Adventures in Retailing
Part IV: Woodbury Common

by

Ross M. Miller
Miller Risk Advisors
www.millerrisk.com
February 24, 2005

With Presidents' Day Weekend giving me the first opportunity in over a month to get ahead of the curve in my teaching, it is time to get back to retailing with a visit to Woodbury Common. Though it might sound like a socialist utopian community, Woodbury Common is a "premium" outlet mall situated immediately off the Harriman exit of the New York State Thruway not far from Bear Mountain.

I was inspired to write about this mall when I noticed on a recent visit that I was apparently the only patron whose spoke English. Some of my fellow patrons were familiar from my days back in Houston when I would visit Neiman-Marcus purely for entertainment—at the end of the Disco Age, academic salaries did not go very far at the city's high-end retailers. Back then, certain customers from foreign lands would pay from their purchases with crisp $100 Federal Reserve Notes peeled from rolls that barely fit into their pockets.

I travel in circles where plastic is the coin of the realm, so after witnessing two transactions where money (in big bills) did the talking, I had an epiphany. Although the items being purchased would undoubtedly be whisked away to distant shores within days, I did not expect that any trace of them would appear on our country's balance sheet as exports to offset our gaping foreign-trade deficit. A back-on-the-envelope analysis, however, demonstrated that unless the number of alien visitors willing to "underdeclare" the value of the goods leaving the country was on a par with our indigenous population, such transactions could only explain a small fraction of the trade deficit. Still, given the difficulty of accounting for anything these days, one has to wonder just how much faith some be placed in government statistics that implicitly assume a world of honest people.

With the topic of international finance (about which I know nothing) out of the way, I will address the mall experience at Woodbury Common itself. I discovered Woodbury Common in its early days when it was still small and outlet malls were the new, new thing in retailing. Woodbury Common is an outdoor mall with stores arranged to resemble a retailing "village' rather than a series of adjacent, yet askew, strip malls, which is what the mall really is. In theory, the mall is built on concept of selling luxury goods at ridiculously low prices. In practice, there is more schlock than luxury and more rip-offs than bargains. I do not intend this remark to be viewed as disparaging, just an objective observation or what my old colleagues in the economics of industrial organization would characterize an optimal strategy in the price-quality state space. If one understands the game that is being played in such a mall, shopping can be profitable as long as one enjoys the process.

Basically, shopping in an outlet mall is like being a fund manager; if you don't know what something is worth, you are going to pay too much for it. The optimal shopper enters the outlet mall with a mental shopping list and a target set of prices. When shopping for good sold by mainline retailers, such as the Coach Store, it is wise to visit the flagship store first to know what the true retail price is. Some stores, such as Brooks Brothers, have special lines of merchandise that sell only at their outlet stores and very little of their "good stuff" makes it to the outlet store. (With Brooks Brothers, the best bargains are to be had at the semiannual sales at the flagship stores and through their catalog.) Some stores, such as the Sony Store, actually have the temerity to sell many items at their full retail price. (In the Sony Store's defense, it has some great "refurbished" items that beat the best prices available on the Internet. I wonder how you say "caveat emptor" in Japanese.) My visits to the footwear outlets are driven not so much by price as by the superior selection afforded to one with outsize feet.

I should mention that after one serious misadventure on Memorial Day Weekend, I never visit Woodbury Common on a weekend (Fridays included). I even go out of my to avoid its stretch of Thruway, which can back up for ten miles, during prime shopping hours. The best time to visit the mall is on weekday mornings in the dead of winter—the colder, the better. While the locals around here think nothing of wearing short in subfreezing temperatures, many of the visitors to the mall come from climes where significantly negative Celsius is cause for a national emergency. A bargain is not a bargain is you have to wait in line for half an hour to cash it in.

For a mall that purports to be premium, the edibles are rather pedestrian. A big fuss was made several years ago when the mall added an Applebee's—the McDonald's of sit-down dining. (The real McDonald's is available in the food court along with the usual suspects.) Before I lapse into a restaurant review, it is worth noting that those insidious Dippin' Dots have long been a feature of this mall.

In my assorted travels I have stumbled across other outlet malls, but I must give the nod to Woodbury Common for general atmosphere—the mall does resemble a village, albeit a tacky one, at the base of a wooded hill that is sometimes quite beautiful—and because some luxury items (by my standards, not Sarah Jessica Parker's) do manage to find their way to the mall at attractive prices. (When Manolo Blahnik sets up shop in an outlet mall, can the final day of reckoning be far away?)

Woodbury's competitors seem a mundane lot. Gilroy, California has diversified its economic base to outlet malls, but its setting has much more of a strip-mall (not to mention, garlic) flavor to them. The Jersey Gardens outlet mall benefits from the local tax breaks to be found in Ikealand-by-Newark-Airport, but is decided downscale and fully enclosed. It had a good Asian restaurant—a real restaurant, not a chain—but my sources tell me that it has closed. The very existence of Jersey Gardens is evidence that the salad days of the outlet mall had passed.

I will resume this retailing series once I get a chance to visit the Wal-Mart SuperCenter that recently opened to the north of me where mobile homes run free. I am beginning to have second thoughts about my tilt toward Target as repeated visits to their stores indicate inventory management policies that leave much to be desired.

The next few commentaries will focus on things that I have run across while gearing up to teach finance course for the first time in fifteen years, which is like an eternity in financial time. (This gearing-up process is what has been making me more sporadic than I had planned.) My first installment in this new series is called "Outlaw Financial Calculators."

Copyright 2005 by Miller Risk Advisors. Permission granted to forward by electronic means and to excerpt or broadcast 250 words or less provided a citation is made to www.millerrisk.com.