Practical and profitable: the appeal of retail outlet centres
Retail outlet centres in the UK have continued to perform well, bouncing back from the pandemic to welcome international and domestic shoppers once again. In this article, we explore the appeal of outlet centres as a location for occupiers and consumers alike, and some of the reasons they continue to prove resilient.
Outlet centres continue to enjoy strong performance overall
2022 saw a total of 260 openings and 230 closures across the 36 UK outlet centres we analysed: this net increase of 30 units represents the most significant growth (+1.13%) of any location type over the full year. This is especially interesting in a year where shopping centre vacancies continued to improve and retail parks were the only other location type to see a net growth in units (+0.41%). In some ways, outlet centres provide the best of both: the accessibility of retail parks coupled with the strong provision of major brands traditionally on offer at shopping centres. Outlet centres are well-placed for accessibility by car, and some are particularly easy to reach by train: London’s Marylebone station offers a well-publicised regular service stopping at Bicester Village.
They provide exposure to a wide audience
Outlet centres offer a prime opportunity for brand exposure, with impressive visitor numbers comprising domestic visitors and tourists. In 2019 alone, Bicester Village welcomed over 7 million shoppers. 35% of these had come from abroad. The outlet centre takes care to cater to international visitors— luxury shoppers from the Middle East form one of its key audiences and are welcomed by signs and customer assistance in Arabic, along with VIP guest services. The weakness of the Pound, especially towards the end of 2022, has given tourists even more spending power in the UK.
Tourists from China have also included Bicester in their UK itineraries for its lower-price luxury offer and the (since abolished) VAT-free shopping for non-EU visitors; prior to the pandemic, Bicester Village employed 150 Mandarin-speaking staff to offer assistance to shoppers. During the pandemic, the outlet centre pivoted its marketing strategy to focus on domestic visitors but made sure to sustain its relationships with its overseas clientele. This strategy has paid off well in the post-pandemic period, engaging UK shoppers while encouraging the return of international visitors.
Some brands have shown particular interest in outlet sites. Tommy Hilfiger, Levi’s, Superdry and New Balance have each opened at least one site in each of three outlet centres: Bicester Village, Icon Outlet at The O2 and London Designer Outlet. For retailers, outlet centres present an opportunity to profitably clear excess stock, increase brand visibility and perhaps establish new relationships with customers who would not usually shop at their stores.
Outlet centres can attract high levels of spend per visitor
Retail outlet centres create appealing conditions for spending: shoppers often dedicate several hours or a whole day to visiting an outlet centre, so may be more inclined to justify the trip by making a purchase. This also presents an opportunity for F&B occupiers to offer restaurants, coffee shops and bars to support long dwell times.
Although prices may remain high for some brands, the idea of finding a bargain provides a sense of satisfaction for many. Buying an item marked with a discount often makes us feel as though we have saved money, and this may encourage customers to spend more in the same trip.
Outlet centres tend to host a mix of luxury designer brands and premium high street offerings, accommodating a few different income profiles. Luxury retail in particular remains largely resilient through periods of widespread economic difficulty— those with the disposable income to shop at luxury brands will likely still have disposable income despite cost-of-living increases. When it comes to luxury items, shoppers often prefer to buy in person, which luxury stores cater to with strong experiential offerings and in-store services.
The appeal of outlet centres for occupiers and consumers
Outlet centres can be both practical and profitable for retailers, allowing them to sell excess stock in a dedicated space without devoting large sections of existing stores to sales racks. They also enable brands to create new fans and provide a highly-visible experiential touchpoint. Shoppers can indulge in a day-long shopping trip and find their favourite brands in one place, offering premium products at reduced prices.
Even in 2023, outlet centres may continue to prove resilient, as they continue to present comparatively good value for some shoppers and attract a stable base of luxury consumers who are less impacted by rising living costs. However, British brands and retail sector organisations have called for the reinstatement of VAT-free shopping, once a major draw for tourists. The removal of the scheme, they say, has made the UK less competitive as a shopping destination when compared to other European countries (where it is still in effect). Outlet centres have carefully considered their approach to retain domestic and international customers over the pandemic, so it is hoped that they will continue to trade well.
Katie Girdwood is a Business Development Manager for Local Data Company.