Outlets: The unsung heroes of retail

Don’t bore Europe’s outlet sector retailers with recessionary tales of woe; they are too busy ringing their tills to listen. Or at least that is the way it seems. During the downturn the outlet sector has become one of the fastest growing and profitable sectors in the European retail market, capturing the consumer’s traditional love of a bargain with shoppers’ sharpened price focus and also a sense of destination.

There are presently more than 150 outlet centres across Europe, with that number likely to be swelled by an additional 30 by the end of this year. Some believe there is scope for the current supply across the whole of Europe to treble if the Continent is to catch up with the outlet centre’s spiritual home, the US.

Opportunities for growth

Henrik Madson, managing director UK and Northern Europe, for Europe’s biggest outlet operator McArthurGlen, agrees that the British market has reached maturity but does not rule out further growth. “With seven centres spread across the UK we are pretty happy with our geographical coverage but we are always open and every month a new piece of land or a possible scheme comes up,” he says. “But we are more likely to focus on extending our current centres. For example, in Swindon we are adding a third phase of 50,000 sq ft.”

Instead he believes that the major issue for the UK outlet market is broadening its demographic appeal. “We are looking to encourage more youth brands to our centres. Designer has always done well and we saw something like 20% like-for-like sales growth in this sector over the past 12 months,” he says. “But we also want to attract the consumer of tomorrow and brands like Penguin, G-Star and Superdry are using our outlet centres and are a big draw for the 20- to 30-year-old market, who will hopefully be interested in other areas of the centres.”

GVA Outlets director Brendon O’Reilly believes retailers need to reappraise the way they use outlet centres against the reduction in stock levels and therefore surplus stock that has been routed through the channel. He notes that the US market has ridden its way through a number of recessionary cycles but for the UK the transition from a deep recession is something new.

“Outlet centres have been used very effectively to sell out a mountain of stock but with retailers and brands manufacturing far tighter quantities many outlet retailers have some careful thinking to do,” he says. “Retailers and brands now have to consider their strategies and how they balance their stock and the product manufactured specifically for outlets. They have to look at the channel differently. In the US, manufacturing techniques for certain products are adapted for outlets and core lines are made available to complement the outlet offering.”

For example, brands such as Nike ensure that all their stores, even in the discount-focused outlet centres, include staple lines like white socks because there is a consumer expectation that such items will be available.

GVA Outlets head of retail Anna Jones adds that for brands to make a success of their outlet strategy they need to work to understand the channel. “Accessories and leather have become more prominent in outlet centres and were an obvious addition to the fashion offer,” she says.

GVA Outlets’ leasing team have worked with the luxury leather goods brand Osprey London on its outlet strategy and Jones says that managing director Graeme Ellisdon was “very keen to learn and took a very open approach to establishing the first outlet store”.

Osprey London has maintained the brand through high-quality fit-outs and a “great sensitivity to value and the brand”, she says. “It is something that concerns a lot of brands but you only have to look at a market like Italy to see how well it can be achieved.”

Crossing the channel

As for growth in the UK, Chris Warren, partner in the retail team at agent Cushman & Wakefield, adds: “There are not that many gaps where you would try and develop,” but stresses that outlet centres have become a very important channel and that sales have been sustained during the downturn.

“They fit well with value consciousness and consumers visit them typically three or four times a year in purposeful trips where they intend to spend money,” he explains. “Fashion has and continues to lead the market - most good schemes have about half devoted to fashion, with perhaps another 20% of sports retail. We have seen some new sector entrants - Bose has seven stores at outlet centres and Toshiba has expanded having debuted at Cheshire Oaks.”

Jones says she can see more potential for footwear, which occupies a similar position to accessories as a complement to mainstream fashion offers, and which is currently dominated at UK outlet centres by Clarks.

Madson clearly favours youth brands for growth but admits that the focus of the company’s capital programme will be outside the UK. “Germany is an obvious market - it is very under-developed. We have taken a two-pronged approach, given the strict planning restrictions in the country,” he says.

“On the one hand we have successfully opened our first phase of Berlin and will open near Hamburg, on the other we have established sites in the Netherlands and in Salzburg, Austria - close enough to attract German consumers and able to open seven days a week.”

McArthurGlen

Based in the UK

• Operates 19 centres in the UK, Austria, France, Germany, Greece, Italy, Luxembourg and Netherlands
• Under development: Italy, Germany and Greece
• McArthurGlen will open more than
• 1.5 million sq ft of retail space across Europe in 2010 and 2011 at new schemes near Naples, Athens and Neumünster near Hamburg; plus extensions at six existing centres in Berlin, Veneto near Venice, Roermond near Düsseldorf, Parndorf near Vienna, Barberino near Florence and Castel Romano near Rome

GVA Outlets

Based in the UK

• Operates nine centres in Bulgaria, Czech Republic, Denmark, Hungary, Switzerland; with outlet centre Fashion House in Poland and Romania
• Under development: Germany, Serbia, Slovenia; with outlet centre Fashion House in Romania and two in Russia
• GVA’s thrust is towards Germany and Central and Eastern Europe

Neinver

Based in Spain

• Operates 11 centres in Spain, Italy, Poland, Portugal and Germany
• Under development: two in Poland, two in France and one in Spain
• Late last year Neinver and MAB Development signed an agreement for development in France and Germany and identified four initial projects in France. The joint venture aims to invest e135m (£119.9m) over five years

Value Retail

Based in the UK

• Operates nine centres in the UK, Belgium, France, Germany, Ireland, Italy and Spain
• Specialises in high-end outlet centres, typically located close to European capitals and recognised retail centres, such as Paris, Milan and London with Bicester Village (pictured)