by Giles Membrey, Managing Director of Rioja
There is no doubt that high inflation is having a negative impact on many aspects of our lives, from food prices to energy costs. However, one of the effects of high inflation is that it encourages consumers to go in search of even greater value for money, and this is good news if you are a landlord at an outlet center: with rents based on turnover any increase in the price of goods being sold increases sales density and benefits you directly.
Outlets are becoming more and more attractive to consumers in their search for value, with the subsequent rise in footfall increasing turnover, and by association rental income, to the financial benefit of the landlord. It’s why we are currently seeing landlords actively investing in marketing their outlets and the brands within them. There has already been an average increase in sales densities of around 20%-22% over the past three years and aggressive marketing may yet push this figure higher.
Interestingly, one of the other main drivers for outlets is the ongoing increase in internet sales. With more online sales comes a corresponding rise in the number of items being returned, a significant percentage of which end up in outlet stores. Additional returns mean more stock going into the outlet, more stock means greater choice for the consumer, greater choice means a happier consumer, and a happier consumer means more repeat visits. It’s one of many reasons why a growing number of brands are looking at taking space in outlets and why I remain optimistic about the sector.