Outlet Wars : Cabazon Mall Expansion Is Latest Salvo


In another salvo in the increasingly competitive factory outlet wars, Desert Hills Factory Stores in Cabazon, Calif., will add 50 stores in May, making the center in the heavily traveled Palm Springs corridor one of the nation’s largest outlet malls.

The expansion, due to be mirrored by competitors over the coming year, marks another surge in a phenomenon that has seen a tripling in the number of U.S. outlet malls, which offer cut-rate prices from merchandisers selling direct to consumers.

The number of bargain-oriented outlet centers has mushroomed to 311 from about 100 in 1988, according to Value Retail News, a Clearwater, Fla.-based trade publication. Industry observers predict that a total of 600 centers will be open in the United States by the end of the decade, and developers have already 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.

Desert Hills’ 52 existing stores drew 2 million customers last year. The 190,000-square-foot expansion, which will include such firms as Burberrys Ltd., 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, Chelsea’s Newport Beach-based president and chief operating officer. “Effectively, they want it all.”

Shoppers’ wishes dovetail nicely with a growing recognition among manufacturers that outlet malls serve a purpose, said Kris Hundley, executive editor of Value Retail News. “They give manufacturers a place to move dated product out of the full-price store and into their own outlet.”

The factory outlet malls feature manufacturers selling directly to consumers, typically at prices below those found at traditional stores. They sell everything from first-quality merchandise to discontinued products, irregular items or slightly blemished merchandise. Some critics maintain that many of the stores now sell lower-quality merchandise than that found in traditional stores. Craig believes that Southern California’s growing appetite for better value 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 observers to wonder if the industry is approaching saturation--or if developers are adding stores that fail to deliver substantial price reductions or 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.”

Chelsea, which recently announced plans for a center in Carlsbad in northern San Diego County, hasn’t had to beg for tenants, Craig said. The Cabazon expansion was fully leased before the bulldozers went to work.


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: 1995 = 311 Outlet stores: 1995 = 11,603 Outlet sales (in billions): 1994 = 11.4

* Source: Value Retail News.

* Researched by JANICE L. JONES / Los Angeles Times