Outperforming a sluggish full-price shopping retail sector, discount outlet development has been experiencing powerful growth. With 220 retail outlets operating in the US and plans for nearly another fifty to undergo construction, the industry is poised to grow by a brisk 25 percent.
Many retailers find outlet development irresistible since it typically flourishes in both strong and weak economic circumstances. According to Lisa Wagner, a partner in EWB Development LLC, outlet centers are more resilient than their full-priced counterparts. “A strong outlet center will always outperform a strong regional mall. Some of these outlet centers are performing double what typical malls do,” said Wagner. “If you look at certain brands, their outlet business is exponentially huge compared to their full-price stores.”
Steven B. Tanger, president and chief executive officer of Tanger Factory Outlets, sees the allure of the outlet center as recession proof. “The value proposition is embedded in the lifestyle of today’s consumer, and outlets are the natural destination of choice for branded apparel,” he observed. “The old adage is true: in good times, people love a bargain and, in tough times like these, people need a bargain.”
And the enthusiasm for retail outlet development isn’t confined to the US. European companies have been aggressively expanding, with an eye to construction in China. Scott Malkin, chairman of Value Retail and cochairman of Value Retail China, sees outlets as the last best hope for European growth today. “Europe’s possibly only growth industry today and maybe for some period is outlets,” said Malkin. “We are up in terms of spend and visitation, and the quality of our consumer is strengthening.”
“In China, you are going to have a wave of outlet center construction because there is very little of the product in existence,” Malkin continued. Brands have been growing at full price and and haven’t been pushed to be more efficient in terms of correctly disposing of their surplus. That’s all coming now.”
Others, though, have expressed skepticism that all the plans for development will ultimately come to fruition. Adrian Nelson, group leasing director at the McArthurGlen Group, explained, “There are a lot of people trying to jump on the development bandwagon. Outlets are doing well, and it easy to put forward a proposal, but making it happen is more difficult.”
Wagner concurred, adding, “I think about one-third of the projects that are announced will be developed. There is an awful lot of throwing things against the wall to see what will stick.”