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The transformation of UK outlets

The outlet market has moved on from being a simple discount haven to becoming destinations in their own right. 

McArthurGlen Ashford walkway new phase

Fashion outlets are increasingly becoming fashion destinations in their own right. Pictured: McArthurGlen Ashford.

The UK outlets market has been transformed beyond recognition over the past five years, with operators and the fashion brands and retailers they house upping the experience they offer to shoppers, who in turn see them as a destination for a day out.

This trend can be seen far and wide, from Value Retail’s Bicester Village in Oxfordshire to fellow operator McArthurGlen’s Designer Outlets, where fashion retail is combined with unique events and food and beverage offers.

“Our customers travel a long way,” says Adrian Nelson, group leasing director at McArthurGlen, which has six sites across the UK and a further 15 across Europe and Canada. “They tend to come four or five times a year and will have travelled up to an hour, so they sure as hell want a great experience.”

Offering good transport links, plentiful parking, clean facilities, free Wi-Fi and a well laid out centre are the basics now. Value retail chairman Scott Malkin calls these the “mechanics”. “These are things that are necessary, but they do not lift the soul.”

“I call that the ‘software’: what the brands do in-store and how we can work with them on their merchandising, staff training and communication of their brand values. It is the kind of thing that great department stores think about all of the time and so do we now.”

On the menu

At Bicester, which has been given the green light to add 28 new shops and 500 additional parking spaces, offering more includes opening a dedicated train station in October with a direct link to London Marylebone, and signing London private members club Soho House to open a restaurant, called Farm Shop.

“We are introducing the quality and consistency of a central London restaurant. This kind of development is a key part of our vision for the future,” says Malkin.

This shift away from a narrow focus on discount to destination shopping was driven by the realisation – by landlords and retailers – that outlet stores had some of the highest turnover per square foot in the retailers’ portfolios.

Not that many retailers would admit that, says Eric Eastman, executive director of luxury and lifestyle at property consultant CBRE. “That’s when the landlords said outlet stores had to be a proper reflection of the brand. There was resistance and some retailers wouldn’t use their branding.”

The major improvement in the quality of the outlet stores shopfits is one of the “biggest single changes” in the market over the past eight years, says Nelson. “I would challenge people to tell the difference between an outlet store and it full-price counterpart. Before, it was just a clearance channel and the shopfits reflected that.”

He adds brands no longer treat it as a bolt-on to their full-price business. Nelson says: “It is now a lot more organised and is often supported by its own team. In turn, the concern about brand protection from the tenants has lessened as they have become happier about the adjacencies.” 

It is a combination of these factors that helped to convince brands, including lifestyle fashion brand Joules, that it could open outlet stores without eroding the value of its core brand. It has six stores now at Bicester and its Irish counterpart Kildare, the Designer Outlets in York and Cheshire Oakes, at Land Securities-owned Gunwharf Quays and Clarks Village in Somerset.

“There has been a real shift over the past three to four years toward creating a destination shopping experience that is a day out and, often, a family day out,” says Andrea Gray, director of retail at Joules.

“The leisure offer improved and helped to improve the dwell time and more international customers started to visit, not just at Bicester but we are also seeing both international and domestic tourists at Kildare, Cheshire Oaks and Gunwharf Quays.”

Outlets continue to play an important part in helping clear end-of-season lines

Sue Carvell, commercial director for Cath Kidston

Lucia Marcuzzo, vice president of retail at Levi’s Europe, which has outlet stores in a number of UK outlets villages including Gunwharf Quays and Cheshire Oaks, adds customer buying habits have also played a part in making outlets lifestyle destinations.

“Consumers are not only dressing ‘high-low’, but they are also shopping high-low. What that means is that we’re seeing that customers who shop at our outlets are often the same as the ones that we see on the high street and online,”

While some brands, such as Coast and Cath Kidston, use their outlet stores as a key part of their clearance strategy, others such as Joules make product specifically for their outlet stores.

“Outlets continue to play an important part in helping clear end-of-season lines, which then allow our prime stores to focus on selling new stock,” says Sue Carvell, commercial director for Cath Kidston, which also has one outlet store in France.

Quality vs discount

However, a split has appeared in the UK outlet market – the oldest in Europe – with premium centres focusing on experience and mid-range players retaining a focus on discount. While the core offer of branded items at discount prices has not changed for any of the operators, with discounts of 30% to 50%, the kind of stock sold has.

Jo McWilliams, commercial director of Coast, which has four outlet stores also at Clarks Village, Gunwharf Quays plus Cheshire Oaks and Swindon, says: “The way we trade our outlet locations is based on two key things: the individual centre and its market profile, and the customer profile. At the premium locations, we are trading with stock that is no older than one year; a mix of old season and mark-down current season, at higher price points.

“At the discount locations, there is a greater mix of aged products with current season being the more fragmented and slower selling lines. Stock package tends to be more direct stock consolidations from the lower-graded stores.”

At the discount locations, there is a greater mix of aged products with current season being the more fragmented and slower selling lines

Jo McWilliams, commercial director of Coast

However, all of the brands are keen to make it clear, that this is the only difference between their outlet stores and the retailers’ full-price offer. Outlet landlords will not accept any less now, says Gray.

“They demand a premium feel and a high service level. We measure these stores against the same criteria that we measure our full price stores. We definitely find that some customers only shop at our outlet stores or are new to the brand and only discover us as part of their day out. That is why the experience is so important.”

To maintain that standard, McArthurGlen is currently refurbishing and extending a majority of its site. The Ashford Designer Outlet is being refurbished and expanded by 75,000 sq ft; Cheshire Oaks is undergoing a £3m renovation to upgrade walkways, facades and street furniture and is now in its final phase; an overhaul of Bridgend was completed last summer; and the £35m expansion and revamp of Swindon, including new space in its listed Long Shop building, was completed in the spring.

Expansions for the Designer Outlets at York and East Midlands are at early planning stages, with no completion dates yet confirmed.

These changes are supported by events such as a Vintage Festival, which ran at York and Swindon in May and featured an archive of vintage fashion by womenswear and accessories designer Angelo, and the arrival of Jack Wolfskin, the outdoor label, French brand Sonia Rykiel and Gucci.

Bringing in new brands and refreshing the mix is key to staying ahead now, explains Nelson, as the rise of online shopping means outlets can no longer just rely on price to bring shoppers in.

“We need to get the right brands at the right time,” he adds.

Unless you are Gucci, Armani or Prada, retailers will be competing with a host of rivals for space

Eric Eastman, executive director of luxury and lifestyle at property consultant CBRE

Reinvention and reconfiguring every year to reflect the “appetites and attitudes of our guests” is key to the department store model that Value Retail’s Malkin now believes best fits Bicester. He adds: “We work hands-on and at enormous cost to us to ensure that brands are greeted and incorporated into Bicester.

“We are constantly remerchandising and improving and every year 25% of our brands and retailers become bigger or smaller or simply different. It is a continuous process that reflects how brands themselves work and respond to external factors.”

That said, space is not as readily available as it might have been in the past and landlords can afford to be choosy now.

As Eastman says: “Unless you are Gucci, Armani or Prada, retailers will be competing with a host of rivals for space.”

With the opening of World Resorts scheme in Birmingham, which includes an outlet, in spring, there are scant new developments in the offing with many believing the UK market has reached saturation.

The Scotch Corner Designer Village, in North Yorkshire, is the only development awaiting planning.

Even without new schemes, competition in the market remains fierce with the obvious pressures from online. For Malkin, however, the hardest competition comes from within.

“We are always competing with ourselves. Whatever we do this year, we have to try to do it better next year.”

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