(MONEY Magazine) – No one, not even the most grizzled veteran of the holiday shopping wars, is likely to forget the past few months. Kamikaze sales nosediving right through the tender heart of the Christmas season. Venerable names -- Bloomingdale's, Saks Fifth Avenue, Marshall Field, Bonwit Teller -- up for sale along with their silks and cashmeres. Manufacturers refusing to ship to department stores swaying on the brink of bankruptcy. And consumers hanging back, suspecting those never-ending discounts on private-label merchandise aren't for real -- as often they aren't. ''So-called regular prices are inflated simply to permit markdowns,'' says William Flatley, a principal with Kurt Salmon Associates, a retail consulting firm in New York City. A particular sign of desperation: discounting of designer labels much earlier in the season than usual. Now, as the fireworks fade, the damage is coming clear. Best assessment: the department store, the traditional seller of high-fashion apparel to American women, is undergoing an agonizing downsizing that may drive many shoppers elsewhere. But where? The moneyed elite can toddle off to the designer shops that line Madison Avenue and Rodeo Drive. Serious scavengers can continue to bottom-fish at off-price stores such as Loehmann's and Annie Sez. And the rest? Unwilling to pay full retail prices yet dyed-in-the-wool devotees of well-designed, well-made clothes, this flock is finding a new field to graze in. And it's still a bit of a secret: the designer outlet, a small store leased by a single designer-manufacturer, usually in an out-of- the-way mall made up of a dozen or more outlet stores, including those of other designers plus assorted retailers. The outlets offer merchandise at about the same bargain prices as conventional off-price stores -- 20% to 80% off. Yet these stores have an inviting, if not luxurious, ambience. And best of all, most of their merchandise is first quality -- not the irregulars sold by off-price stores. The Harve Benard outlet pictured on the previous page is typical. Come spring, in fact, outlets may have an unprecedented array of the designers' best new lines. Designer-outlet merchandise is normally manufacturers' end-of-the-season leftovers that haven't been sold to department stores and other full-price retailers. At least one designer -- Harve Benard -- has been refusing to ship orders to department stores that are considered credit risks -- an estimated 15% of its business. If that trend builds, designers will have convoys of clothing detouring to their outlets. The designers don't advertise their outlets, however, and these stores operate somewhat differently from mainstream retailers. So anyone interested in designer duds at discount needs to know where to find the outlets and how to shop them. Thanks to numbers alone, it's getting easier. The upscale outlets started appearing only about six years ago. No one has figures on their growth in particular, but the number of outlets of all kinds grew 18% last year, compared with 5% for full-price specialty stores and one-half of 1% for department stores. So far, a handful of top names -- Harve Benard, Liz Claiborne, Anne Klein, Calvin Klein, Ralph Lauren, Ellen Tracy, Tahari and Adrienne Vittadini -- represent most of the action. In just four years, Harve Benard has built an outlet army of 64 stores scattered coast to coast -- the most ambitious such expansion so far. Vittadini, a newcomer to the pack, has four. While the country's midsection is still only lightly dusted, the Northeast is already nearly saturated and California is getting there. A look at how the rag trade works explains the quick emergence of the outlet. Major designers manufacture most of their lines in places like Hong Kong -- where the cheap yet skilled labor more than offsets the superschlep to market. But factory runs must be ordered as much as a year in advance of the selling season, and the inevitable miscalculations result in piles of unsold garments. ''Even in a good season, you will have 5% to 10% of what you make left over,'' says Frank Mori, president of Takihyo Inc., the holding company that owns Anne Klein. ''That used to put a lot of leverage in Loehmann's hands. In buying such a large amount of merchandise, off-price stores were able to negotiate lower and lower prices for it.'' So six years ago, the company started opening its own outlets. Anne Klein and other designers began to see advantages, aside from not being beholden to off-price stores. One was the ability to control distribution of a valued label. Translation: designer clothes would not hang next to a competitor's or, worse, be sold in an off-price store next door to a major department store customer. The greatest motive of all behind the designer outlet trend: these stores have turned out to be immensely more profitable than anyone believed possible only five years ago. According to Value Retail News, an outlet and off-price trade journal, outlets average annual sales of $211 a square foot. That's slightly higher than ladies' specialty stores in large shopping centers. The difference is that the outlets are owned by the designer-manufacturers, thus eliminating middlemen, and advertising costs are almost nonexistent. ''Already outlet stores are the major profit center for quite a few of these companies,'' says Kurt Barnard, publisher of Retail Marketing Report and a retail marketing consultant. ''The executive vice president of a prominent designer told me that without its outlets, his company would not be profitable.'' Another reason for designer boldness: the continuing turmoil among department stores. As a result of all the leveraged buy-outs and other consolidations, says Stanley Tanger, president of his own outlet shopping center development firm, ''the numbers of department stores are shrinking, resulting in fewer and fewer points of distribution for manufacturers. Plus the major stores all look the same. They cherry-pick from designers' lines. Outlets give designers a way of showcasing more of their merchandise.'' If you still