Outlet Malls. A commercial phenomenon that is consolidating and growing in Europe

For the great majority of Latin American travelers, the outlet concept is limited to the United States and, at best, Canada. However, this branch of the retail business has in the Old Continent numerous exponents that replicate offer the benefits that are deployed from the other side of the Atlantic.

The “outlet” concept was born in the United States in the mid 1930s, when the men’s clothing brand Anderson-Little decided to open a store to directly market its production surpluses and get rid of those that came up with some faults. Then, in the 1960s, Harold Alfond, founder of the Dexter Shoe Company, followed suit. Both initiatives germinated in the northeast of the Union.

Later, in 1974, with a more advanced commercial concept, the clothing firm Vanity Fair pointed to this new market vein by opening a store in Reading, Pennsylvania, which would mark the starting point for the consolidation of a new sales channel. Thus, throughout the 80s and 90s, outlet malls began to be created, that is, building complexes housing firms focused on direct factory sales at promotional prices. They generally offered articles from past seasons and residual production. Failed elements began to disappear thanks to technology that reduced factory defects to almost zero.

At that time, these spaces were erected several kilometers from the big cities in order not to compete with the traditional stores of the same brands. But the distances were shortened and today in full Orlando there are, for example, three outlet malls, another two steps from downtown Las Vegas and one about to open minutes from downtown Manhattan, on the Staten Island waterfront.

The wave arrived in Canada in the late 1980s with the opening of the Dixie Outlet Mall in Mississauga, followed by Vaughan Mills (2004) in Vaugham and Toronto Premium Outlets (2013). All three in the province of Ontario.

A BOILING PHENOMENON.

Today, in the industry – and not only in North America – there is talk of “Shopping Tourism”. An activity that, measured on the basis of tax-free transactions, reached in 2018 an estimated US$ 72 billion in the world. And Tax Free represents only 10% of the average purchases made.

Given the undoubted social, economic and cultural impact of this branch of travel on destinations, in 2014 the World Tourism Organization promoted the creation of a working group that led, two years later, to the creation of the World Shopping Tourism Network, a meeting space aimed at centralizing information, communicating and responding to the needs of different actors linked to the business.

Its director, Antonio Santos del Valle, says: “We all agree that there are more and more travelers who travel with the goal of buying and that we all acquire something when we travel, regardless of the purpose of our journey. In addition, one of the particularities of Shopping Tourism is its transversality with other segments, mainly the hotel industry, gastronomy, transport and even with other segments, such as cruises, corporate travel and MICE. In all types of tourism we know, the traveler-tourist has a profound need to carry something from the place he has visited, either for his own enjoyment or to offer and give to others. Who can say that he has not bought something during the trip?”. In fact, a study of that organization ensures that 96.8% of international tourists make purchases on their trips.

When referring to the benefits of this activity, Del Valle does not hesitate to say that “is transforming destinations, is the fastest growing tourism product and also holds the highest expectations for its enormous potential. It avoids seasonality, favors the diffusion of local retail businesses, generates and increases the development of sustainable jobs, promotes knowledge of the culture and identity of the territory and offers a unique travel experience for consumers. In addition, it is a fundamental catalyst for the evolution of the tourism model due to the high purchasing capacity associated with this type of traveler.

Which are the destinations that are best prepared to take advantage of the potential of Shopping Tourism? “Everyone, did not hesitate to say the executive, who added: “All they have to do is identify their products, develop a tourism plan where they are clearly promoted and do not forget the transversality that I mentioned, or the relationship with the enograstronomy, cruises, events, culture, etc.

THE EUROPEAN EXAMPLE.

The first Old World country to have a complex outlet of internationally recognized labels was England, in 1995, the hand of the American builder Joey Kaempfer, who led the landing of Cheshire Oaks in Ellesmere Port, about 50 km. from Manchester. Today, with 145 stores, it is the largest establishment in the United Kingdom.

Subsequently, driven by the power of Asian buyers, Europe itself and in recent years also Latin America, the outlet mall concept was consolidating strongly in many countries of the Old Continent to reach the more than 200 that are currently in operation.

One of the leading operators in the sector is VIA Outlets, a company founded in 2014 whose rapid growth allows it to have 11 premium complexes in nine European destinations, where it has more than 1,100 stores on a gross surface of 260,000 m². In 2018, Otto Ambagtsheer, the firm’s director of operations, reassesses the role of the business, arguing that “before the brands offered the collections of previous seasons and their excess stocks at reduced prices, that’s true, but that’s all. Now, on the other hand, the outlet mall has become an excellent channel to give a second life to a product and maintain the brand image at all heights. In our case, we interpreted the shopping experience by thinking of the ‘beautifully’ aspect local´, recreating in an attractive way the architecture, decoration, culture and history of the area. In this way we integrate landscapes, leisure spaces, gastronomy, crafts and even the climatic conditions of the place, as happens in our Freeport Lisboa Fashion Outlet, near the Atlantic coast of Portugal”.

“On the other hand, he added, we have strived to add benefits such as the one that, together with Global Blue, offers the easy refund of VAT in all our complexes, while we have revalued the facilities with VIP lounges, wi-fi service, courier service for sending purchases to the home residence and travel agencies to facilitate the booking of excursions, flights and other activities.

Asked about the weight of the international customer base for the European outlet malls business, Ambagtsheer said: “It is extremely relevant and is growing, as Europe in general, and certain destinations in particular, are recognised shopping centres all over the world. Chinese travelers, for example, are saving for months in order to take full advantage of the offers, while the buying power of the Russians is increasing and focuses on luxury brands.

