Do Factory Outlets still hold the same appeal that they used to?

Factory outlet centres, also sometimes called designer outlet centres or shopping villages, are well established in the UK. With 41 such centres (as defined by this report), the UK market is generally regarded as saturated: any further major openings are unlikely after Gloucester Quays launching in 2009.

Sales growth has slowed – estimated at some £1.3 billion of retail sales in 2008, up by 4.6% on 2007 – and will be harder to come by. Polarisation will become more marked – the larger centres with big-name puller brands will do well, smaller centres will struggle without having key differentiators and other reasons to visit, for example being near a tourist destination. ...more »

Factory outlet centres, also sometimes called designer outlet centres or shopping villages, are well established in the UK. With 41 such centres (as defined by this report), the UK market is generally regarded as saturated: any further major openings are unlikely after Gloucester Quays launching in 2009.

Sales growth has slowed – estimated at some £1.3 billion of retail sales in 2008, up by 4.6% on 2007 – and will be harder to come by. Polarisation will become more marked – the larger centres with big-name puller brands will do well, smaller centres will struggle without having key differentiators and other reasons to visit, for example being near a tourist destination.

There are opportunities for sales growth, especially as Mintel’s consumer research reveals that nearly a third of all adults have never visited an outlet centre. However, such growth will be hard won: there is much increased value/discounting competition from the high street, consumers being much more cautious about their spending and there are emerging discount brand shopping websites.

Key report issues: How recession-proof are factory outlet centres? How crucial is a strong tenant mix as retailers/brands are driving harder deals? What is the blurring of the boundaries between outlet centres and an increasingly discount-oriented high street? How can outlet centres enhance their overall proposition, and not just being about bargains? What are the strategies for being successful in a widely regarded saturated market?

Source: Mintel, décember 2008