Updated: Jul 30, 2019
Changing demographics, generational attitudes, new technologies and globalisation have created a new consumer paradigm. Physical retailing is transforming from functional locations where product is consumed to immersive destinations where place, space and time are consumed.
Growth in online sales (but not necessarily profitability) and increases in the cost base of physical retailing has led to diminished demand for retail space and greater need for processing returns
Conscious customers now base their buying decisions on many factors beyond price. These new consumers, led and influenced by millennials, are exerting influence on retailers and forcing them to adapt
The majority of shopping centres (and management practices) are designed for a previous generation of customers and are increasingly obsolete
Footfall is declining on many high streets as consumers migrate to more appropriate experiences. Over the last 5 years, sales in physical stores has been less than half the long-term historic trend
Customer experience is now essential as retailers and centres strive to differentiate themselves in a challenging and crowded market
According to consultants AT Kearney, investors need to break from yesterday’s patterns and practices and fully embrace a consumer-driven future through the creation of Consumer Engagement Spaces which offer mixed-use visitor experiences. These can be:
Destination Centres: large spaces centred around a large attraction e.g. Xanadu in Spain, the Mall of the Emirates in Dubai or the American Dream Center
Innovation Centres: “smart” spaces where pooled tenant data is used to create targeted offerings
Values Centres: spaces that draw their identity—and tenants—from consumers’ shared values e.g. Great Food Hall in China, the Market Hall in Portland, the Markthal in the Netherlands or Eataly
“Retaildential” Spaces: retail-housing “lifestyle centres” that target specific demographics
Ken Gunn Consulting believes that designer outlet centres embody aspects from each of these concepts. For example:
Destinations - such as Gunwharf Quays, Valmontone Outlet or Icon Designer Outlet combine large scale brand offerings with high profile leisure attractions. As a result, it is not uncommon for outlet catchments to extend well beyond 90 minutes
Innovation – turnover related rents mean that outlet centres are naturally ‘smart’. For example, many clients employ Ken Gunn Consulting to pool trading data to prioritise growth opportunities, while others such as Value Retail or Via Outlets use technology partners such as Coniq to monitor visitor performance and offer targeted promotions
Values – outlet centres are an extraordinary package of leading brands, attractive places, relaxing environments, entertainment, hospitality and value for money. Distilling these elements into a rewarding, fun day out guest experience, means that outlet visits are more akin to leisure day trips than more functional shopping trips
Lifestyle – with the emphasis on aspirational fashion brands such as Polo Ralph Lauren, Coach, Levi’s and Tommy Hilfiger, set within ‘brand enhancing’ environments, lifestyle is engrained within the very fabric of outlet design and operational management. Rather than focussing on narrow demographic groups however, outlet’s skill has been to appeal to a broad cross section of high spending lifestyles through the promotion of a VIP guest experience
It is therefore no surprise that while sales growth at shopping centres has stagnated over the last decade, sales at designer outlet centres have more than doubled, making the format the most successful physical retail channel. Since 2013, the compound growth rate has been 10 times that of traditional retailing and close to the performance achieved by digital channels
Today’s designer outlet centres are sophisticated, dynamic, successful destinations where guests are happy to spend time browsing in their favourite brands and relaxing with friends and family. The best outlets have developed close relationships with consumers, are responsive to changing demand, always offer great choice, attend to every aspect of the guest experience and focus on driving performance. In this respect, they are far removed from traditional shopping malls and resistant to (but not completely immune from) the trends driving consumers away from traditional, functionally obsolete retail centres.
Creating a modern designer outlet centre, requires much more than a plot of land and retail development skills. Having worked on more than 180 outlet projects, in 30 countries, over 20 years, Ken Gunn Consulting is ideally placed to assemble multi-skilled expert teams who will deliver vibrant, future-proof and successful destinations. As dreams rarely become reality without robust feasibility and growth strategies, Ken Gunn Consulting is the ideal first step for any designer outlet project.