The latest outlet centre to open in Gloucester seems ideal for today’s cost-conscious shopper, but with a glut of branded value havens across the UK is there room for more? Liz Morrell reports
As the most recent outlet centre to open, the two-month-old Gloucester Quays Designer Outlet is shiny new. Literally, in fact – you can almost see your face in the polished floor. “We have laid the equivalent of one and a half football pitches of granite marble on the floor,” says centre director Franco Muccini, adding that the quality build has been designed for longevity.
Gloucester needed to impress. It is likely to be the last outlet centre of its size to be built in a market that, with 41 UK centres, has pretty much reached saturation. News this week that the Hornsea Freeport centre in Yorkshire has entered administration has heightened concerns that not all the UK’s factory outlets will be able to prosper.
Muccini says sales on opening day in Gloucester were “exceptional” with a number of the centre’s stores topping the country in terms of trade. So with visitors on opening day, at least, seemingly forgetting the recession, how is the rest of the market doing? In Mintel’s Factory Outlet Centres – UK report, published last December, it said sales growth had slowed, up 4.6 per cent to about £1.3bn of retail sales last year. “It’s far from booming but it is still growing,” says Katrin Magnussen, editor of the report.
MHE Retail chief executive George Wallace adds: “The leading outlet villages have continued performing very well during the recession – showing decent sales growth and increased customer traffic.” Meanwhile, Land Securities portfolio director for retail and hotels Deepan Khiroia says its outlets are “doing very well”. At Gunwharf Quays in Portsmouth footfall has remained fairly constant but turnover is up 1 per cent. The Galleria in Hatfield, meanwhile, has seen a 2.7 per cent increase in cars on last year – although Khiroia admits that sales are flat.
“Places like The Galleria have more voids as a result of administrations, but sales are not really down,” he says. “The retailers we have put in – such as Gant and Calvin Klein – are doing really well,” he says.
Specialist asset manager and retail property developer Realm manages 11 outlet centres – including the first UK outlet centre Clarks Village, which opened in 1993. Its head of marketing and communications Andrew Duncan tells a similar story. “In turnover terms we are seeing a continuation of a rise that started back in January 2008 with an average like-for-like increase of 5 per cent for the year to date,” he says.
The same seems to be true at McArthurGlen’s portfolio of seven designer outlets, where average footfall figures are up 4.4 per cent and sales are up 6 per cent for the second quarter compared with the same period last year. Average sales of designer brands and accessories are up more than 20 per cent across the UK centres.
At what is generally acknowledged as the only true designer outlet village in the UK – Value Retail’s Bicester Village – both spend per visitor and comparable sales are up 20 per cent. In the past six months 25 brands have been introduced, including labels such as Amanda Wakeley and Donna Karan in the past two weeks alone. “We focus solely on the high-end tourist and high-end brand customer,” says Value Retail group marketing and retail director Frank Blanchett, who explains that tourists have been driving the growth.
Outlet centres are back in the forefront of customer’s minds – especially those at the designer or brand end – as shoppers look to buy smarter. Duncan says: “As the credit crunch began to kick in last year a lot of people were rediscovering outlet centres and that effect has now snowballed.”
He adds: “Everyone is looking to stretch their pound and we are seeing a lot of customers who would normally shop designer on the high street coming to outlets because they don’t want to look as extravagant and want to make their money go further,” says McArthurGlen managing director for UK and Northern Europe Henrik Madsen.
And as customer interest has grown, so has that of the retailer. Retailers such as Quiz and Bench have recently entered the market and more high street names are expected to follow. Realm leasing director Christine Finlay says it has witnessed an increase in enquiries generally from retailers already in the market but also from the big fashion retailers. “They realise that this does give them the opportunity to trade in centres substantially cheaper and also gives them the opportunity to trade alongside big brand names,” she says.
