Despite alternative channels springing up to clear excess stock, the UK’s outlet sector is now the biggest in Europe and is luring young fashion brands to sit alongside designer labels.
During the economic downturn, the outlet sector has become one of the fastest-growing and most profitable sectors in European retail, consummating shoppers’ sharpened love of a bargain with the theatrics of destination shopping.
At the end of this year, 180 outlet centres are likely to be operating across Europe, a 20% leap in 12 months, with exponents estimating there is the potential to treble that number. With 44 outlets, the UK has the largest and most mature outlet market in Europe.
Henrik Madsen, managing director for the UK and northern Europe at Europe’s biggest outlet operator, McArthurGlen, which at the start of September opened a major extension to its outlet centre in Berlin, says the UK outlet market wants to broaden its demographic appeal and expects young fashion will play a major role in this.
“We’re looking to encourage more youth brands to our centres. The designer [sector] has always done well and we saw something like a 20% like-for-like sales growth in this sector over the past 12 months,” he says. “But we also want to attract tomorrow’s consumer. Brands like Original Penguin, G-Star and Superdry are using our centres and are a big draw for 20 to 30-year-olds, who will hopefully visit other areas of the centres.”
Extending their reach
For young fashion brands and retailers, outlets offer a chance to dispose of excess stock and extend reach, although concerns over sales cannibalisation and brand integrity remain among some.
There are, after all, plenty of alternatives for distribution of excess stock, from selling through the successful TK Maxx chain to a raft of online routes, including discount sites. Among these is auction powerhouse eBay, which has launched what it describes as an “assault on the fashion world” to increase its share of clearance fashion sales.
eBay’s Fashion Outlet, which sells product from 30 clothing brands including the likes of Superdry, Karen Millen, Ted Baker and Bench at up to 70% discounts on high street prices, is currently the site’s fastest-growing sales channel, achieving sales of £4m in the three months from June to August. Angus McCarey, director of eBay Enterprise, says: “Over the past year we have seen a 25% increase in the number of shoppers choosing to shop online at eBay. We are able to provide direct access to a wider range of well-known, high-end brands and at lower prices than are available elsewhere.”
However, those brands in tune with the concept of outlet centres - many of which also distribute through eBay’s Fashion Outlet or alternatives - point to high levels of control, customer interaction and brand extension as the advantages of a self-owned, bricks-and-mortar discount strategy.
Chris Warren, partner in the retail team at property agent Cushman & Wakefield, says: “[Selling via outlet centres] must be managed carefully and location choice must be selective but it is really a case of brands managing their outlet strategies in the same way as their main retail operations,” he says.
He cites G-Star, which started with a store at Value Retail’s Maasmechelen outlet in Belgium and has since opened stores at premium centres Bicester Village and Cheshire Oaks in the UK.
“G-Star typically places its [full-price] stores just off luxury retail street destinations. By choosing two of the highest-end outlet centres in the UK it has mirrored that approach for its outlets,” says Warren.
John Michel, head of shopping centre management at property agent King Sturge, adds: “The [shopping] experience is very important in the outlet sector, as is location. Take a brand like [boardsports brand] Animal. It has the opportunity to exploit the popularity of surfwear in the southwest of England [by opening in centres in the region].”
Madsen stresses that brands have to learn how best to operate an outlet strategy. “For young fashion brands there is now more opportunity to work with a younger consumer [who shops specifically at outlet centres] but it is an educational process, understanding exactly how outlets work and that they can complement their existing business, cash flow and inventory management.”
Anna Jones, head of retail at GVA Outlets, which operates centres across Europe and acts as an agent in the UK, cites Osprey London managing director Graeme Ellisdon as an example, saying he was “very keen to learn and took a very open approach to establishing the first outlet store”.
Leather goods brand Osprey London has maintained the brand ethos through high-quality fit-outs, Jones adds. “It’s something that concerns a lot of brands but you only have to look at a market like Italy to see how well it can be achieved.”
Case studies: brands making outlets work for them
Fossil Maintaining Brand identity
Fossil senior vice-president Wolfgang Thoeren says the accessories, watches and clothing brand aims to have four outlet stores in the UK within the next couple of years.
“We see the stores as a distribution channel for excess stock,” he says. “As our full-price stores are getting larger, the outlet stores will also need to become bigger.”
Fossil has one outlet store at McArthurGlen in York and is to open at Cheshire Oaks this year, with openings at outlets in Swindon and Ashford planned for 2011 and 2012. The brand has opted for a sophisticated shopfit, which makes its outlet stores look similar to its full-price units.
“We made a decision to take this route,” says Thoeren. “It’s not like 10 or 15 years ago, when outlet centres were more basic. We want the Fossil environment within a nice outlet environment, to create a good feeling. We also do not manufacture for outlet.”
Lacoste Controlling distribution
Lacoste has adopted an outlet strategy to sell off excess stock and past-season product, preferring to take control of its discounting strategy than allow others to do it on its behalf.
Chief executive for Germany and Austria Sanjiv Singh says outlets will deliver the brand to new consumers.
“TK Maxx is a route many take but we decided not to supply it,” says Singh. “Our concern with selling to other distributors is about where the product might reappear. Even if you sell it to Ukraine, it somehow seems to pop up next to one of your stores. Outlets are a much more controlled channel.”
Franchisees and wholesale stockists have accepted that outlets do not cannibalise sales, says Singh. “Let’s face it, we have to do something with the stock. We can’t just burn it,” he says. “It also makes a premium product accessible to people who will later become full-price buyers.”