ICSC: Are outlet centers facing their first real crisis? (EU)

Tenant demand for outlet development in new markets continues to grow as designer outlet sales hold strong, but this asset class has serious competition from clicks as brands move to liquidate some of their stock online.

Patrick Munden, eBay's Head of Seller Communications

Patrick Munden, eBay's Head of Seller Communications.

Brands are being targeted by eBay which is now offering a route to dispose of stock without damaging their reputation. 59% of items put on eBay are new, fixed-price products, and this will rise significantly now the mighty etailer has set up its own Outlet Store, cutting out the physical 'bricks and mortar' designer outlet centre and selling discounted brand bargains direct from retailers and manufacturers. Debenhams and Superdry, to name just two, have already signed up.

Delegates at the 5th ICSC European Outlet Conference, held in Milan last week, were left wondering where this would leave the Designer Outlet Centre industry as they listened to Patrick Munden, eBay's Head of Seller Communications, list the etailer's achievements: €68 billion retail sales in 2009 forecast to grow 11% over the next few years. eBay currently holds 5 – 6% of the retail market and it expects this to grow to 15%.

The retailer also estimates that it has taken away 14% of traditional high street sales, but argues that 11% of offline sales are generated on-line, bringing the net effect to just a 3% reduction in traditional high street sales.

A percentage of this growing retail market will now include the outlet offer and with no physical outlet centre to populate, eBay doesn't have leasing teams, but 'Enterprise Sales Teams who work with the brand or retailer to establish whether they have the stock and systems in place to fulfill anticipated demand. Then the brands are left alone and the marketplace is left to decide whether such a strategy will be successful.

For a brand or retailer it seems a cost-effective solution – no fees, no staff or infrastructure costs associated with a store in a designer outlet centre, and no long-term commitment if things don't work out.

But Patrick admitted that things are rarely that simple.

"We don't consider ourselves to be taking away a large slice of the retail pie; rather we feel that we are growing the retail pie. People still want to visit physical stores to touch and feel goods such as fashion and we remain just one of a number of routes to market for brands and retailers to redistribute unsold goods."

It is an interesting challenge for outlet centers which have, until recently, been the destination of choice for customers to buy branded, desirable goods at big discounts. However, some in the outlet centre industry see this as a wake-up call for outlet centers to improve and widen their offer to the customer.

Managing director at ICSC Europe, Ermine Amies said: "We need more research to evaluate whether online outlet sales cannibalize factory outlet and full price mall sales or discretionary spending is instead diverted from other goods and services and not bricks and mortar sales."

Neil Thompson, chair of the ICSC Outlet Centre Conference and Chief

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