Outlet centres face growing competition from e-commerce

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 on-line.

This was one of the key conclusions of the 5th ICSC European Outlet Conference held in Milan last week. Brands are being targeted by Ebay which is now offering a route to dispose of stock without damaging their reputation. Some 59% of items put on Ebay are new, fixed-price products, and this will rise significantly now the 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 this week, listened to Patrick Munden, eBay's Head of Seller Communications, say that eBay had achieved $57 bn retail sales globally in 2009. Ecommerce is currently estimated at 5 - 6% of the retail market and eBay expects this to grow to 15%.

Research undertaken in Germany estimates that ecommerce has taken away 14% of traditional high street sales, but shows that 11% of offline sales are generated on-line, bringing the net effect to just a 3% reduction in traditional high street sales.

Managing director at ICSC Europe, Ermine Amies said: 'We need more research to evaluate whether online outlet sales cannibalise 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 Executive Officer at Fashion House Developments, said: 'On-line outlets may be viewed as competition by some but they are not substitutes. True Outlet centres are providing the real tactile experience of shopping as a leisure activity for good brands at a reduced price. Brands will always use several different methods of liquidating excess stock but what they are focussed on is doing that in high-quality shopping environments where they can communicate the values and the heritage of their brands.

'Of course any competition is also an opportunity for outlet centre management to sharpen up their offer and their marketing campaigns. But people shop: they always have and they always will - because of the essential direct social interaction it provides. It is also debatable whether the true luxury brands would ever wish to sell their goods on-line as it reduces their exclusivity on which a large proportion of their brand image hangs. The industry cannot be complacent about online competition, but neither do we consider it signals the demise of traditional shopping or factory outlet shopping.'