I have a small brand which we sell via wholesale with no own stores. I want to know how cost effective it will be to sell surplus stock via my own factory shop. Am I better off approaching an out of town discount centre or just opening ad hoc Sale shops on short term leases?
The primary difference between a true factory outlet and an ad hoc shop is that you will be required under your lease to sell your stock at discounted prices. The factory outlets operate on turnover rents i.e. your rent is based on a percentage of your turnover. They also operate on shorter lease terms than you would normally expect and the landlord has the ability to terminate leases much more easily so they retain control of the retail mix and can remove an operator that isn’t performing. Similarly the tenant isn’t tied in to a long lease and can walk away much more easily than is often the case.
The alternative of short term leases is a realistic alternative as there are many vacant units available particularly in just off prime/secondary locations in many towns and cities and landlords are often willing to let on a short term basis which again gives the tenant flexibility. I cannot recommend which is best for your particular business however I would suggest you make enquiries along both avenues and determine which best suits your business plan.