haven't heard about these outlets, there's a reason: designers, to head off unfair-competition complaints by department stores carrying their labels at full price, not only haven't advertised their outlet stores but have placed them in smaller communities at least 20 miles from major retail hubs. Outlets turn up in some pretty unfashionable places. For instance, while Polo Ralph Lauren shops are familiar features in carriage-trade department stores across the country, and while Polo stores occupy space at some of the world's most prestigious addresses (Madison Avenue in New York City, Place de la Madeleine in Paris and Rodeo Drive in Beverly Hills), Polo outlets are in such low-rent locales as Eureka, Calif., Billings, Mont. and Martinsburg, W.Va. For the whereabouts of the major designer outlets, see page 120. You can also call the designers' headquarters, most of which are in New York City, and ask where outlets are. A valuable sourcebook for outlets of all types is the Joy of Outlet Shopping, available for $3.95 from the Outlet Consumer Reporter, Box 7867, St. Petersburg, Fla. 33734. Instead of being a drag on sales, this dispersion, born out of fear of department store retaliation, has actually begun to affect American shopping habits. Often outlet centers are on major highways either between two sizable cities like Vancouver, B.C. and Seattle, where Harve Benard and Liz Claiborne are staked out in Burlington, Wash., or in tourist areas such as Niagara Falls, where Ralph Lauren and Calvin Klein have branches. Planning a foray to the Great Smoky Mountains National Park to get away from commercial culture? If so, you might want to drive a little faster when you near the park, so as to avoid the Anne Klein and Calvin Klein trading posts on Route 441 in Pigeon Forge. The strategy, modeled loosely on the fabulous success of L.L. Bean and its neighbors in Freeport, Maine: to get shoppers to plan all-day or even weekend excursions to the outlet malls and stop-offs at others while on vacation. A recent poll of MONEY subscribers by the Gallup Organization, for instance, found that nearly a third consider shopping opportunities when planning vacations. And a majority -- 54% -- reported that nonfood shopping is a family activity. (See the box on page 124 for additional poll results.) To serve what retail marketing executives call the destination shopper, an estimated 500 bus companies now offer a range of special tours, some just to malls, others to a mall plus a traditional tourist attraction. For example, Yankee Trails in Rensselaer, N.Y. offers weekend deals to two popular shopping towns -- Fall River, Mass. and Reading, Pa. For $90 or so, you get overnight accommodations, dinner, breakfast and transportation. So what will you find in a typical designer outlet mall? Although the phenomenon is too new and spreading too fast to have much uniformity, some generalities can be made: -- There's usually a broad mix of merchandise, as designers favor their outlets over off-price stores. ''If I have five beaded evening tops unsold at our first-line stores but no matching skirts, I probably won't put those pieces into our outlets even though they're top quality,'' says Richard Catalano, president of Adrienne Vittadini. ''We'll ship them to Loehmann's.'' -- You'll discover a new meaning of ready-to-wear. While it is impossible to predict what you will find on any given visit, stock tends to lag what you'll see in department stores and specialty stores by as much as one season. This may be a boon. For example, if you need a winter sweater this month, the place to look for it is in the outlets, not department stores, which are already pushing spring items. -- You won't be put off by the look of the place. Premises are usually unglamorous but clean and easy to shop. Dressing rooms are ample and often have private booths. Return policies vary but are clearly spelled out in signs near the checkouts. Service is minimal -- mainly cashiers and dressing-room monitors. -- Yes, shoppers, there are sales. Most outlets discount their discounts at different times during the year, especially in January and the summer. For example, in early December, much of the merchandise at the Calvin Klein outlet in the Woodbury Common mall in Central Valley, N.Y. sold for 33% below the regular outlet discount. A strapless velvet dress retailing for $600 was ticketed at $300 and was on sale for $150. A suede jacket retailing for $800 and matching jodhpurs for $960 were ticketed at $400 and $480 and were on sale for $268 and $322. In fact, if you're canny and patient, you might get what you want for next to nothing. Because department stores generally insist on a constant sense of freshness to lure traffic, most of them turn over their merchandise every six weeks or so. Outlets, like off-price stores, let goods sit on the sales floor, with numerous markdowns, until they are sold. At a Calvin Klein store in Freeport, Maine, for instance, a white tailored cotton blouse with cloth- covered buttons that retailed for $120 was initially priced at $60; a few months later, it was down to $20. Asks Jerome Chazen, chairman of Liz Claiborne, which also practices serial discounting of merchandise that doesn't move: ''What else are we going to do with it?'' While the outlet may be the end of the road for merchandise, outlets themselves are dressing up and heading for town. With department stores weakened, the logical next step is to move in for the kill to those forbidden zones -- the big cities and suburbs -- where outlets have thus far feared to tread. Sure enough, a Chicago-based developer, the Prime Group, opened its first outlet center last fall. Name: Warehouse Row. Site: Chattanooga, about 16 miles from Tennessee's biggest upscale mall. Among the tenants: an 11,000- square-foot Polo outlet, Ralph Lauren's largest, second in size only to his flagship store on Madison Avenue in Manhattan. In fact, you may as well start looking for an outlet mall at a crossroads near you. And start figuring out just how much all that cheap chic is going to save you.

