City & Country: Cover Story - Outlet centres catching on in Asia

THE chilly autumn air that hangs over London cannot deter the determined shopper looking to grab luxury items at discounted prices. Travelling an hour out of the city’s Marylebone Station, passing quaint villages, rolling hills and farmland, one reaches Bicester North station. A feeder bus that comes every 10 minutes then shuttles shoppers to their destination: Bicester Village in Oxfordshire.

Noted as one of the most successful outlet centres in the world, Bicester Village has a net lettable area (NLA) of 235,000 sq ft and about 138 shops that are tenanted by Prada, Dior, Carolina Herrera and Ralph Lauren, among others. The discounts at the centres start at about 30% and although the designs are a season or two behind, there is no drop in quality. About 60% of the visitors are tourists, most of whom are from China, the Middle East and Southeast Asia.

Top: Bicester Village is one of the most successful outlet centres in the world with a 27% compound annual tenant sales growth over the past five years to 2012
Bottom: Luxury brands like Dior and Ralph Lauren are just some of the retailers drawing tourists who make up 60% of visitors to Bicester Village

“Bicester Village is successful in the UK because of its unique claim that it is the only true designer outlet where the majority of tenants are likely represented on Bond Street,” Mark Disney, CB Richard Ellis (CBRE) executive director of shopping centre development and leasing in the UK, tells City & Country.

Bicester Village was developed and is operated by Value Retail, a company that specialises in luxury outlet shopping villages.

“While many other outlet malls in the UK offer designer products like Ralph Lauren, Hugo Boss and Armani, they would not have 15 or 20 luxury brands. They may have a handful of famous brands and designers that provide credibility and the platform for marketing to the general public. Also, the mix is more premium than designer, like Ted Baker, Reiss, Gant and Timberland.”

Disney cites a 2013 report by Exane BNP Paribas that highlights how successful Bicester Village is. It says sales at Bicester Village are in excess of £2,000 psf, which is higher than in any other shopping centre in the world, while compound annual tenant sales growth over the past five years to 2012 was 27%.  

While Bicester Village’s model is worth emulating, it could prove a challenging task. “You could make a case for a similar centre located to the south or southwest of London, which would also have catchment potential and be stronger if closer to London,” says Disney, “but it is difficult to deliver these outlets because you need confidence in the operator. The brands in Bicester do so well that they will want to continue trading there. If there were another outlet that could damage Bicester’s business, would it terminate some of the leases? Would it cause too much turbulence there? Could another operator persuade enough brands to come to an alternative centre? Would luxury brands have another outlet in the UK?

“Maybe, maybe not, but I think if you ask the brands in Bicester if they would like one more shop with exactly the same mix in the south, they would probably say no because it might reduce the number of people coming to Bicester.”

Indeed, there is another popular outlet centre in Portsmouth called Gunwharf Quays. To reach it, one has to take a two-hour train ride from London’s Waterloo Station and stop at Portsmouth Harbour Station. The shops there showcase more premium brands, such as Gap, Oakley and SuperDry, than luxury brands.

Top: The entrance to outlet centre Gunwharf Quays
Middle: Gunwharf Quays attracts a lot more locals and offers amenities such as a cinema and 24-hour gym
Bottom: An artist’s impression of Penang Designer Village that will cover over 28 acres with attendant developments such as a hotel and some residential components

The layout and atmosphere here differ as well with more modern designs and wider walkways and corridors that are ideal for families with prams and young children. Also, the visitors are noticeably local while the F&B outlets are varied and number 30 compared with just four in Bicester Village. There is also a cinema, a 24-hour gym and other amenities that give Gunwharf Quays a more community-like environment while the price points are much lower, making the shopping experience a true joy. Gunwharf Quays is owned and managed by Land Securities, the largest commercial property company in the UK.

Both Bicester Village and Gunwharf Quays, along with many other successful outlet centres in the UK and in Europe, understand that they provide an alternative shopping experience compared with high street retail outlets and shopping complexes.

“Outlet shopping is a leisure experience and the operators need to remember that,” Disney stresses. “It is important that everything controlled by the operator is made as pleasant as possible. It probably starts with a website, then the journey to the centre, the marketing through social media, presenting new brands and offers and tailor-making your visit; making that customer feel fulfilled and persuading that customer to decide to make a visit.”

On new openings, Disney says there are several in the pipeline. The London Designer Outlet opened near Wembley Stadium last October and there are plans to set up a luxury designer centre in the O2 Arena. These and several others prove that London has an appetite for outlet centres, which bodes well for shoppers near and far.

Outlet centres in Asia

The outlet centre trend that is so popular in the UK, Europe and the US is slowly coming to this region. Retailers did not see the need to expand to Asia before because the economies in their own countries were strong. However, the global financial crisis, which shook the foundations of the Western economies, saw them shifting their focus to the still robust Asia. CBRE senior director of Asia client development Bryn Davies notes that Asia, of late, has played a huge role in the international retail market.

