Outlet stores

Outlet stores: how the sector went from dreaded to fashionable

The UK retail landscape has countless facets, from multi-million pound flagship stores to independent online start-ups making their names.

Each of them is an integral part of the retail ecosystem, but the one that is often overlooked is the outlet sector.

Often located far from spaces associated with traditional retail and often sidelined to sell surplus or obsolete lines, brand centers have avoided the spotlight since the concept was imported from the United States 20 years ago. .

However, that could all be about to change. As new urban malls continue to emerge and it becomes increasingly fashionable to haggle, the industry could benefit from the upcoming squeeze in consumer spending.

Shopping center asset management firm Realm saw sales of its outlet portfolio increase 16% in 2016, alongside a 5% increase in footfall.

“For Realm, the outlet business is obviously extremely important. It’s a niche and we’re specialists and that’s what we do. Realm chief executive Colin Brooks told the Retail Gazette.

“In general retail terms in the UK market there are probably around 30 sales centers of all sizes and sizes. We’re actually talking about a sector which in terms of retail sales probably accounts for no more than one to two percent of retail sales across the UK consumer market as a whole.

“But it is clear that for retailers this is a very important way to eliminate surplus and / or the second stock. And more and more as the market has matured over the past 20 years, it is becoming a real trading outlet for this type of stock.

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“Retailers find it very important to turn their excess inventory into cash, which obviously makes sense to them from a business perspective.

“They have brand protection so that their brand continues to be retailed in a quality retail environment by their own staff, whereas 20 years ago you might find some of their business appearing in local markets or other rag shops ”.

London Designer Outlet (LDO) is a prime example of the new wave of outlet centers, located next to Wembley Stadium in Greater London, with stores representing some of the country’s biggest brands.

The focus on tourism has been a key part of LDO’s success. LDO CEO Sue Shepherd explained to what levels they are going to respond to overseas buyers: “Right from the start when we opened at the end of 2013, we really started to get serious about tourism in the middle of the year 2014 and by then there has been tremendous growth. .

“So much so that we have most of our mall guides and signage in English and Mandarin. We’ll probably have something like six percent of our total sales this year coming from duty-free purchases only.

“We have focused a lot on tourism over the past two years and now have a separate team here that now works with tourism companies, attracting visitors mainly from China, the United States and the Far East, but more and more Europe, especially after Brexit.

“It has become even more appealing to do factory shopping in the UK. “?

“It doesn’t sound like science fiction, but it’s fundamentally different from how a mall would operate. “

While LDO clearly has advantages over branded hubs positioned outside of high density areas to attract tourists, there is an intrinsic quality of the outlet model that puts traditional retailers on the back burner.

Brooks explained that the main difference between malls and traditional shopping centers is that their rents are based on sales, which means there is a completely different relationship between retailer and tenant.

“There is absolutely complete alignment between the center owner, the center asset manager and the retailer”? ? he said.

“Everyone who works in and around the asset is all aligned with one thing: to help drive sales for the retailer, because the owner of the asset earns income from the sales generated in the stores.

“It doesn’t sound like science fiction, but it’s fundamentally different from how a mall would operate.

“What this means is that asset management companies like ours actually have a slightly different business model.

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“All of the transactions we do with retailers are done directly with retailers rather than through an agent. Even further than that, a large portion of our leasing team are former retailers. They need to understand the language of retail.

This alignment gives outlet store retailers a significant advantage over traditional retailers. Not only do they benefit from the full cooperation of their owners to make changes that drive footfall and sales, they are also able to host events at the venues on a holistic level.

In an environment where experience is becoming an essential part of the retail landscape, especially in attracting tourists, this is a trait that outlet stores like LDO are already using to their advantage.

“We have a very close relationship with the owner and they are on site. I think the whole experiential retail article is interesting, ”Shepherd said.

“More and more people want some kind of shopping, dining, entertainment, experience when they go out in a quality environment.

“So our marketing team works hard to put on events throughout the year that give people a pretty compelling reason to want to come here rather than going to Westfield or Brent Cross on the road. “

While selling high-end brands at discounted prices is great for shoppers, it has the potential to distract buyers from full-price stores by cannibalizing profits.

Brooks believes that in recent years, retailers have become more open to factory outlets and have started to take advantage of the perks they hold as an alternative source of income.

“I think the market has changed dramatically over the last 20 to 25 years”? ? he said.

“When Americans first introduced the concept to the UK, a lot of high street retailers were concerned that if they opened outlet stores near their stores there would be significant cannibalization and that would dilute sales at full cost.

“You can buy your champagne at Lidl and it’s considered cool now, whereas a few years ago you probably wouldn’t have told anyone you were doing this. “

“That’s why, 25 years ago, most of the original brand centers were developed outside of town, at locations on the highway.

“What we’ve seen over the past five years has proven that retailers have matured in terms of knowledge of how stores operate, and LDO is one of the forerunners of what we are calling the new generation of urban store centers. Retailers now see them as a positive outlet and income generation opportunity.

“High-end brands can access different markers by selling their brand at a discounted price to customers who otherwise might not be looking for their brand because they consider it too expensive.

“They see it as an avenue to slightly less affluent customers or maybe price savvy customers and they see it as an opportunity to sell their brand.” ??

This “price-savvy” ?? The consumer has played a key role in the rise of the brand center in recent years.

Shepherd believes bargains have become fashionable and are attracting many younger, more fashion-conscious shoppers.

“I think there’s also something that after 2007/2008 makes it more and more savvy to shop for bargains and you don’t have to pay top dollar for Nike sneakers anymore”? she said.

“Most of our stores don’t sell a second. They will sell products made for the release or they will sell residual lines from previous seasons. This is what we call the Lidl effect.

“You can buy your champagne at Lidl and it’s considered cool now, whereas a few years ago you probably wouldn’t have told anyone you were doing this.

“Especially here where we have a real specialization in sports shoes and the whole athleisure trend. We find a much younger and more urban millennial customer.

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