Meeting the needs of the Outlet Centre customer: 2014 update on the European Market Recent trends in the expansion of Outlet Centres across Europe Outlet centres in Europe are expanding significantly in terms of number and size. There are currently about 210 outlet centres across Europe (excluding Turkey), with 193 of those having provision greater than 3,000 m2. These total 3.3 million m2 and have annual turnover in 2013 of €10.8bn, which represents an increase in sales of 60% since 2008. Since January 2013, eight new outlet centres have opened in Europe, led by developments in Central and Eastern Europe. These new openings represent a total GLA of 177,000 m² and made 2013 the best ever year for outlet centre development in CE Europe. Floor space provision for Outlet Centres in Europe has risen at an increasingly fast rate since 1980. From then it took 20 years, until 2001, to reach one million m2, four years later in 2005, provision reached 2 million m2, and seven years later, by 2012, provision had reached 3 million m2. We suspect this will reach 4 million m2 by 2018, if the current development trend continues. FSP’s Outlet Centre capacity map for Europe has highlighted significant areas of under development of in Europe, as well as gaps in provision in more mature markets , for example the English Midlands in the UK.. To estimate capacity, FSP divided the population within 90 minutes of every postcode sector in Europe by the total outlet provision. Locations offering the strongest potential either have significant total populations, an under provision of outlet centre space, or in ideal locations both, within a 90 minute radius. Coverage and occupier trends All of this expansion in the Outlet Centre market cannot be fuelled without occupiers. Currently FSP’s occupier database contains 13,850 outlet stores run by 4,231 occupiers. FSP has developed the FISH (Fashionable, Individual, Safe, Homely) Classification to segment these occupiers so that they can be appropriately matched to customer demand. This is based upon the age and image self-perceptions of shoppers: how young or old do I feel and what image do the brand labels I buy convey? Consumer classifications such as ACORN or MOSAIC tend to be based upon Census data, and so can standardise out these ‘attitudes’, whereas FSP’s FISH Classification allows operators to focus on understanding shopper needs, take account of local factors and directly match consumer demand to occupiers. For Outlet Centres, the most significant shopper segments are Assured and Family, in contrast to the typical high street, which can be as much as 40% Family, with Young typically accounting for 30% and Assured just 15%. This lack of competition for Assured merchandise
(in all but the largest cities and regional towns), is one of the reasons behind the appeal of outlet shopping and the majority of the top occupiers fit into the Assured segment. Future gazing – what’s coming next? The last few years have been characterised by lack of development funding and difficulties in gaining planning consent. However, looking forwards, 2014 and 2015 look set to continue from a strong year in 2013. There are 15 pipeline schemes planned for 2014/15 opening, with Germany and Russia accounting for 40% of the new Outlet space. Looking at FSP’s capacity map for Europe, it is interesting to see just how well the distribution of proposed sites corresponds with the areas of greatest untapped potential. The surge in Outlet Centre openings is likely to continue into 2016: we can think of at least 10 reasonably advanced proposals in the UK and France alone. While 2014 looks like being quite a restrained year, 2015 should be a return to form with FSP expecting around 150,000m2 of new space to open then. Further development beyond 2015 will be seen in the Rhone Alpes, Cote D’Azur, the English Midlands and Germany, leaving areas of untapped potential still dotted around Mainland Europe. It is worth noting that Paris has just about reached capacity with seven outlet centres located within 35km of the Champs-Elysées. By comparison, London appears relatively underserved, although we would be wise not to ignore some of the lessons of the past here. What opportunities are there to better meet the needs of customers? The key message from research and KPI data collected across Europe is that satisfying the needs of a greater proportion of visitors will bring rewards. Poorly performing Outlet Centres tend to have more ‘detractors’ as opposed to ‘promoters’, with the latter visiting more often and spending more per visit – making them the ideal shoppers. To illustrate, in a sample of four, very different sites across Europe, changes which could convert visitors from Detractors to Promoters would increase total visits by 50% and average spend by 40%. If this example was applied to a scheme with an average visit frequency of 8 times per year, footfall of 2m and turnover of £80m, doubling the proportion of Promoters from 20% to 40% would increase sales by 25%. FSP estimates that there is scope for further development of between 50 and 75 new outlet centres around Europe, suggesting that the current pace of growth is likely to continue. However, few territories are now genuinely untapped; 80% of Germans already live within 90 minutes of an outlet centre despite its relative under provision. This means that future schemes will need to be increasingly well planned in order to ensure that they maximize the opportunities available. We also understand that it is no longer acceptable to manage Outlet Centres by numbers. Competition is much stiffer and with a new breed of investors, expectations of performance are higher. An insight based, integrated approach is essential for success. FSP have the cutting-edge research and understanding to offer that insight, with Director Ken Gunn recognized as a leader in the field of Outlet Centres. For more information, please contact us: 01494 474740