Outlet stores: an attractive retail model undergoing major changes

By

Matthieu Guinebault

Translated by
Nicola Mira

Published
Nov 15, 2018

MAPIC, the commercial real estate trade show held in Cannes, France, on November 14-16, also staged the second edition of the MAPIC Outlet Summit, on November 13. It was the occasion for developers, brands and retail specialists to turn their attention to the potential of the inventory clearance market, and on how its model needs to evolve.

Over 300 industry professionals took part in the event, whose popularity meant it was held in a new venue, the lavish function rooms at Cannes’ Majestic Hotel. A popularity which underlined how brand outlets are “undoubtedly one of the most promising models for the commercial real estate industry,” said in the opening address Nathalie Depetro, director of MAPIC. Her introduction was followed by an afternoon of discussions and presentations on the changes brand outlets need to introduce to respond to new in-store experience expectations, to e-commerce and new technology and to Millennial consumers.

A specific consumer target, about which David Lardera, CEO of the Scalo Milano outlet, opened two years ago, noted a distinctive trait. “Our brand outlet is served by the Milan underground, something which I think is significant, now more than ever,” he said. “Because, talking about young consumers, we must realise that the majority of them don’t have a car. And this means we need to rethink our accessibility,” he added. A point that was confirmed by Marc Dambremez, in charge of retail outlets and asset recovery at Levi Strauss: “One of the findings that most surprised me going through our data is that our outlet store clientèle’s average age is significantly higher than that of our other stores. The big challenge for us is how to ensure a future for our outlet stores in these conditions.”

“We must make every effort for the outlet store experience to satisfy consumer expectations, and we all know how important they are these days,” said Fabien Stutz, senior director of real estate and store construction for Nike in the EMEA region. Nike operates 140 retail outlets in the region, excluding Converse and partner stores, and Stutz underlined how Nike's strategy has changed in the area: “We think we must move faster than before, we must be constantly on the look-out for novelty. But this kind of shift must be made together with landlords. If it isn’t a joint effort, it doesn’t make any sense.” 

A consideration that was shared by all participants, and which in this day and age goes beyond the marketing and event-creation dimension, to encompass the as yet underexploited opportunities afforded by data analysis. “Nowadays, a solution that is fully consistent with the omni-channel experience of customers doesn’t exist,” said Sébastien Sommer, marketing and retail Ddirector of developer Neinver Europe. “What is certain is that both brands and landlords have their own statistics. And pooling them together could produce powerful analytical tools.” 

David Lardera was of the same opinion: “I don’t think the internet is the devil: I think it's a chance for redemption. It gives us a huge amount of information which enables us to reach out to young people in a targeted way. And this gives great results. It’s our job to start from there and create a genuine experience.” Confirming the opportunities afforded by the web, Haorna Wu of TH Real Estate indicated that in 2025, while the e-commerce share of world trade will have grown from 9% to 25%, that of outlet stores is expected to remain stable at 13%, e-tail chiefly encroaching on department stores and specialised retailers.

However, the shopping experience offered by outlet stores must be nurtured with new digital tools, as shown by the work of Wishibam, a French shopping assistant app which provides information on store inventory, at the new The Village outlet centre for example. “From the consumer's point of view, besides accessibility, the obstacles are size availability, queues and the lack of shop assistants,” said Wishibam’s CEO Charlotte Journo-Baur. “By simply informing consumers about the availability of in-store stock, the stores’ footfall has increased. And we are ready to go even further, deploying a ship-from-store service to enhance the experience,” she added.

This kind of seamless online/offline coordination, according to Dierk Schneider, director of global retail real estate at Swarovski, should erase the difference between the experience enjoyed in traditional shops and in outlet stores. “Customers don’t have different expectations [between the two],” said Schneider. “We must therefore offer them consistency, hence we decided to make no distinction in the way we treat our stores, between traditional and inventory clearance ones.  Some technical adaptations are of course involved, but to customers they must look and feel the same,” he added.

The outlet store experience, like that in shopping malls, now puts a great emphasis on catering services. “People who eat [in outlet centres] are also those who spend more time there, and more money,” said Steve Dumans, vice-president of design at developer Unibail-Rodamco-Westfield. “If we can manage to make the shopping trip a fixture in their lives, it could eventually turn into a ritual, a destination,” he added. Michel Reuvers, in charge of catering at McArthurGlen outlet centres, echoed Dumans’ words. “Great care should be paid in how we design catering services nowadays, since it could otherwise cause issues going forward,” he said, adding that “the first mistake is to think that catering units must be similar to the other units in terms of area and returns. There has to be variety, with something for each time of day, for all tastes and for the whole family, if we want catering services to make [customers] feel like stopping there, and coming back.”

International experiences were also compared at the summit, and there were a few surprises. TH Real Estate pointed out that, despite the large number of outlet and inventory clearance centres in China, they still have a low penetration rate by number of inhabitants. By this criterion, South Korea, the USA and Australia are the most mature markets. Brandon O'Reilly, promoting the future Fashion House outlet centre in St. Petersburg, Russia, reminded the audience that the country only has five brand villages. According to Haorna Wu, outlet centres can expect to reap great rewards from the forecast explosion in the tourist market in the coming years. In Denmark, this originated a project for the creation of 120 outlet store units right next to Legoland, the country's main leisure destination.

Omni-channel retail, tourism, the shopping experience and family expectations: among the various aspects debated at the MAPIC Outlet Summit, price was only briefly touched upon, proof that the outlet store sector is fully aware that price alone isn’t sufficient for good business.