“Over the last five years, Asia’s influence on retail markets or brands here in Europe has been tremendous because both the European and the US markets have been subdued since the crisis,” he says. “Retailers struggled as domestic consumer spending levels dropped. They realised then that the only way was to grow internationally.

“If you take British retailers, continental Europe wasn’t very interesting to them because it was facing the same problems as Britain, as was the US. However, Asia was booming. It became a strong attraction, particularly for the luxury sector, which saw phenomenal sales. This strengthened confidence in the region as an important market and for value fashion retailers, it increasingly became a major global driver of sales.”

Outlet shopping is a leisure experience and the operators need to remember that
— Disney

As a result of this heightened interest in Asia, many brands are entering the market with their own money when in the past many had come in via the franchise route, leaving the day-to-day operations to the locals.

“As Asia becomes more important to global retailers, they are now entering the market with their own money,” Davies points out. “In some cases, they are taking back those franchise agreements, buying out the partners and operating the business themselves. So the financial cost is significantly higher because they are directly responsible for rent, staff, logistics, management, legal and so on.

“As the world becomes smaller, Asia becomes a much more important part of the jigsaw. More retailers will want control over what they are doing in Asia rather than leaving it to someone else.”

According to a recent report by CBRE on how active retailers are globally, 130 of them from all over the world were asked about their expansion strategy. Some 35% said they would open 40 or more stores somewhere in the world outside their domestic market, which, says Davies, shows a shift in the confidence of retailers that had adopted a wait-and-see attitude as they were not sure what was happening domestically to be able to expand overseas. However, with economic conditions in Europe and the US improving, it is possible for them to grow internationally and spread the risk of doing business. Malaysia is also in the sights of some of the retailers.

Over the last five years, Asia’s influence on retail markets or brands here in Europe has been tremendous — Davies

“In terms of geography, where the stores are going to be opening, 10% of retailers we interviewed said they are targeting Malaysia in 2014,” Davies says. “That may not sound like many, but in the context of Asia, it is more than some of the more established markets like Australia, Japan and South Korea. So, Malaysia is more interesting to them than some of the more established markets and also the rising stars like India. If you look at the potential of the two markets, it is chalk and cheese in terms of size.

“I think the reasons that make Malaysia attractive include the wide use of the English language, ease of doing business and a strong sense of brand awareness among consumers. Retailers see Malaysian shoppers, particularly those in the 18 to 35 age group, as being very savvy, strong in social media and into trend-watching.”

He explains that for developers or investors looking to cash in on the retail boom in Asia, the help of a retail specialist is important. Be it CBRE or another agency, the contacts, specialist knowledge of brands and local market knowledge are vital to ensure the right tenant mix is achieved.

Penang Designer Village

In the second half of 2016, Malaysia will have the Penang Designer Village (PDV) that will be built in Bandar Cassia, which is at a short distance from Penang’s second bridge. Currently, there is only one outlet centre in Malaysia — Johor Premium Outlets. There is another under construction in Melaka and a couple more outlet centres under negotiation and one most likely to be situated in Sepang.

Penang Designer Village will be developed by PE Land (Penang) Sdn Bhd, the property development arm of Kuching-based PE Holdings under the Pan Sarawak group, while the principal consultant is CBRE Malaysia, which will also operate and manage the outlet centre.

The PDV will be built on 28 acres on a 40-acre parcel that was purchased for RM65 million by tender from the Penang Development Corporation. The gross development value of the entire 40 acres is close to RM1 billion and once fully developed, besides PDV, the land will also house a residential component covering 10 acres and a hotel taking up the remaining two acres.

So, you are seeing the growth of a new format of retail, which is premium outlet malls — Soo

Coming up at a cost of RM350 million, the PDV 1-storey structure will have a net lettable area of about 400,000 sq ft with 150 retail lots. CBRE Malaysia’s managing director Allan Soo says the tenant mix will include luxury and premium brands, although it is too early to disclose the brands.

“Retailing is changing at this point in time and will continue to do so in the future. It is no more the usual row of shops put together in a ‘box’ where you display your merchandise,” says Soo. “It is more about going out and feeling good with some kind of association or status, so at the end of the day, people are not going out for just the traditional form of shopping.

“So, you are seeing the growth of a new format of retail, which is premium outlet malls. We have to stress the word ‘premium’ because outlet malls are from the Adidas and Nike days, but have today grown into something more dynamic with the luxury brands joining the fray. That creates a totally different experience for customers where you can go to a premium outlet mall and shop for something that is of really good quality and at the same time get value for money.

“You could say this is aspirational shopping with a discount. It is very exciting, it is something new and has huge growth potential.”

This article first appeared in The Edge Malaysia Weekly, on April 21 - 27, 2014.


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