For many traditional retailers, outlet stores have become an essential part of their overall store strategy mix. Here’s why.

According to Kyle Stock, writing for Businessweek: “High-end department stores are slumming … sort of. At pricey apparel retailers such as Neiman Marcus and Bloomingdales, outlet stores may soon outnumber traditional locations, according to a new report by Bloomberg Industries. In fact, they already do at Saks and Nordstrom. Some 60 percent of Saks locations are now outlets, and all but two of the 15 stores it plans to open in the next two years will be discount centers. Nordstrom meanwhile, has 123 “Rack” outlets, a number it plans to double by 2016. The strategy is a simple play for the bargain-hunters who have driven handsome returns for Ross Stores and TJ Maxx . ‘It’s predominantly an entirely different customer for these companies,’ says Bloomberg Analyst Poonam Goyal. ‘They know they can’t afford the full-line stuff, but they still desire the brand.’”

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