bargain-oriented outlet centers has mushroomed to 311, up from just about 100 in 1988, according to Retail News. Industry observers predict that as many as 600 centers eventually will be open in the United States, and developers already have opened two U.S.-style centers in England.
“When you have something that works, you naturally want to expand on it,” said Ira Kalish, a Los Angeles-based retail consultant with Management Horizons, Price-Waterhouse’s retail consulting arm.
With nearly 450,000 square feet of retail space, the expanded Desert Hills center will be one of the nation’s single largest factory outlets, centers where manufacturers sell directly to consumers, typically at prices below those found at traditional stores.
Craig believes that Southern California’s growing appetite for better values will allow the 40-store Camarillo center to “approach the 500,000-square-foot mark twice as fast as Desert Hills,” which opened in 1990.
That kind of explosive growth prompts some retail observers to wonder whether the industry is approaching saturation--or if developers are adding stores that fail to deliver substantial price reductions or that cut costs by offering inferior merchandise.
“Originally, these things were places where consumers got substantial bargains, say 50% to 70% off,” Kalish said. “But as they’ve become more popular, manufacturers recognized that, and maybe consumers are only getting 20% off from the department store price.”
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Chelsea, which recently announced plans for a center in Carlsbad in northern San Diego County, hasn’t had to beg for tenants, Craig said. Despite Southern California’s wealth of existing retail storefronts, the Cabazon expansion was fully leased before bulldozers went to work.
“There was a damn good reason why they’re expanding Desert Hills,” Hundley said. “That’s one of the premier projects in the country, and demand for space has remained very strong.”
During a recent seminar sponsored by Hundley’s publication, outlet center developers agreed that the industry will continue to add centers through the end of the decade. And, Craig said that average sales per square foot at Chelsea’s 16 centers rose to a healthy $309 in 1994, up from $298 a year earlier.
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Consumers aren’t alone in their desire for more outlet centers, Craig said. Developers report that a widening array of manufacturers are entering the outlet arena. Bose and Harmon International Industries, two respected audio system speaker manufacturers, are now selling through company stores, and consumer electronics giant Sony has shown an interest in expanding its outlet presence.
“Each year, we’ve seen a 5% net growth in the new number of manufacturers getting into the business,” Craig said. “They’ve learned the value of being able to showcase their own name in their own store.”
Several other developers also have their eye on Southern California. Plans have been announced to bring a blend of outlet, discount and value stores to an open tract in Carson at the San Diego and Harbor freeways interchange.
Washington-based Mills Corp., which blends factory stores, big retail chains, entertainment outlets and restaurants, broke ground April 6 for Ontario Mills, a 1.7-million square-foot enclosed outlet mall that will open in late 1996 in Ontario. Mills is continuing to study a possible retail center at The City Shopping Center, an aging center in Orange.
The growing trend toward company-operated stores “is all part of the trend toward the disappearance of the line that separates manufacturers and retailers,” Kalish said. “It all means that the consumer will have all kinds of opportunities to get a full assortment of major brands close to where they live.”
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Discount Shopping Boom Plans to double the size of the 240,000-square-foot Desert Hills Factory Stores in Cabazon, Calif., would make it one of the largest outlet malls in the nation. Since 1990, the number of outlet malls and stores nationwide has increased steadily, and sales have nearly doubled.
Outlet malls: 1990: 183 1991: 222 1992: 249 1993: 275 1994: 294 1995: 311
Outlet stores: 1990: 5,758 1991: 6,907 1992: 8,256 1993: 9,151 1994: 10,529 1995: 11,603
Outlet sales (in billions): 1990: $6.3 1991: $7.4 1992: $8.3 1993: $9.9 1994: $11.4
* Source: Value Retail News.
* Researched by JANICE L. JONES / Los Angeles Times
