Our recommendation for an excellent 5-minute read by Ken Gunn, the authority on Designer Outlet Centres. Learn from him why consumer experience drives outlet expansion, and how to change consumer behaviour.
Creating the complete consumer experience – the driving force of outlet expansion
Our clients in the outlet industry come to us with a mix of needs. Developers, investors, and operators want to understand how to maximize sales, income and asset values, while asset managers and leasing teams want support to attract high spending customers and the most desirable brands.
Understanding how to change consumer behaviour lies at the heart of FSP’s outlet insight. FSP’s 2017 European Outlet Shopping report shows how successful outlet centres and operators are producing market leading performance by using insight and intelligence to shape a compelling visitor experience.
The report shows sustained growth in outlet centres, as the industry adapts to smaller markets, evolving customer retail and leisure trends, increasing numbers of brands and evolving competitive landscapes. We’re seeing innovation in design, location types, target customer and merchandise mix as outlet centres continue to outperform other retail formats.
As a result, the number of active brands in outlets expanded by 4% and the number of stores by 7% in 2016. Estimated European outlet industry sales rose by 51% between 2013 and 2017 to €17.3bn (8.6% p.a.). This growth is 10 times the general rate of growth in European retail sales (0.8% p.a. between 2013 and 2017).
Importantly, operators are increasingly aware of the potential of evolving outlet centres into destinations, in line with ever-increasing customer expectations. As for consumer-led trends, here are the key themes coming through in outlet development:
An appropriately balanced retail mix
Our report shows that the winners of outlet expansion – in the UK and Europe – are those that get the balance right in terms of luxury and brand equity. Cheshire Oaks has got this spot on, with its ability to attract the right mix of high-end and accessible brands, in line with the aspirations of its visitors.
Changing outlet locations
As brands increasingly recognize that outlet is the entry point for new customers, rather than a dilution of brand equity, we are seeing a move away from remote, purpose-built sites towards more authentic, urban locations. Gunwharf Quays and Outlet City Metzingen ooze urban diversity, while Hackney Walk is joining up new-build with railway arches and existing.
With 200 outlet centres across Europe, the days of finding heavily populated catchments near capitals and second cities have almost gone, leaving sites at a premium for those operators whose outlet product can only work in this type of market. Elsewhere, however, innovative investors are working with more adaptable operators to create new opportunities. The exciting Honfleur Normandy project, for example, will target older tourists from the UK, metropolitan tourists from Paris and under-shopped catchment residents from Northern France. There are several similar concepts proposed in the UK, including Scotch Corner Designer Outlet in Richmondshire.
A day out experience
The speculative nature of visits to outlet centres and the appeal of quality brands at discounted prices make outlet shopping more akin to a leisure trip than to a functional chore. Progressive operators are looking to increase sales by curating attractive destinations, which package together desirable brands, great F&B and a strong leisure offer, so that visitors have more reasons to visit and more to occupy them than just shops. Gunwharf Quays has long been the UK’s most complete outlet experience, but emerging schemes such as the O2 are likely to raise this concept to new heights.
For many outlet specialists, the trends above may not be particularly new. FSP believes, however, that they remain under-exploited and are increasingly important for future growth. In today’s digital and physical world, consumers and brands have more choice than ever before. The outlet centres that succeed will be those which best support brand values and innovate to become in the complete consumer experience for the unique markets they serve.
About the Author:
Ken Gunn is Managing Director at FSP and can look back on 30+ years of work experience in retail property. He uses his deep understanding of consumer shopping habits, retail centres and leading edge analysis to support FSP projects and assist clients to realise the true potential of their shopping centre and retail park investments. He is a widely-respected authority on Designer Outlet Centres and in the last decade has worked on over 100 outlet projects in 30 countries.