Designer discount outlet company McArthurGlen’s UK chief executive is hoping to cash in on the recession by offering customers a fix of top-end labels at bargain prices
Julia Calabrese’s roots may be in real estate but that does not stop her getting excited about her recent meeting with Santo Versace, president and joint chief executive of designer brand Versace.
The brand has a store in McArthurGlen’s Serravalle Designer Outlet centre in Piedmont, Italy, and US-born Calabrese, who runs the discount designer outlet group’s UK operation, is hoping that Versace might open more stores.
UK managing director Calabrese says working with retailers and fashion brands is a different experience from the real estate executives and office developers that she had worked with before joining McArthurGlen 10 years ago.
“Retailers have a more creative attitude,” she says. “Retail is fun and exciting. I get to meet great people at Ferrari, Dolce & Gabbana and Versace. I work with all these great brands and talk about the product –although I don’t get to do that every day.”
McArthurGlen had 28 centres in the US when it opened its first development in the UK – Cheshire Oaks near Ellesmere Port, Cheshire – in 1995. Calabrese joined from US global property firm Cushman & Wakefield, but had previously worked with McArthurGlen chairman Joey Kaempfer at real estate business Kaempfer Management Services.
Two years ago the group restructured to include three separate regional directors for the UK, northern Europe, and southern Europe. The change gave Calabrese a more strategic role, with an overview of the group’s operations across all its European centres.
Calabrese now oversees seven UK centres including Ashford in Kent, Bridgend in south Wales, Cheshire Oaks, an East Midlands outlet in Normanton in Derbyshire, Swindon, York and Livingstone in Scotland, as well as 10 European centres in the Netherlands, France, Austria, Germany and Italy.
The designer outlet concept is based on providing a mix of high street and premium brands discounted by up to 70% in an out-of-town retail environment, with easy access to transport and plenty of parking.
It takes no more than 40 minutes to get to an outlet from a target catchment area.
Shoppers get labels at lower prices, while brands have a convenient way to shift end-of-season lines or over-bought product. Brands in McArthurGlen’s outlets include Tommy Hilfiger, Polo Ralph Lauren and Ted Baker, alongside retailers such as Moss Bros and Marks & Spencer.
The model seems to be bucking the market trend, with like-for-like sales up 4% for the year to date across UK outlets. Calabrese says that in an economic downturn the centres are becoming a bigger draw for shoppers who want the quality and prestige associated with a label, but are growing more price-conscious.
Calabrese says it was an altogether different experience opening an outlet in the UK. “I’m not going to say it was easy,” she says. “In the US the key concern was location. It was as important here too, but there was a lot more politics when we launched in the UK. We had to deal with planners and get approvals for the centres. It was a new idea and they didn’t understand it.”
Convincing brands to back the concept proved to be just as challenging. “We had to educate the brands as many were not familiar with the concept. We spent a lot of time showing brands the centres, but many were convinced that British shoppers didn’t want a bargain.
“We thought that was ridiculous – who wouldn’t want to spend 70% less on something? Thirteen years on and 17 centres later, I think it’s clear that everyone loves a bargain.”
The first brands to come on board were Nike, Polo Ralph Lauren and Timberland. Calabrese also cites high street retailers Next and menswear tailoring business Suits You as some of the early UK adopters of the discount outlet idea. These familiar names helped to convince other retailers to sign up.
“Retailers are a close-knit group and many thought that if Ferragamo and Valentino were involved then it was safe for them too,” says Calabrese. “They like the competition but they also like the support of all being there together.”
In the UK, the brand mix is less luxury oriented than on the continent, with a larger proportion of high street brands and middle to top-end brands.
“Most of the businesses we started with are still in our centres,” says Calabrese. “But if a brand leaves us we try to replace it with something more premium.”
Calabrese says that while she is pitching the concept at top-end brands such as Dolce & Gabbana and Versace, such brands are generally more focused on international and emerging markets in the Far East.
Competition from these emerging markets has not deterred McArthurGlen from expanding its number of premium high street and designer brands over the past 18 months in the UK.
New additions to the brand portfolio over the past year and a half include luxury brand Mulberry, branded young fashion retailer Cruise, footwear business Kurt Geiger and premium brand Ted Baker, which all opened their first outlet stores with McArthurGlen. American lifestyle brand Original Penguin has also opened its first UK store at Cheshire Oaks. Calabrese says this is a sign that more brands and retailers are seeing the advantages of this lower-priced distribution channel. Some brands supply product specifically for the outlet shops, although most of the product is the remainder of last season’s stock.
“At the beginning, some brands were concerned that discounting would devalue their brand. They were worried that the quality of the shops wouldn’t be good enough to represent their label. But the outlet is another distribution channel if they are not selling as much or are over-extended with the units they have.”
