Brendon O'Reilly, GVA Grimley Outlet Services

The outlet sector is one of the fastest growing, best performing and most profitable sectors in the European retail marketplace today. Retailers don’t always sell what they buy, and outlets provide them with a safety net. Institutions are recognizing outlet centers as an asset class that they should own, and they are looking for “a uniform standard of information”. ORDA, the Outlet Retailers and Developers Association, aims to provide this and more. We met with Brendon O’Reilly, Executive Director, GVA Grimley Outlet Services and member of the ORDA Steering Group, to find out more about the new association and the outlet sector in general.

 What can you tell us about ORDA?

“ORDA was recently officially launched at MAPIC. It is the Outlet Retailers and Developers Association, a group of people who’ve come together to promote the outlet sector, principally to provide a platform where information is shared between different, normally opposing, parties, because the outlet sector is growing very rapidly. When the outlet sector started in Europe there were only three developers involved in the UK, which was not a situation where you were going to create this kind of organization because the developers were all in competition. Now there are approximately 145 outlet centers, and in the next five years there will be another 100. The number of centers developed by the original three developers in the next five years will only represent maybe 15% of the total. So far we have a good mix of both developers and tenants, though fewer tenants than developers, which is normal. I’m really pleased with the quality of our members.”

What is the purpose of ORDA?

“The single most important thing we need is a uniform standard of information. You have lots of new entrants, lots of new tenants seeking information. People are asking: ‘Where should I go? What should I do? How are outlet centers performing?’ And there is no current channel, no ICSC or trade magazine or good communication medium for people to see how this works. If you look at airports in Europe, for example, there’s a trade body, a trade magazine, exhibitions, and so forth, so if you’re a retailer wanting to go into an airport you have all the information you need. And that’s ORDA’s platform, to promote an understanding of the outlet sector and to engage with new entrants. Institutions in the last few years are recognizing outlet centers as an asset class that they should own, and these institutions need information and research, and that’s the next stage."

Was the decision to launch this new organization influenced by the downturn?

“Yes, the downturn positively affected this decision. The entire outlet sector is doing well; the concept of brand and value is very attractive when you’re watching your pennies. GVA has taken the initiative to set this up; it’s a voluntary position.”

What is the outlook for outlet centers in areas like CEE?

“Expansion in CEE will happen at a similar pace as across any region because tenants normally have 15-20% of their inventory needing to be cleared through an outlet. So the need is there. In Central Europe it has gone faster because planning is easier. In Germany there need to be 30 outlet centers and currently they have five. So there is a huge gap there between demand and the current capacity. Some figures to consider are that we have 60 million people in the UK and 41 outlet centers, 80 million people in Germany with five outlet centers, and 150 million people in Russia with no outlet centers. In 5-10 years time in Poland there will be 15 outlet centers where there are currently five, in Germany there will be 25, and in Spain, which currently has eight, there will be 15. We have 600 tenants in our existing centers and they tell us where they need this function. It’s going to happen.”

What can other retail sectors learn from this?

“The outlet sector gives retailers a safety net. They don’t always sell what they buy, and the outlet sector clears what they don’t sell. It’s as simple as that. Retailers need to have innovation, they need to renew, they need to have seasons. Their consumers are all about now. The outlet sector is all about quality, brand, and value. There is a different consumer for each. The normal ratio is around 15-20 stores for one or two outlet stores. That gives them the ability to clear, cleanse, and bring the new product into the mainstream. That also eliminates the disappointment for a customer returning to the main store and seeing the same product they bought three months ago at on sale at a huge discount. That’s what the outlet is for. Retailers don’t want to sell things at half price; they want to sell them at full price. That’s the philosophy, everyone wins, the retailer, the developer, and the consumer. We have not yet brought anyone into the sector who has not instantly taken up work. The first outlet is always the biggest hurdle. They think: ‘Will I cannibalize my existing business? Will nobody come to my high street stores tomorrow?’ But then they do it and realize there’s no effect on their high street location at all. The sales go up here and the cash keeps getting generated there.”

The outlet sector is often described as ‘counter-cyclical’. When the world economy gets back into higher gear, will there be negative ramifications for the outlet sector?

“The outlet center has only been here in Europe since 1993 and grew out of the last downturn. Every center that we have enjoys a much higher profile now than it had a year ago, because people are seeking them out. That awareness won’t go away. For sure, people will go back to the high streets, but once people have been to an outlet center they’ll want to come back. What will happen in Europe will be the same as what we saw in the past in the U.S. In the U.S. what happens is every time there is a downturn the outlet sector goes up, and during the recovery it flattens, a plateau, but it doesn’t go down again. When people go into an outlet center they know how much they’re going to spend, they don’t know what they’re going to buy. When people go into a shopping center they know what they’re going to buy, they don’t know what they’re going to spend. And when they go to an outlet center they buy three of everything because it’s all half price. The brands like it because the outlets target families who buy brands for the children at half price, then when the kids are older they’re loyal to the brands. The sector is growing massively at the moment. I think that will continue in the medium term. Anyone who didn’t have an outlet strategy from a tenant point of view already is now looking at it. When things are unpredictable the outlet sector gives them the balance of predictability, preventing a backlog with the stores being full of last season's merchandise.”

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