Workshop led by

Olivier Dauvers Tribune Grande Conso

Speakers
Henrik C.Maris Factory Outlet Consultancy	Eric Decouvelare Retail Group Director McArthurGlen
Iestyn Roberts Chief Executive Freeport	Alexandre Séjourné Property Director Concepts & Distribution (Marques Avenue)
Franck Verschelle Managing Director Asset Management Pantheon

Olivier DAUVERS
We are going to look into the future to think about what could be happening in 5 years’ time and highlight the strengths and weaknesses of the brand village concept. Imagining the future, considering the competition (e.g.: the Web), the changing behaviour of brands relative to the business, the development of the concept, the possibility or otherwise of maintaining the forward momentum of the project, and finally, the possibility of extending the concept into other areas than fashion and textiles.

Henrik C. MARIS
There will be more outlet centers in the future years all around Europe, even in areas like Northern Italy. There exists a very high demand for existing centres nowadays. The problem for the business is that there are not enough building permissions. Even the very big players are not being good enough in some regions in the lobbying in order to get business permissions. It should be done more be in that field. The major problem for factory outlet is the lack of brands. There are many brands that only do one or two standard loans or no outlet business at all. Most of them are interested, but they see the whole operation going into outlet business. They are not thinking about holding the operation until it is running well. In the next two-three years the winner will be the chain that will bring the brands over the Alps or over the Pyrenees. Brands from the South have to be brought from the North or vice versa. Other center players have to do the same effort to bring something new, combining these new things with the classical ones. That can refer to players in France, too.

Olivier DAUVERS
What dangers are there for brand villages if they are not careful?

Henrik C. MARIS
The danger for a brand is going in its “back yard”. This is a frequent problem in Germany and Italy. Excess stock is not a problem, on the contrary, it is a good thing. It represents a question of taking the brand out in the street where it can be seen and also find places in Europe where its presence would be useful. The brand on the street will create a demand for full price business.

Olivier DAUVERS
Do you share view of those who are moving increasingly towards commercial tourism?

Henrik C. MARIS
In tourism, there have to be done serious outlet centre business based on the classic 60 minutes circle. In order to do really good business one should look around, as outlet centre shopping is very much a border shopping thing. Many centres that are on border are attracting customers from other countries.

Olivier DAUVERS
Franck Verschelle, does commercial tourism make it possible to extend the circle of consumers by drawing them in from further afield and pulling in a moving flow of customers?

Franck VERSCHELLE
I agree with what Henrik said, we are talking of the same thing, relocation and flows. In terms of the flows, drawing on commercial tourism not only gives a varied customer base throughout the year, depending on the seasons, but also alleviates the potential negative impact on existing proximity zones.

Olivier DAUVERS
It is also a way of getting better accommodation, isn’t it?

Franck VERSCHELLE
Yes. Nevertheless, it is not a property scheme but a reality, and so there is a need for a competent operator to set it up. The development of a region with outside customers will have a very positive impact.

Olivier DAUVERS
Following the summary of the fundamentals of the concept, on which side of the balance are you, pure and simple commerce or commercial tourism? Although there is no real opposition, looking at your centres and your projects, we can however identify differences in directions.

Eric DECOUVELAERE
Whatever we say, the fundamentals are a reality, the brands, prices, etc. If on top there is also tourism, when the centres are carefully geographically located, it is clear that we will take action. Our approach is to offer the client an experience that matches with their investment whether in terms of one-off customers (tourists) or those of the trading area. Are prices on their own enough of an attraction?

Olivier DAUVERS
Alexandre Séjourné, looking 5 years ahead, do you think we need to improve the proposal of the centres with an attraction other than the price of the brand?

Alexandre SEJOURNE
I have been carefully following the ideas that have emerged over these two days, and in particular the parallel drawn by Philippe Vilmus between warfare and economics. At the moment we have many projects in Europe based around the brand village model. This highlights the need for brands, prices, effective architecture (to give form to the emotion)… Taking the parallel drawn by Philippe Vilmus, operators are fighting in the same location, with the same weapons. On one hand, we are going to try and protect our fundamentals, but on the other we will rework the criteria for success for ourselves. The architecture will be original, but not necessarily a pastiche of the region. This will nevertheless match with the requirements of the customers and of the shopping centre. More than simply the feeling of wearing a known brand, I believe that consumers have a real sense of having bought a Ralph Lauren shirt for 70% less. They will boast more about the unbelievable saving made than about the fact of wearing this brand. Fifteen years ago we were working on brands and prices. Today Internet sites such as venteprivée.com offer these benefits. We are not just managers of buildings, we must be present in the shops and not allow the brands to slacken off. They must continue to be dynamic. We must be around to remind them that their image is at issue and that they must satisfy their customers. Like us, they need this.

