Bargains, brands and brunches: How outlet centres are fending off cost-of-living crunch

Outlet centres have been gaining momentum over the past few years and are expected to grow by 18.5% to the value of £4.1bn by 2024 compared with 2019 levels, according to GlobalData.

However, with just over 30 outlet malls across the UK, these locations need more than just big-name brands to bring shoppers in, with many now investing in food and beverage options, leisure activities, storefront refreshes and calendar events to keep the momentum going.

Capitalising on the rise in popularity of outlet centres during the pandemic, operators including Bicester Village, Icon Outlet and McArthurGlen have been creating destinations for a big day out rather than a quick shopping trip, encouraging domestic tourists and locals alike to make the journey. 

Gaining momentum

As the popularity of city centres waned during the pandemic, outlet centres thrived as outdoor destinations where customers could shop across multiple categories while avoiding public transport. 

One such centre is the Icon Outlet at the O2, which boasts more than 2,000 parking spaces and has thousands of visitors every day.

The centre, which encompasses the outer circle of the O2 Arena, is currently around 86% let by brands such as Nike, Ted Baker, Calvin Klein and Tommy Hilfiger. Managing director Janine Constantin-Russell describes it as “Regent Street’s little sister”. 

The pandemic opened doors for Icon Outlet to work with new brands such as The Cosmetics Company, a retailer that typically thrived in airport locations but sought revenue streams elsewhere when international travel was banned.

The retailer temporarily moved premium brands such as Mac Cosmetics from Heathrow Terminal 5 to the outlet store and “just carried on”.

Icon Outlet has also created a pop-up space in the centre where both current and prospective tenants can host events.

“We have brands who want to come and try out the space – or it might be a brand who has got this mountain of Sale items coming from its high street locations or sample stock that it needs to shift,” says Icon Outlet retail director Andrew Hulse. 

“They don’t want to ship that abroad because it costs so much, so we’re providing them a space to do that.”

Bicester Village echoes this idea; a spokeswoman told Retail Week on a visit to the centre that “more brands are willing to have a conversation with us” as outlet centres become a more accepted revenue stream.

The shopping village has invested in an extension, completed last year, and upgraded its storefronts. It requires its tenants to refresh their stores every couple of years as well, ensuring that a luxury feel is retained.

McArthurGlen has also added a host of new brands to its portfolio, including Stella McCartney, Zimmermann and Pucci.

Co-chief executive Susie McCabe says retailers are investing more in their shopfits to elevate their look and feel, making them more desirable places to shop and attracting a new customer base.

Ted Baker retail director Caroline Campbell feels that outlet centres have become stronger over the past few years and “can be an entry point for a brand to attract a new customer”.

“Outlet villages have seen a lot of investment in recent years, providing not only a strong retail assortment but also food and beverage and recreational activities”

Caroline Campbell, Ted Baker

The retailer’s outlet business has seen the best recovery out of all its channels and continues to be its best-performing bricks-and-mortar channel for both the UK and the EU.

“Outlet villages have seen a lot of investment in recent years, providing not only a strong retail assortment but also food and beverage and recreational activities,” she says.

As well as more brands, outlet centres are seeing a shift in the customer base shopping with them, particularly as long-haul tourism slowed during the pandemic.

One fashion boss says its outlet stores have seen a greater number of local shoppers and domestic tourists.

In the case of Bicester, for example, he says people will increasingly stop for a few nights in the Cotswolds and include a trip to the outlet centre.

He adds that this has brought in a different type of customer, one who has decided to holiday in the UK and would therefore be willing to spend more on branded goods as a treat.

“The customer profile goes from Primark to Prada or Zara to Zegna – the spectrum is really broad, but at outlets, you definitely see a higher transaction value,” he says.

The dual acceptance of outlet centres as a smart place to sell and shop from a brand image, price and safety point of view has driven momentum in these spaces – something operators need to retain post-pandemic.

A big day out

While the main draw of an outlet centre may be bargain prices for big-label brands, operators have had to think outside the box to keep loyal customers coming back for more.

“We’ve had to be incredibly focused on engaging local catchments, with a real focus on making sure we’re giving reasons to visit for consumers that are fun and give them an emotional connection” 

Susie McCabe, McArthurGlen

McArthurGlen has focused on hosting brand activations and events in order to drive footfall.

“It’s no secret that long-haul tourism has been challenged in every market so we’ve had to be incredibly focused on engaging local catchments, with a real focus on making sure we’re giving reasons to visit for consumers that are fun and give them an emotional connection,” says McArthurGlen’s McCabe. 

The company worked with artists to create murals in each of its UK locations, showcasing local talent and creating Instagrammable moments.