Calabrese says that there are few gaps left in the UK for an outlet centre, particularly in the Midlands, but that the designer outlet market is relatively mature and there are no plans to open more centres in the country. The long-term focus is on emerging markets, particularly in the Far East and Russia, and the group plans to open about five centres in Italy, Germany and Greece over the next two years.
However, the UK business is growing, with like-for-like sales up 4%. Within this figure, Calabrese says that luxury brands are seeing double-digit growth. “And that’s before the Christmas and key season,” she adds.
This is also against a general dip in footfall at out-of-town centres, as increasing fuel prices curtail car journeys. “Traffic is holding in most cases and shoppers are watching their money, but transaction values have gone up,” says Calabrese. “We’re also getting different customers – shoppers who usually want to buy the brand at full price, but are now a little more price-conscious.”
All the leasing deals with brands and retailers are on a turnover rent – after a basic rent component, the retailer’s rent goes up or down according to the turnover of their business. There are also service charges and marketing charges, in line with what many other centres charge. “It’s a turnover business, so if for every pound you take I make 10p it becomes a partnership. We have a retail academy, so all staff get training and each brand will have their own dedicated point of contact at the centre to deal with any issues they may have.”
When Cheshire Oaks opened 13 years ago, discount designer product was a new concept, but now McArthurGlen competes in a crowded market. From the likes of TK Maxx to regular discounting on high streets, shoppers no longer have to travel to a McArthurGlen outlet to get their bargains. The boom in online shopping and the designer discount model being made available on the internet has meant that many customers can stay at home to do their shopping.
Calabrese is aware of the competition, and reels off the names of designer websites such as Asos’s discount site Asos Red, and invitation-only sites such as Vente-Priv饬 which all sell premium brands at reduced prices. She says: “The same shopper shops online and in stores. Younger shoppers are doing a lot more online, but they also like to go to stores and we think long and hard about how to get them out from behind the computer.
“We just need to make the experience in the shopping centre exciting. You need to continually upgrade the centre and the brands that you offer and we’re constantly talking to new brands.
“It’s not just other outlets and discounters – in this economic environment full price is a challenge. We’re going head-to-head with full-price players.”
In the past year and a half, McArthurGlen has spent £3.5 million upgrading its food courts at Ashford, Bridgend and East Midlands, with the other four centres due to get the same treatment over the next couple of years. Average shopper dwell time is currently 95 minutes across the outlets and keeping visitors on site is key.
“You shouldn’t be cutting back marketing spend in a downturn,” says Calabrese. “The centres have regular events. It’s very family oriented. Coming to our centre is a leisure day out and we aim to have people stay for two to four hours. Now the quality of shopfits is at luxury levels.”
McArthurGlen has also launched a full price airport retail concept, Collezioni, which sells luxury brands. The first shop opened in Venice’s Marco Polo Airport last summer. Although there are no immediate plans for the concept in the UK, airport locations are being looked at.
Calabrese says that in the recession between 1988 and 1992 in the US, the business had some of its biggest growth, and she expects a similar response in the UK.
“I don’t like to say that it’s a reaction to the economic climate, but it makes sense that if trade is more difficult brands have more stock they may want to put in our centres. Retailers always say they are buying tighter, but there are always lines that don’t sell.
“Now with the way the high street operates, fashion is getting faster and there are more ranges, so there’s fresher product in our stores more regularly as well.”
2002 Chief executive, McArthurGlen UK
1998 Chief operating officer, McArthurGlen UK
1995 Senior managing director, Mid-Atlantic Region, Cushman & Wakefield, US
1992 President, Barnes, Morris, Pardoe & Foster Management Services LP, US
1983 Senior vice president, Kaempfer Management Services, US Vice president, Savage/Fogarty Companies, US
Which is your favourite retailer?
I don’t have one particular favourite shop. I like to browse, moving in and out of a range of stores in a village environment, getting new ideas, discovering new experiences, finding inspiration. When I travel, whether for work or for pleasure, I like to seek out the interesting, the unique, the different. I was in New York recently and visited Japanese department store Takashimaya on Fifth Avenue. It talks about being a “store temple” and being “curators of merchandise” and that is exactly what Takashimaya is, complete with unique nuances, novelties and experiences in a stylised environment. It is a retail paradise and an inspiration and a pleasure to visit.
What is the most successful scheme you have worked on?
The development of our Serravalle Designer Outlet Village in Milan – one of our flagship schemes in terms of the brands that we offer and the complete shopping experience, from the architecture to the events we host, which include the International Jazz Festival and The Chocolate Festival.We have 180 brands including top names in Italian luxury retail, such as Dolce & Gabbana, Prada, Versace and Bulgari, to name a few. The architecture is stunning and they have taken inspiration from the local Piedmontese style. The scheme opened in 2000, but now offers 402,570sq ft of retail space following three additional phases.
What is your proudest achievement?
Definitely being appointed chief executive of McArthurGlen UK has been my proudest achievement.
What would be your dream job if you weren’t working for McArthurGlen?
I would love to own a luxurious spa on a tropical island.