Insight

Are factory outlets good for brands?

Will opening a factory store damage the brand’s image and divert consumers from its main retail outlets?

Though factory stores may be a boon for serial shoppers, what kind of impact does opening one have on a brand? It is often assumed that opening a factory store may damage the brand’s image or divert consumers from its main retail outlets. It is also possible that it may help the brand attract a newer set of customers. Poring over 12 years’ worth of data relating to one such store, researchers Yi Qian, Eric Anderson and Duncan Simester found that the introduction of the factory store did, in fact, lead to positive spillovers to the retailer’s core business. They found that customers ended up purchasing more products from the higher priced, higher quality stores of the brand once the factory store opened. This shift accounted for almost 17% of the incremental sales from the opening of the factory store.

 

Title: Multichannel Spillovers from a Factory Store 

Source: The National Bureau of Economic Research

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