What is an Outlet Centre?: How do outlet centres fit into the retail dynamic?

Presented by:Lisa Quier Wagner

President, Quier Target Marketing

Lisa Wagner – Quier Target Marketing♦Started in the outlet centre industry in l988 with McArthur Glen in US – 22 centers opened in 6 years!

♦Opened Cheshire Oaks in 1995 with McArthur Glen Europe

♦Further openings in France, Sweden, Scotland and Germany with McArthur Glen and Outlet Centres International

♦Over 40 outlet centres in 20 years – and now Bucharest, Romania with Mega Designer Outlets

What is an outlet centre?

A collection of manufacturers’ owned, operated, or licensed stores selling overstocks, excess goods and overruns direct to the public

History of the Outlet Centre Industry

In 1800’s, US apparel and shoe mills began offering excess goods for sale to employees and then public

In 1936, Anderson Litter (menswear) pioneered “Factory to You” disposition centers for overstocks

In l974, the first Multi-Tenant Outlet Mall opened in Reading, Pa in a former apparel mill building

During late l970’s and ‘80’s, outlet centers opened due to:Consumer desire for status symbol brands Impact of economy and energy crisis on discretionary incomePressure on wholesale business resulting in underutilized factory

output Increased overseas manufacturing and long order lead timesDemise of exclusivity arrangements for brands in department stores Increased financial failures of department and specialty stores

History Continued

During ‘boom’ of 1980’s and ‘90s, outlet centers opened based on: Non-metropolitan markets/’edge of town’ locations Sensitivity to retail accounts High tourist trade

Around 2000, industry compressed through mergers and acquisitions; the industry repositioned more competitively

Recent trends driving US outlet center development: Consumer demand for quality, value and selection Recognition that outlet stores could be profit centers rather than

simply disposition Technological advances allowing manufacturers to increase

productivity and intentionally overproduce Growing strength of brands over department stores

Who is the outlet customer?

Extensive studies show consistent patterns: Demographic profile:

Predominantly Women Average age of 40 Typically employed; education level of some College+ Household Incomes $50,000 USD per annum+ (Middle class and above) Typically living in households with children 

Psychographic profile – Heavy shoppers; early adopters; inquisitive; brand-seekers

Current State of the US Outlet Industry – Very Healthy!

Centers getting closer to city centers   Village concept gets customers away from cars and into

pedestrianized plazas – increases impulse shopping, allows all stores access to customers, greatly enhances dwell time, sales results dramatically increased (98% of new projects are villages)

Current State of the US Outlet Industry – Very Healthy!

Upgraded store ambiance and amenities enhances brand image and loyalty

Few irregulars and overruns; more current season stock Strong sales patterns with less seasonality Tourism continues to be strong driver

Industry Snapshot:(As of April 2008, source: ICSC)

Number of US outlet centers: 217  Total outlet center Gross Leasable Area (GLA): 57 million

square feet = approx 17.8 million square meters Average outlet center GLA: 260,422 sf = approx 81,400 square

meters  Average size of the 20 largest centers in the US: 606,000 sq ft

(approx 190,000 sqm) 74 developers own 217 outlet centers: with the Big Three:

Chelsea, Prime and Tanger owning 93 44 new centers being planned currently

The Stores are What Make the Centre:(As of Dec, 2007; Source: ICSC)

Total number of outlet chains in US Outlet centres: 305 Total number of stores: 11,544 Average outlet chain size: 38 stores 2008 expansion plans: 348 new stores (66 chains reporting) 2009 expansion plans: 302 new stores (48 chains reporting) Number of parent companies operating outlet chains: 261

parent companies Number of parent companies operating multiple concepts: 51

chains operate 140 concepts totaling 6,337 stores 

The Stores are What Make the Centre:(As of Dec, 2007; Source: ICSC)

TOTAL OUTLET SALES OF OVER $17 Billion USD per annum representing approx 2% of total retail sales in the US economy

Global Expansion

Back-of-factory shops existed throughout Europe for centuries Proliferation of ‘gray market’ goods and resulting brand damage,

combined with success of outlet industry in US prompted European expansion

McArthur Glen Europe opened first ‘American-style’ outlet centre, Cheshire Oaks, in UK in 1995

Global Expansion

Now 117 outlet centers in 22 countries of Europe and UK; total of 24.3 million square feet or 7.5 million sqm

Asian sector accounts for 5.3 million sqf; Turkey has 6 centers, Dubai has a 1 million sqf Dubai Outlet Mall; Australia and New Zealand have 16 total and one in South Africa; South America is developing and BRIC (Brazil/Russia/India/China) is next focus of interest

Global Expansion

Of European centers, 59 companies own 117 of the centers, creating diversity

20 largest centres total more than 8 million sf; 17% of the centres account for 33% of the GLA 

Developers are planning 28 Phase One outlet schemes totaling nearly 6 million sf (1.8 million square meters) of GLA; 14 expansions to existing projects are planned in the next 2 years

Global Expansion

 In Eastern Europe: Poland: 6 outlet centres open (pop of 38.5 mil)Czech Republic: 2 outlet centres open (pop of 10 mil)Hungary: 2 outlet centres open (pop of 9.9 mil)Romania: 1 village concept outlet center opening; 1 mall

concept (pop of 22 mil)How many outlet centres could Romania hold? 

Global Expansion

Global Expansion

Global Expansion

Global Expansion

Predictions for outlet centre development in Romania:

The same rules will hold true as in the rest of the world: Centers will prosper in edge of town locations primarily If they can see it, they will get to it – visibility to the highway

trumps access every time It takes a village – get customers away from the cars and into an

open-air plaza Critical mass is critical – centres are getting bigger as a result of

consumer demand for depth and breadth of offer

Predictions for outlet centre development in Romania:

Tourism will be a driver A ‘known’ destination is much easier to market Traditional retail sensitivity is not a threat Leisure is a complementary aspect – not an essential element The brand/value equation has to deliver Romanians are going to love outlet centres – and the outlet

industry is going to embrace Romania!

Contact Us:Lisa Quier Wagner

President, Quier Target Marketing