Olivier DAUVERS
What will your centres look like in 5 years applying the vision you have of them?

Iestyn ROBERTS
I don’t think consumers need a change in that fundamental. The modern consumer is becoming a very differentiating person. The reason people come to us is the pleasure of finding something they haven’t expected to find at an unexpected price. We will make environment even more attractive than it is now. Countries across Europe are very different and it has to be worked a lot with the local cultures. Our centres will not be enormously different. What brings people to us are the right brands, the right prices, and the right environment.

Olivier DAUVERS
Have you ever considered replicating the model you have perfected (brands/prices) from the offline to the online?

Eric DECOUVELAERE
Here again, we are going to stay in our core business. Obviously the “click” has been a reality for a number of years. We have been tempted but the fact that we are not logistics experts holds us back. More specifically, we have thought about it in a different way. For example, there are operators who are interested in the market and the question is to identify what we can bring to it together. From our perspective, we bring our relationships with our brands (approximately 700) and an understanding of the market. As for these operators, they have the files and a mastery of a business requiring a specific expertise. I am surprised that we, operators of brand villages, are not closer to these private sales sites.

Olivier DAUVERS
You therefore share my incomprehension concerning this absence of synergy between our two businesses.

Eric DECOUVELAERE
Precisely, we are working on it, and I hope that this will lead to something over the coming months.

Olivier DAUVERS
Alexandre Séjourné, do you believe there is a synergy between the off-line and the on-line?

Alexandre SEJOURNE
We asked ourselves this same question some two years ago, we were not at all worried. Today, the turnover of Ventes-Privee is around €300 M on its own. To start with we wanted to know how it all worked. We questioned our brands. They explained that they could destock 15,000 items in 3 days. However, this online sale involved a complete loss of control over the image with regard to the consumer, and insignificant margins. But above all, remaining in our online shop for destocking would prevent us from opening our permanent brand at full price. It is thus extremely complicated. The ventes-privées site apparently takes 30% of margins and there are 70 other destocking sites.

Eric DECOUVELAERE
As for us we are reviewing the models. We could undoubtedly manage to identify some complementarities, but at the moment, these are mainly directed towards discounters. The factory outlet retains legitimacy for the brand as it controls its image and its communication.

Olivier DAUVERS
Do you think that you might be interested in this communication channel one day?

Franck VERSCHELLE
No, because there are a great many things already to do in the future for our business. In addition, we must not confuse the evolution of a business and a distribution channel. This would be like asking a supermarket to build small shops. It is a different business, with different analyses, etc

Olivier DAUVERS
Nevertheless, in the supermarket sector the big chains were also specialists and have now all become multi-size. The idea was precisely to target the same consumer, but to attract them in different ways.

Franck VERSCHELLE
Multi-size perhaps, but not inevitably multi-channel. The co-existence of these multi-channels in the major chains has always been complicated. It is about know-how, investment, and a number of issues... At the moment it is the advertisers who are happy thanks to the advertising investment from all these new sites. I believe in this development but it is not our business and Pantheon will not make it a priority. The online will not replace factory outlets and brand villages.

Olivier DAUVERS
The idea is really to know whether there is any strategic relevance to be had in combining the two channels. And Iestyn Roberts, would you be interested in e-commerce?

Iestyn ROBERTS
The Internet is a great place to promote our businesses and to communicate with our partners, but a commercial media doesn’t do this for a living. Our environment offers to our partners the opportunity to manage their brands and it is a very special environment in order to sell our products.

Olivier DAUVERS
If one of you did go down that path, would you maintain your relations with the brands?

Alexandre SEJOURNE
I think that as soon as the brands understand that they can do this on their own, they will start doing it.

Olivier DAUVERS
It is hard to forget what the value of a customer file, the history of a business relationship…

Alexandre SEJOURNE
When a customer is registered on the site, access to the product is still not certain, which could put them off. In France, factory outlets and online sites are complementary in the sense that we can say to the Internet user that if they miss a sale, there is a second chance in a factory outlet.

