Factory outlet stores represent an integral part of a dual distribution channel strategy, in which products are sold through two different channels: (1) factory outlets and (2) traditional store formats. However, there are potential risks, including cannibalization and brand dilution. Our research considers perceived quality of the item from each channel. Through two experimental studies, our findings suggest that without any pricing information, consumers spontaneously assign products from outlet channels to be of lower subjective quality than those from the traditional channel. However, when both products in each channel are discounted, then this reduction in quality perception is attenuated, following the belief in the price-quality relationship.

• Jared Wong(Yale University, United States)
• Foo Nin Ho(San Francisco State University, United States)