Research article

Urbanising the concept

Why are more outlet schemes seeking more central locations?

A more ‘central’ destination

Another consequence of polarised shopping trips has been the increased significance of local retail journeys since the GFC. This means that destination centres have to compete for a reduced share of consumer spend, particularly in the face of ecommerce. In order to maximise exposure to shoppers, many destination schemes now combine with another retail and leisure offer, or capitalise on more locally generated shopping trips.

Furthermore, despite strong performance growth in the sector, frequency of OC visitation for most consumers remains low, due to the ‘destination’ nature of the proposition. This means that these schemes are competing with regional shopping centres in terms of the destination visit, even though the offer is quite different.

Around half of consumers make local shopping trips each week, but less than a third of outlet visitors make the trip more than once a year. The visitation statistics strongly indicate that those consumers that make the journey will contribute good spend levels. There is therefore a rationale for increasing market penetration by sitting the offer closer to areas of high population density. OCs have traditionally been located in out-of-town locations with a distinct ‘drive to’ model.

In recent years however, there has been an increase in the number of OCs located in more urban environments that are closer to shoppers, benefit from better public transport hubs, or are located close to other retail or leisure attractions to capitalise on existing footfall. This has been referred to as ‘proximity outlet retailing’.

Figure 8

FIGURE 8Outlet centre visitation frequency

Source: kamaco Research

Realm data shows that consumers are willing to travel to OCs (40–50 minutes on average), but there remains a bias to more affluent households making these trips and 30% of all consumers have never even visited an outlet. This implies a significant untapped potential should outlets be located closer to consumers, particularly to those that are less affluent and Value/Discount driven.

Mintel state that consumers, particularly Millennials, are more likely to visit an OC if located in ‘proximity’ schemes; i.e. locations that are more accessible to consumers. This is also true of less affluent households. Both of these consumer groups have above average representation in urban environments.

The brands represented on most OCs also suit these two demographic groups, with provision being biased to the Mass market price point, despite the high profile ‘designer’ element. Since 2011 there has been a reduction in the proportion of OC retail units devoted to both Value and Premium brands and an increase in Mass and Aspirational brands.

Mintel suggest that increased discounting on the high street has made it less appealing for some demographic groups to travel to less-accessible locations to visit OCs.

The performance data we have analysed does not support the notion that OCs have lost relevance, as trade growth has consistently been positive. However, it does suggest that there is a consumer (and therefore operator) advantage to schemes locating within urban centres, where there is a complementary offer and existing footfall.

Figure 9

FIGURE 9Outlet centre changes in brand ‘VAMP’ 2011-2017

Source: kamaco Research

Reaching an untapped market

Realm have identified two key kinds of shopping trip to OCs based on their experience of assessing visitors to their centres; the Leisure Shopper and the Economic Shopper.

The Leisure Shopper visits for a non-essential purpose, does not have a specific purchase in mind, will travel to the scheme and is likely to dine during the visit. The Economic Shopper is on a bargain-hunting mission and may be visiting solely to buy things that they want, but would struggle to afford at full price.

Yet as discussed earlier in this report, there are demographic groups that are underrepresented in Outlet visitation, while offering a significant potential in terms of frequency and spend (see Figures 3 &10).

Figure 10

FIGURE 10Demographic profile of OC visitation and their frequency

Source: kamaco Research, Realm, Experian

Our analysis of Realm’s customer data has found several indications that more centrally located supply can increase market penetration.

Less affluent households are an important outlet shopper group as they spend £47–£73 on average per visit. They also have some of the highest visitation frequency, often with more than 10 visits per year. However, not enough of these shoppers do in fact visit as less affluent households account for fewer visitors than more affluent groups; the distance that shoppers are prepared to travel to visit an OC increases with affluence and mobility.

For example, Mozaic group ‘Municipal Challenge’ account for 4% of Realm’s overall visitor profile, but those that do visit in fact have the highest frequency of any group (16 trips annually) and spend £47 each visit.

Less affluent urban centric shoppers are therefore an important but underrepresented consumer group. Similar Mozaic groups include Family Basics, Transient Renters, Municipal Challenge, Vintage Values and Modest Traditions. Each account for below average proportion of existing outlet shoppers, but their visitation statistics for those that do shop in OCs are in fact strong in terms of frequency and spend.

These households are of average or below average affluence, but they are not deprived and make up a significant proportion of the UK’s consumer market, accounting for 30% of households nationally, but around 50% of households in urban cities and towns.

Additionally, we know from other kamaco research that below average affluence households tend to have increased loyalty and frequency to local shopping locations and there is real potential for the in-town and hybrid OC model to grow, particularly in cities with fewer designer names on the high street.

Existing OCs are not poorly located, as their footfall and visitation statistics continue to grow from strength to strength. However, there is clearly an untapped market that has yet to be fully exploited. It is also one of the primary reasons that the market has seen an increase in urban schemes in recent years.

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Simon Smith

Simon Smith

Senior Director
Research & Consultancy

kamaco Two Exchange Square

+852 2842 4573

 

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