Olivier DAUVERS
Henrik Maris, are there objective complementarities that exist between brand shops and destocking sites?

Henrik C. MARIS
We are talking about leisure business. Different customers exist. Sometimes, they don’t know exactly what they are going to buy. Outlet suggests excess stock and excess shopping.

Olivier DAUVERS
There is a lot of talk of the Internet, proof that ways of thinking of yesteryear have become much faster.

Eric DECOUVELAERE
We have seen that online sites work very well in those countries that have a good hotline culture. Ventes-privées works very well in France because there is a real understanding of the factory outlet and brand village in France. However, in Italy, there are a large number of projects but the country still lacks major operators, unlike Great Britain. The development of brand villages.

Olivier DAUVERS
At the moment, opening the last dossier on “development”. The scale of announced projects (1.5 million m²) is astonishing. But can this rate be maintained? It is in fact rather unusual to see such a level of expansion in sales areas.

Franck VERSCHELLE
McArthurGlen came to Europe to work with Nike and Polo for their destocking. Today, we are facing the same demand, brands are asking that we work with them in Eastern countries. We now need to be Europeans, or even beyond this.

Olivier DAUVERS
Is this an objective reason for believing that you can open new m²?

Franck VERSCHELLE
Of course, because a distribution circuit is becoming reality and the demand exists. For us, we already have our own circuit. The brands are advancing, and we are behind them. Their confidence arises from having worked together over many years. They need solutions for the more risky markets.

Olivier DAUVERS
Do you think that the volume of unsold goods will follow or even exceed the amount of m² in the next 5 years?

Franck VERSCHELLE
Fifteen years ago there were as many brands and as many, or almost, customers. We were facing problems of overstock. Today, we have 2½ million m² for selling them off. Overstock will of course never disappear. The day on which the overstocks and m² curves crossover will pose a serious philosophical problem for our projects. In terms of simple expansion no operators will emerge one morning to announce that they plan to expand in the United Kingdom. There are thus countries reaching saturation, others in which there is still room, more or less developed countries. In France, 23 centres have opened in the space of 7 years. There are only 2 today. The erosion is ok, but the chains need to know how to select relative to a market logic, relative to a destocking logic and a geographic logic. There are markets reaching their saturation points and others opening up, we thus need to think about the future crossover of the overstocks and m² curves.

Olivier DAUVERS
Do you think there is a risk that these curves are going to cross?

Eric DECOUVELAERE
We must be the first wherever we go. In addition, we all here have products that have a shelf life. If we are promoters, developers, we also have a responsibility for revitalizing the products. When we walk through a department store and we see brands we have and those we do not, we can see that there is still work to be done. If we still have work to do in educating the customer, we also have it to do with the brands. Many of these are still not present in the brand villages, it is our vocation to go to them and work with them.

Olivier DAUVERS
Are we running the risk of having too many brand villages? A market consisting of too many operators and too many assets will end up reducing the value for everyone. The next shareholders could therefore be reluctant to see any integration?

Iestyn ROBERTS
Looking at the whole market with the kinds of brands that we want to work with, there are some conflict pressures. On one side, there are supply chains that are becoming more efficient. With the Internet it is possible to sell the products profitably. It is a growing world environment and not just within Europe, but also in the Eastern Europe and in the Far East, where there are very fast growth economies. Big brands need big supply chains and they create surplus products. The opportunity is to find the right location, an area that is not yet penetrated by another outlet. The consumer demand is a natural human impulse. There will be further opportunities in the euro zone and even bigger opportunities outside it.

Olivier DAUVERS
Is the demand of investors always this persistent, or even more so? In effect, in this commercial town planning, one can wonder if there is not more money than there is need.

Iestyn ROBERTS
If there is more money available that means that there is a demand. Factory Outlet is different from conventional retail. A well run out outlet centre has a consistent growth, makes good money for the owners and there is no shortage of people who want to buy.

From the floor (Olivier COUTIN – Unibail Rodamco)
As I see it there is more money in the market than available products. This means that money that cannot be invested in traditional retail centres is first shifted into other forms of commerce and is now being directed into factory outlet and brand village centres.