Its Cheshire Oaks outlet also installed a ‘container village’ including a myriad of food and beverage options and live music events, enticing customers to visit after work on weekdays using the time they used to spend commuting. It extended some of its opening hours so retailers could equally benefit from the initiative.

Caledonia Park, located in Gretna on the border between England and Scotland, has hosted a summer events calendar and dialled up its food and beverage offer to entice customers from as far afield as Glasgow and the Lake District, as well as tourists on the journey between the two countries.

The centre also played host to a range of ‘animated characters’ to entertain children, as well as erecting large screens to show the Commonwealth Games and other sporting events.

Owner Railpen’s head of property asset management Matthew Howard says small touches at the centre cater to local visitors.

“We have an enormous amount of people who just bring their dogs to the centre and there are water bowls everywhere – it’s a real community thing.

“That’s one thing that is unique about Caledonia Park; it does have a rural community feel as well as attracting people from all around.”

Icon Outlet has leaned into creating unforgettable and unique experiences all year round.

Half the outer circle at the O2 is a dedicated Entertainment District, including a range of food and beverage options and leisure activities.

These include Toca Social, a one-of-a-kind interactive football bar where customers can book a booth and practise scoring goals. During the World Cup and the Euros, booths could also be rented out to watch big games.

Boom Battle Bar is another big pull. The venue offers a range of competitive activities including mini-golf, axe-throwing, augmented reality darts and beer pong.

Alongside the main arena events, Icon Outlet also hosts Mamma Mia! The Party for eight shows a week, while smaller gigs are held in the Indigo room.

Rounded off with a 19-screen cinema, the outlet’s range of activities ensures a guaranteed stream of visitors. Free parking for every £35 spent in stores creates more incentive for customers to shop as well.

A bargain for retailers and shoppers alike

All the outlet centres agree that a big draw for brands is the collaborative relationship they offer to retail partners, with the majority offering turnover-based rents as standard.

Railpen’s Howard says: “We know how they trade, we know how they’re performing and because of that openness they’re just much more willing and open to working with us.”

“It’s always struck me as quite strange to have the adversarial relationship that you tend to get [in other retail locations],” he adds.

“Even now, things have moved on a lot but in traditional shopping centres, high streets and retail parks, there is still a degree of that adversarial relationship with tenants that won’t work with landlords or vice versa. And the strange thing is it benefits both sides enormously [if they do]. And outlets are a really good example of that.”

“We know how brands trade, we know how they’re performing and because of that openness they’re just much more willing and open to working with us”

Matthew Howard, Railpen

As the UK becomes increasingly price-conscious with the cost-of-living crisis taking hold, outlet centres could be cushioned if consumers cut their discretionary spending.

Offering up to 80% off full-price branded goods depending on the location and brand, outlet centres’ main attraction is offering labels at lower prices.

Bicester says shoppers have become “less snobbish” about where they shop, with high-value clientele spending at both outlet and full prices.

The spokeswoman adds that there has been a flight to luxury for mass-market consumers dipping their toes in the world of designer goods.

Buying from an outlet is often a gateway to buying full-price, she explains, but shoppers then feel empowered to shop across both channels.

With finances increasingly tight, Bicester says outlet shopping will be a “natural choice” for shoppers – especially in the lead-up to Christmas.

This sentiment is echoed by McArthurGlen’s McCabe.

“We’re all going to have to be mindful and watchful relative to the cost of living, and consumers’ disposable income will be impacted,” she says. “But we’ve got an advantage there as you don’t have to trade down in order to save money. These are world-renowned brands that are still offering really incredible experiences.

“We just need to understand what choices consumers are making – are they cutting back on eating out? Are they cutting back on clothing?”

One fashion boss says that, while he believes consumers will be cutting back on spending in general, fashion will remain a resilient category.

“It would be foolish to pretend that everyone’s not going to have less money to spend because they’ll be spending more on heating their homes and food.

“The challenge for retailers is to try to make sure we are further down the line of things that people are going to choose to cut.”

He says big-ticket items like furniture and cars will be the first to go, followed by holidays and eating out. But for those who favour branded goods, outlet shopping will make the option of buying in those categories more viable.

However, he adds that the solution to the cost-of-living crisis does not lie in opening more outlets, but in ensuring prices across all channels are “appropriate for the current climate”.

Both he and Ted Baker’s Campbell agree that outlets are an essential and profitable part of their business.

Communicating the value proposition will be paramount to keeping the momentum going for outlet centres over the upcoming months as consumers may have no choice but to cut back on non-essential categories.

Outlet centres have gone from strength to strength over the past few years. No longer luxury retail’s dirty secret, as the cost-of-living crisis looms their exciting mix of value, community spirit and brand relationships could be their saving grace.

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