Page 38 - February 2020

RLI RETAIL INSIGHT

Lynchpin for Success

Giles Membrey, Managing Director of Rioja Estates,
the development company behind the forthcoming
Grantham Designer Outlet Village, explains how the
tenant/landlord relationship seen in outlets could
benefit the ailing high street.

utlet retail is based upon a very unique landlord/ the long-term gain of long leases, priority is placed upon
tenant relationship that stands apart from the evolving the brand line-up to answer customer expectation
traditional arrangement seen on the high in a fast-moving retail environment. Outlet landlords will
Ostreet and in full price retail. It is a symbiotic evolve the layout of a scheme, even relocating brands
partnership that enables both parties to flourish together within to ensure the best placement for footfall flow and
and, conversely, to work together to maximise returns in customer expectation. Outlet leases tend more towards a
leaner times, naturally making the prospect of a new lease in five-year period, versus the 10-15 years of full price, ensuring
trying times a more appealing prospect. a relevant retail line-up and the high-performing operational
Shared risk means shared trust, which – in outlets - is seen and asset management process crucial to success.
most acutely during the store opening phase. A lower than Negotiation of individually tailored terms to each brand’s
average base rent allows the tenant to enter a scheme cost- specific offer ensures the most beneficial approach for every
effectively, but by linking turnover to rent, the landlord will party, such as margin, turnover, area and other factors. All brands
share the benefit if the tenant is successful. The outlet model will adhere to a minimum discount clause and, while some
is structured to decrease tenant costs and increase sales. landlords may have developed unique strategies to meet targets,
To this end, the physical model for the design and layout this outlet model is largely standardised throughout the industry.
of outlet retail destinations is purpose-built, single storey, and Tenant benefits were behind the very conception of outlet
in an out-of-town location, making servicing and delivery retail. Outlets were born out of the need for brands to
easy for tenants. This is enhanced by the landlord owning profitably sell-through old stock without having to remain in
and managing a dynamic, multi-layered marketing footfall extended sale periods that take up valuable floor space. The
campaign to communicate the outlet as a whole, prioritising outlet environment allows tenants to retain brand integrity
value and quality messaging and featuring tenants to save with a dedicated independent space incorporating brand
them from having to market their individual stores. values and identity rather than having to fall back on third
Rather than just providing a unit and collecting rent, outlet parties with no interest in the brand behind the product.
retail landlords are actively involved in assisting brand turnover, An important consideration driving the landlord/tenant
marketing, centre management initiatives, monitoring deliveries, relationship in outlet shopping centres is that they are not
stock packages and even staff performance. It is in their interest simply retail destinations, they are leisure destinations. Indeed,
as they stand to gain from an increase in sales if these initiatives tourism accounts for approximately 20 per cent of an outlet’s
are successful. Landlords will pay irrecoverable costs to drive custom, versus only five to seven per cent on the high street.
footfall and sales, seeing a return through turnover rents. Shoppers generally visit between four and six times per
To this end, the asset management focus in outlets is much year, often socially with family and friends, versus the regular
more dynamic than in full price schemes. Rather than seeking weekly or fortnightly visit to a high street or shopping centre,
incorporating groceries and so on. The look and feel of outlet
destinations reflect this with attractive village-style layouts,
landscaped gardens and play areas adding to the pleasant
and appealing customer experience, ultimately increasing
dwell time and helping to support and drive sales.
This leisure element is also behind outlet retail’s imperviousness
to the negative impact of internet shopping. Shoppers view an
outlet destination as a ‘day out’ to be enjoyed. This is particularly
true in premium centres where luxury brands become accessible
to a wider market. In these situations, shoppers want to take
their time, touch and feel the product, and enjoy the shopping
experience versus the transactional nature of e-commerce.
Traditional retail is a more ‘every day’ process that is readily
sacrificed to the convenience of online shopping.
The outlet model is much more appealing for brand as
it remains attractive to shoppers, incorporates minimal risk
and boasts an enhanced chance of success. While short term
leases and pop-ups are a move in the right direction, this alone
won’t work; the high street needs to align with turnover rents,
closer landlord/brand co-operation and commercially active
centre management wielding a targeted marketing spend. This
also explains why outlet retail leasing programmes continue to
deliver, while full-price schemes are finding it harder to attract
and keep tenants. It makes sense for brands to invest in outlets
and high street landlords would be wise to take note.

38 RETAIL & LEISURE INTERNATIONAL FEBRUARY 2020