Banana republic, a factory outlet brand?

It is not new for clothing retailers to set up a factory outlet store to get rid of old or end-of-line inventories, while Gap Inc. said they are going to carry styles designed and produced exclusively for the outlets, in order to attract consumers who like their style yet are more focused on value. In spite of the economic downturn, Gap Inc. opened two stores in Edmonton in March 2009- Banana Republic factory store and Gap factory store.

It first seems rational in the short run to offer more values to depressed consumers, so that they could keeping buying from their preferred brands while paying less, however it creates more confusion for consumers in the long run than it already has. As the RVP distinction between Banana Republic and Gap is not quite clear, consumers generally see the only difference in price, with their outlet stores coming into existence with an exclusive designs at a low price range, consumers would be further confused about what they are getting. Is it a cheaper version of Banana Republic? Is it of worse quality? Is the design less trendy? If it is as good and cheaper, why should they buy from a regular retail store?

For typical factory outlet shoppers who look for value, they could be exciting to see a factory outlet store like this, as they come to the store expecting to find something last season and cheap, instead they find the clothes new and cheap, instantly they would feel that it’s a good deal and have more incentive to buy. While this experience could set a reference price for consumers, especially those who shop at both outlet stores and regular stores. These people later on visit a regular gap store and find clothes more expensive than they expect, when the price level remains the same as before! As a result, these people probably find the deals unfair and switch to outlet stores permenently. By doing this, Gap Inc. risks a lot converting part of their regular shoppers to outlet shoppers, and damaging the brand image for their shoppers overall. What's Banana republic, a trendy retail brand? A trendy Outlet brand? Who knows?

http://www.calgaryherald.com/Business/Clothing+retailer+opens+factory+outlets+Edmonton/1384690/story.html
http://www.stockwatch.com/swnet/newsit/newsit_newsit.aspx?bid=U-b005811-U:GPS-20081024&symbol=GPS&news_region=U