At Gunwharf Quays, Superdry has launched its first outlet store and Italian fashion brand Replay opened its first UK outlet store in McArthurGlen’s York Designer Outlet in June. Many believe the market is only set to get bigger as retailers have more stock to dispose of. Muccini says: “It’s the best storage place you are ever going to have for your unsold product and some retailers will trade not necessarily to make a profit but to eradicate a cost.”
Others are growing it as a separate business. Madsen says: “There are those that have their full price, airport, wholesale and franchise business and see it as another channel.”
Gap chief executive and chairman Glenn Murphy outlined his support of the channel in the retailer’s most recent annual report. He said: “Our outlet stores are especially well positioned given the recent economic shifts. The company’s already strong US-based outlet business became even more successful in 2008 and that has motivated us to expand further.”
Indeed, in its annual report, Gap says some of its outlet stores are “the most productive” in the retailer’s portfolio. In the UK, Gap has 14 outlet stores and will open four more by the end of this year. A spokeswoman says: “Our outlet division caters to customers who love the style our brand is known for, but are more focused on value.”
As a result of such interest, outlet landlords are holding their own – with a base plus turnover-related rent lease still the norm. For Realm, Finlay says: “All our leases are turnover-related, which is very tenant friendly because it’s in absolutely the tenant and the landlord’s interests to work together to do everything to maximise sales, therefore it’s a much more proactive environment than a traditional shopping centre.”
Of the terms at Land Securities’ schemes, Khiroia says: “There is no change.” He adds: “At Gunwharf Quays we are actually improving on our terms from last year and for every empty unit there are two or three retailers bidding,” he says.
But as with the rest of the market, deals are becoming more flexible. Finlay says that until fairly recently Realm used to grant 10-year leases, but now shorter leases are in demand. “We are generally doing five-year deals with breaks related to turnover so that retailers can effectively try out outlet retailing,” says Finlay.
Bench is one such retailer. He says: “It is an example of a retailer we bought in on fairly flexible terms that we are now renewing on more permanent deals.”
Outlet centres are also innovating – something Magnussen believes there should be more of if they are to continue to buck the trend. “There needs to be more reasons for people to visit,” she says. Bicester Village recently introduced an Elizabeth Hurley pop-up shop – a concept that it plans more of. Blanchett says: “It provides an opportunity for brands to try us and experiment with us and for us to experiment with them.”
But it’s not all plain sailing. Muccini admits that opening Gloucester Quays Designer Outlet in the middle of a recession hasn’t been an easy task and says some flexibility has been necessary. “Retailers’ demands can be a bit unrealistic and we have had to make compromises, but we want people to want to be in the scheme first rather than try on a deal and get it. It’s not for us to set a precedent we can’t afford to meet,” he says.
Retailers also have to be aware of the different style of operating in an outlet centre – underperform and the landlord has the option to remove them.
Equally, every element of the offer from product to marketing must be as sharp as on the high street, and in some cases even more so because of the types of brands such stores may sit alongside.
As Muccini says: “You have got to understand all the elements that make up a normal retail proposition – the price, product, size, environment and customer service must all apply to outlet stores.”
Get the mix right and the outlet store is no longer just a clearance store but can be a profit maker in its own right.
The big Outlet operators
One in the UK – Bicester Village, the highest average yield per sq ft for an outlet shopping destination in the world
11 outlet centres in the UK – Astle Outlet Park in West Bromwich, Atlantic Village in north Devon, Clarks Village in north Somerset (the first to open in the UK), Freeport Braintree in Essex, Freeport Fleetwood in Lancashire, Freeport Outlet Mall in Stoke on Trent, Junction 32 (previously Freeport Castlewood) in west Yorkshire, Junction One in Northern Ireland, Lakeside Village in Doncaster, Riverside Place in Cumbria and Sterling Mills in Scotland
McArthurGlen Designer Outlets
Seven centres in the UK – Ashford in London, Bridgend in Cardiff, Cheshire Oaks near Chester (the UK’s largest), Livingston in Edinburgh, East Midlands in Nottingham, Swindon and York
The Peel Group
Gloucester Quays Designer Outlet – the most recent outlet to open
No comments yet