Outlets post Covid-19

We are clearly living through unprecedented times and the impact on the retail property industry, along with many other sectors, is enormous. Here, Giles Membrey, Founder & Managing Director of Rioja Estates discusses how he believes the outlet sector has fared and what lies ahead for the sector?


It has been difficult in general for the retail property industry. However, unlike full price shopping centres, outlets are a destination; consumers visit an outlet village with a purpose, mostly to have a good day out with family and friends, to relax, to shop and to have fun. They go with an amount to spend from their discretional leisure budget. The conversion of outlet visitors into spending customers ranges from 80 per cent to 140 per cent, which means that nearly every consumer makes at least one purchase. Outlets offer a combined leisure and shopping experience. We are already seeing that they will continue to attract shoppers during these challenging times. Consumers are now looking more for leisure on their doorsteps, so local catchments are proving to be more important than they were before Covid-19. According to data from CACI, the requirement to work from home and the fear of public transport has reduced visits to city centres by 20 per cent. 55 per cent of consumers are visiting local high streets for non-essential retail versus only 16 per cent going to cities. Outlets with strong local catchments are already benefitting from these new behaviours.

Outlets have always attracted spending consumers in this way and outlet shoppers are a tenacious bunch. Since lockdown, we are seeing this same dynamic as consumers return, which means that lower footfall levels are less of an issue than in high streets and shopping centres. Significantly Covid-19 is reshaping the way that shoppers are able to buy, online shopping is surging, growing by up to 129 per cent week-on-week, creating surplus stock which in turn increases sales through brand outlet stores. Also, we are seeing that consumers are spending more. Outlets are well placed to make the most of a higher spend; tempting customers with great brands at good prices to continue growing sales and rental income despite social distancing and reduced capacity.

Outlets offer a combined leisure and shopping experience. We are already seeing that they will continue to attract shoppers during these challenging times. Consumers are now looking for leisure on their doorsteps, so local catchments are proving to be more important than they were before Covid-19.

Open-air villages have more appeal than indoor shopping centres. From a safety point of view, it has been drilled into the national psyche that we are safer outdoors than indoors. CACI has researched all types of leisure activities (visits to high streets and shopping centres, parks, restaurants, cities) and concludes that there has been a shift in habits from pleasure to purpose. It is important that the outlet and retail sector look at ways of making visits fun again. This is not easy with social distancing, the wearing of facemasks and hand sanitising, but it is an important factor going forward.

The pandemic has made all outlet developers review their projects and reflect on what needs to change in both design and operations to keep outlet staff and visitors safe. These changes range from measures to make sanitation easier, to enabling more comfortable social distancing, with distance indicators in paving, extended weather protection and virtual queuing systems. In addition, operators are looking at scheme-branded online transactional platforms.

Many brands are telling us that since opening in mid-June, their outlet stores are playing a key role as part of an omni-channel strategy. Outlets can be highly profitable for the brands that approach their outlet business as a dedicated channel, with a clearly thought out stock and promotional strategy. Outlet landlords are used to working with a combined base rent and turnover rent deal structure, or indeed with just turnover rent with a ratchet clause, so this de-risks the deal for the brands, aligns the interests of the landlord and tenants and offers brands greater flexibility. This is something all brands want and need right now.

We are confident that good outlet villages will emerge stronger from this crisis. Before Covid-19 there was already a clear focus in outlet development to create vibrant retail and leisure destinations rather than traditional shopping destinations. With a drop in international tourism countered by a rise in staycations and staying local, UK outlets can definitely attract UK customers and tourists with their strong brand value and open-air leisure proposition. UK tourists will be looking to do more outdoor pursuits, benefiting the outdoor sector, which is already a strong category in outlets. There will be a change in the way people dress to match the changes in work habits. Dress down Friday may well become dress down Wednesday, Thursday and Friday. Outlets are particularly strong in the athleisure, casual wear and sports categories, this will give consumers the types of clothes to match a more relaxed lifestyle. With the squeeze on household budgets, outlets also give customers what they want at an affordable price.

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