Franck VERSCHELLE
Yes, there are a lot of investors. But these investors now have significant roles in the decision making process and in the management of the centres. Some of them are even specialists in our business. They are not stumbling in blind. As they gradually come to understand our business and develop structures for it, they are becoming increasingly more demanding.

Olivier DAUVERS
There is no incongruity between what you both have to say. There is a surfeit of capital for investment, unlike in traditional commercial property. There is thus a movement of carry over.

Iestyn ROBERTS
Outlet centres are very small markets in comparison to the total retail investment, which is a huge sector. People who invest in it recognise it as a very different kind of business.

Alexandre SEJOURNE
Previously we had to be extremely ingenious to attract investors, now it is they who come to us. But it is nevertheless important that investors understand our business. For example in Belgium, there was an operation that failed because an investor was abandoned by the promoter, despite the good location of the site and the presence of brands. In guaranteeing the proper operation of the project, the promoter must take responsibility for its management.

From the floor (Jean-Pierre NOBLE - Ixis AEW Europe)
There are plenty of full price shopping centres that are already reaching maturity. No one was interested in brand villages 10 years ago, the context has changed because of good management. But brands need their own traditional distribution circuits. Brand villages are an investment link offering continuity from the full price shopping centres, these latter are reaching saturation in many European markets.

Olivier DAUVERS
What other choices could there be than fashion and textiles? Is it possible to consider expanding the range of our businesses? Do any of you have any relevant experiences?

Alexandre SEJOURNE
There are still plenty of brands to bring in, especially in the fields of textiles and home products. The home is a sector for the future. It is a magnificent product, a vector for emotion. Consumers are keen for it given their experiences of buying in this segment.

Olivier DAUVERS
Could Seb, often mentioned, be an opening for you?

Alexandre SEJOURNE
We will clearly see other openings. Maybe one day we could be selling cars if other buyers cannot be found for them? However, it is clear that some obsolete products (e.g.: high tech) cannot be marketed using this system. Bizarrely we have been called on to market Lindt chocolates, destocking after the Christmas period. This was a good opportunity to capitalise on emotion. Whenever there has been a malfunction, we must make the most of it.

Eric DECOUVELAERE
We are already working on the home. But I want to go back to two product categories. First of all, we are coming up against rapid obsolescence in “technological products”. Although the volumes here are not comparable to those of the textile segment, we have achieved good results. For instance, with Toshiba, we can find customers for products between 6 month and 1 year old. These are phenomenal densities, but it is a model that we cannot replicate in all the centres because of insufficient goods. This operation has nevertheless caught the attention of other brands. The second category is that of “perfumes and cosmetics”. Whilst remaining firmly within the DNA of our brands, we are trying to develop these in the best way. Full price perfumery operators would like to come into our centres, but we are resisting this.

Franck VERSCHELLE
We have a car dealer alongside us in Newcastle, but this is not the future. I remain somewhat sceptical in this matter. Despite the respect I have for these brands, they never draw as do Hugo Boss or the other brands that are in essence at the core of our business.

Iestyn ROBERTS
Our business remains axed on fashion, even though sectors like cosmetics are easy to get. We have big furniture and electronic stores, but they have to adapt to the centre outlet prepositions. It is just an enhancement to our core product and not a replacement of it.

Olivier DAUVERS
What is the reduction for the cosmetics that you said sold in Portugal?

Iestyn ROBERTS
The discount is normally of 30%

Olivier DAUVERS
Is it appropriate to take an interest in markets other than fashion and textiles? Do these represent a real lever or will it remain the exception?

Henrik C. MARIS
The core business will be fashion and textiles, as the key word to it is “margin”. Traditionally, there were 10 textile shops doing the same thing. Nowadays, there are normally 9 textile shops and a flower or a perfume shop. It is good to soften up the centre, which represents in fact a whole atmosphere.

Olivier DAUVERS
To summarise, if we have value chains with sufficiently high margin coefficients on the full price, there is enough to live on even after dividing by 2.

Eric DECOUVELAERE
To complete the picture, we also have a discount travel agency. The holidays are reduced and we sell them through the agency.

Olivier DAUVERS
In this instance, it is an Internet model that has been transposed into the real world!

Alexandre SEJOURNE
We are all in agreement that 80% of our business still comes from textiles, with overstocks readily available. However, other product ranges will add emotion, differentiation, and we will therefore have this extra element of appeal to bring in the customers.