Building on Outlets’ Value Proposition to Attract New Customers

In today’s complex and challenging retail market, leading outlet centers have grown into one of the best performing channels due to their strong results’ higher resilience to market shifts, such as economic recessions and online competition. The reasons for their popularity range from the lure of their customer value propositions to specialized operators’ abilities to support brand values and build meaningful, deeply insightful conversations. These have been vital to expanding their retailer bases.

Looking toward the future, outlet centers are well placed to continue outperforming the traditional retail industry. However, operators need to understand retail’s structural changes in order to build sustainable growth strategies. This is the first time in history that the market includes six generations of consumers, with a new generation that celebrates diversity rather than similarity. This generation is more oriented to “values” than to “value” and prioritizes experiences over products. Moreover, consumers today have access to almost endless shopping and leisure options, and their needs and expectations change faster every day. Evolution is necessary not only to remain relevant to visitors and brands, but to also help address some of the main growth opportunities in the outlet industry: increasing the frequency of visits to the centers, expanding customer bases by attracting new segments, and prolonging dwell time.

From Transaction Enablers to Creators of Experiences

According to Neinver’s internal data, only 15% to 30% of the company’s visitors go to the centers with specific purposes. Outlet centers have traditionally attracted customers by offering good prices and top brands, together with a “day out” experience. While commercial appeal remains a key component of the proposition, changes in the consumer market as well as online and high street discounts are pushing outlet centers to broaden their value propositions, shifting their role from mere transaction enablers to creators of experiences.

To create experiences, operators can learn a lot from adjacent industries, such as hospitality and leisure. This can help create spaces that build on brands’ in-store experiences, including a focus on the food and beverage offer. A compelling dining offer in terms of quantity, diversity, and service quality can help increase dwell time and broaden the centers’ appeal to a wider range of visitors. Several examples highlight the relevance this aspect is gaining in our portfolio. Next May, Vicolungo The Style Outlets in Italy is scheduled to open a new “smart” gourmet point that will offer internationally renowned chef Antonino Cannavacciuolo’s products, with a take-away option or the chance to eat in within an informal area furnished with designer table and seats. In France, a new burger concept opened in 2017 at Roppenheim The Style Outlets, which proved very successful in terms of consumer expectation. The F&B spend per visitor at Roppenheim rose 13% in 2018 compared to the previous year.

Apart from its contribution to the overall offer, F&B would represent the largest tenant in Neinver’s portfolio if it were considered as a single company, so understanding F&B providers’ needs and supporting them in order to boost performance is key.

At the same time, and as opportunities for new outlet developments in Europe are limited to a few strategic projects, operators are investing in renovating and expanding outlet schemes to continue providing the best spaces for consumers and brands. Neinver has been carrying out a remodeling program and expansion focusing on several outlets across its portfolio. For instance, in April of last year, the company opened the Phase 2 expansion of Halle Leipzig The Style Outlets in Germany, achieving excellent results. Overall, the center increased visits by 22% and sales by 32% in 2018. Neinver is currently carrying out a €9 million renovation of Vicolungo The Style Outlets near Milan to refresh the center’s style. The facility has been expanded twice due to its growing success.

Creating a Sense of Now

Some outlet centers are also committed to generating memorable events to meet visitors’ demand for experiences and introduce a sense of now. When creating consumer-oriented events, one must focus on shareable and seamless experiences to reach a tech-savvy generation. Events are also an excellent opportunity to combine related industries, such as fashion, entertainment, arts, and F&B. In Spain, Viladecans The Style Outlets recently celebrated the Spring Shopping Festival, which included events such as fashion workshops, live music, a raffle for tickets to a music festival, F&B special promotions, and an appearance by Spaniard Ona Carbonell, an Olympic synchronized swimming medalist, who gave tips on living a healthy lifestyle.

The evolution of the market has also brought changes to outlet centers’ tenant mixes, with a focus on increasing the sense of novelty in order to increase visitation frequency. Operators are opening more pop-up stores to create a more dynamic offer and test new concepts. The introduction of younger brands that still don’t have a wide presence in the outlet channel can also help broaden customer bases and attract a younger generation.

Thinking as a Digital Retailer to Enhance Physical Experience

It’s estimated that by 2030, 40% of all consumers will be digital natives. Implementing new technologies can help enhance the shopping experience by increasing convenience and personalization factors and creating new touchpoints. However, one must be fully strategic when deciding how to implement technologies and invest in those that add the most value for consumers and brands. The influence of the digital irruption goes far beyond the ways that technologies enhance the shopping experience, and has left some important lessons for physical retail, such as the value of information and of customer service.

Online operators have pioneered implementation of deep customer insights in retail to adapt their offers and communications, and to design their entire strategies around consumers. At outlet centers, one of the greatest opportunities that technology offers is that it lets us get a comprehensive, detailed view of visitors. Using geolocation, for example, one can measure how long they stay, identify the most visited areas and the frequency of visit to a particular store, and match this information to customers’ purchases and activities through apps and social media. Combining geolocation systems with context marketing tools, one can also send personalized communications at exactly the right moment.

Regarding implications for service, online commerce has raised service standards as consumers have become used to maximum convenience and speed. Nowadays, best-in-class hospitality management is needed to meet their higher expectations and guarantee them a comfortable experience.

In the end, well-established outlet centers have managed to expand their customer and retail bases through an ever more sophisticated offer and their strong support of brands’ strategies. To continue growing, operators will have to evolve from simple commercial value propositions to compelling social ones. Seeking inspiration from adjacent industries and even from online business can help incorporate value-added elements to gain ground when competing for consumers’ time.