Then, referring to Latin American travelers, the executive said: “Due to fluctuations in local currencies it is more convenient for them to buy while in the United States or Europe, although thanks to being considered the cradle of fashion and design, our continent is becoming the best option to take home the best products. In addition, they can benefit from an eclectic mix of international and local brands, and warm customer service, factors much appreciated by our visitors.

Regarding the percentage of discounts that can be found, the director of VIA Outlets said that “they are up to 70% compared to the regular retail price and are maintained throughout the year thanks to 860 brand associations that include names such as Adidas, Adolfo Dominguez, Armani, Asics, Bimba and Lola, Burberry, Calvin Klein, Carolina Herrera, Coach, Escada, Furla, Fossil, Hugo Boss, Karl Lagerfeld, Lacoste, La Martina, La Perla, Levi’s, Mango, Michael Kors, Polo Ralph Lauren, Samsonite, Swarovski, Superdry, Tous and Versace, among others”.

On the company’s relationship with travel agencies, he stressed: “Two years ago we launched a Department of Travel and Trade to promote partnerships with the entire value chain sector, which has led us to deploy an integrated strategy with travel agencies, tourist offices, hotels, car rental companies and even the local community. In fact, we are open to developing special tailor-made packages, depending on the size and frequency of the groups you can send us.

PAYMENTS AND REIMBURSEMENTS.

What payment methods does the Latin American traveler prefer in the outlets? According to Marcelo Campos, Marketing Director of MasterCard for Argentina, “one of the new tools that is being highly valued is the Cashback system, through which purchases can be paid with the debit card and, at the same time, withdraw cash from the bank account in case of any trouble”.

“On the other hand, he added, we have recently launched a program of benefits for Mastercard Black and Mastercard Platinum customers that includes exclusive offers for purchases made in more than 30 stores and services in France and the United Kingdom, a proposal that adds to other advantages, from concierge care to facilitate travel and stays to medical coverage or cars to enjoy the trip without worries.

In another order, Campos highlighted that “we were the first company to implement the contactless payment system, 10 times faster than the traditional card. Acercás, pagás y vas vas, fundamental for those who seek differentiating experiences through a first line security system. It is enough to bring the card closer to the terminal, without having to give it to the cashier or sign receipts”.

The talk with this Mastercard manager also included the arrival of Artificial Intelligence (AI) in the digital world. “Its development, he said, has led to the interconnection of the millions of devices we use and interact with on a daily basis. In turn, a large amount of data has been collected and stored, further boosting the presence of AI. In our industry, this technology has the advantage of analyzing anonymized payment data in the real time of the transaction, transforming everything. It will be crucial for tourism companies to invest in IA technology in the future to further improve the transaction experience.

For Luis Llorca, Managing Director of Global Blue Europe (the leading tax refund operator in the market, with more than 300,000 retail partners worldwide), “Shopping Tourism is a growing trend and in this context Tax Free is a vital tool for stores. The more the service is promoted, the greater the satisfaction of the traveler’s purchase and, therefore, the higher the sales. And that we are the first international Tax Free operator is no coincidence but the result of an innovative and digital approach that guarantees a good shopping experience with agreements that benefit both the merchant and the buyer.

Although Llorca agrees in highlighting the future future that awaits Shopping Tourism for “its good mix of brands and prices that will turn them into a shopping destination by themselves”, he stresses that “a good strategy is needed to capture the attention of the traveler; and this is achieved with an effective plan of promotion at origin”.

Referring to the Latin American clientele, Llorca stressed: “They are key to this business, especially in Spain and Portugal. In fact, after the Chinese travelers come those from Latin America. He has a deep knowledge of Tax Free and the fact that there are no language barriers helps them take full advantage of purchases.

CHANGE OF THOUGHT.

Until not many years ago, outlet malls had a bad image in front of the high-end retailer, that is, the retail market. They thought that a store of this format would devalue the image of their brand and that, in addition, their customers would prefer to buy there, thus significantly reducing their income.

But a study published in September 2016 by Management Science (How Does Adoption of the Outlet Channel Impact Customer´s Spending in the Retail Stores: Conflict or Synergy?) produced a different result. Expenses in conventional retail stores grew. The authors argued that it could be a product of shoppers’ learning.

On the other hand, from the Neuromarketing.com portal, specialist Ivette González recognizes that observing a great discount in the mind of the consumer can think two things: that the brain’s pleasure center is activated when it feels intelligent to take advantage of a bargain; or that, on the contrary, the alarms are triggered when thinking that it is something of poor quality.

“For brands that sell luxury goods, this is a thorny terrain from which they want to stay rather than stay away. They seek to associate themselves with adjectives such as ´exclusivo´, ´único´, ´elegante´, ´excepcional´, but never with words such as ´oferta´ or ´barato´. However, he emphasizes, they found some walkable trails through the outlet stores.

Gonzalez also interprets the mentality of the price-sensitive shopper, who doesn’t dare buy certain luxury items because he can’t afford it or because he lacks experience with the brand. “In this case you can solve both reasons for doubt by buying in an outlet store at a lower price,” he says. “In other words, outlet stores serve as a channel for brand expansion, allowing fearful potential customers to approach.

VIA OUTLETS, A LEADING OPERATOR

With more than 30 million annual visitors and sales in 2018 exceeding €1 billion, VIA Outlets is one of the leading global players in the segment. Its portfolio consists of 11 shopping centres in nine European countries with more than 1,100 stores.

Last year, the company invested €29 million in the refurbishment of three complexes: Hede Fashion Outlet in Gothenburg (Sweden), Sevilla Fashion Outlet (Spain) and Wroclaw Fashion Outlet (Poland), while in 2019 projects improvements in Vila do Conde Fashion Outlet (Portugal) and Zweibrücken Fashion Outlet (Germany). www.viaoutlets.com

Author: Antonio J. Navarro. Ladevi.