BOX: WHERE THE DESIGNER OUTLETS ARE

Consumers don't always know the whereabouts even of nearby designer outlets, since the outlets do not advertise. Below are the eight major chains and the locations of all their stores from coast to coast.

Harve Benard: Alabama: Boaz, Foley; California: Gilroy, Pacific Grove, South Lake Tahoe, Vacaville; Colorado: Silverthorne; Connecticut: Branford, East Windsor, Milford, Mystic, Norwalk; Delaware: Rehoboth; Florida: Orlando; Georgia: Commerce; Illinois: St. Charles; Indiana: Michigan City; Maine: Freeport, Kittery; Maryland: Annapolis, Perrysville; Massachusetts: Lawrence, Lenox, New Bedford, Plymouth; Michigan: Birch Run, Holland, Monroe; Missouri: Branson, Osage Beach; New Hampshire: Keene, North Conway, West Lebanon; New Jersey: Flemington, Secaucus; New York: Central Valley, Lake George, Latham, Monticello, Niagara Falls, Plattsburgh, Saratoga; North Carolina: Blowing Rock, Burlington, Smithfield; Ohio: Aurora, Sandusky; Pennsylvania: Lancaster, Reading, York; South Carolina: Hilton Head, Santee; Tennessee: Chattanooga, Pigeon Forge; Texas: Conroe, New Braunfels, Sulphur Springs; Vermont: Manchester; Virginia: Virginia Beach, Waynesboro, Williamsburg; Washington: Burlington; West Virginia: Martinsburg; Wisconsin: Kenosha. Call 800-635-1544 for information on other locations.

Liz Claiborne: Alabama: Boaz, Foley; Colorado: Silverthorne; Georgia: Commerce (irregulars only); Maine: Kittery; Maryland: Queenstown; Massachusetts: Buzzards Bay; Michigan: Birch Run; New Hampshire: North Conway; New Jersey: Secaucus; New York: Central Valley; North Carolina: Brighton, Burlington (irregulars only); Pennsylvania: Reading; Tennessee: Pigeon Forge; Texas: Hillsboro (irregulars only); Vermont: Manchester; Virginia: Williamsburg; Washington: Burlington; West Virginia: Martinsburg; Wisconsin: Kenosha.

Anne Klein: Alabama: Boaz; California: Barstow, Gilroy (to open this spring); Florida: Orlando; Indiana: Michigan City; Maine: Freeport, Kittery; Maryland: Chester; Michigan: Birch Run; Missouri: Osage Beach; New Hampshire: North Conway; New Jersey: Flemington, Shrewsbury; New York: Central Valley, Lake George (opening in the spring), Niagara Falls; North Carolina: Blowing Rock, Hilton Head; Tennessee: Pigeon Forge; Vermont: Manchester; Virginia: Williamsburg; West Virginia: Martinsburg; Wisconsin: Kenosha.

Calvin Klein: Alabama: Boaz, Foley; Florida: Orlando; Maine: Freeport, Kittery; Massachusetts: New Bedford; New Hampshire: North Conway; New Jersey: Flemington, Secaucus (two); New York: Central Valley, Niagara Falls; Tennessee: Pigeon Forge; Virginia: Prince William, Williamsburg; Wisconsin: Kenosha.

Ralph Lauren: Alabama: Boaz, Foley; California: Eureka; Colorado: Durango; Indiana: Michigan City; Maine: Freeport; Massachusetts: Lawrence; Missouri: Osage Beach; Montana: Billings; New Hampshire: North Conway; New York: Cohoes, Niagara Falls (two), Plattsburgh, Watertown; Pennsylvania: Reading; Puerto Rico: San Juan; South Dakota: Rapid City; Tennessee: Chattanooga; Texas: El Paso; Vermont: Manchester; Virgin Islands: St. Thomas; West Virginia: Martinsburg; Wisconsin: Appleton; Wyoming: Jackson.

Tahari: New Jersey: Ridgefield; New York: Central Valley, New York City, Saratoga.

Ellen Tracy: New Hampshire: North Conway; New Jersey: Lyndhurst; New York: Central Valley, Saratoga; Vermont: Manchester.

Adrienne Vittadini: Massachusetts: New Bedford; New York: Central Valley, Saratoga; Tennessee: Chattanooga.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: AMERICANS AND THEIR MONEY HOW FAR WILL YOU TRAVEL TO SAVE? The table below, based on a tele phone poll of 300 MONEY subscribers taken in December, shows how far out of their way people are willing to go to save increasing amounts of money: not very. Respondents indicated that on average they would spend five times as long (52 minutes vs. 10 min utes) to save 20 times as much money ($100 over $5). Margin of error: plus or minus three minutes.