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Spring 2012 New Outlets for Growth

A new model of outlet centers is attracting the value-conscious consumer. And specialty retail is booming right along with it.

It’s hard to imagine a more efficient blending of off-price retail and modest, popular restaurants and entertainment than an outlet center. Today an outlet center is about more than just outlet stores, but the consumer still sees it as the place to look for good retail deals.

Ever since 1981 when Stanley Tanger pioneered the outlet industry by building the country’s first authentic outlet shopping center in Burlington, North Carolina, the outlet industry has grown to hundreds of outlet centers worldwide and the definition of outlet centers has evolved along the way. Today outlet centers are flourishing and are becoming profitable venues for specialty retail.

Definition of outlets

Almost every outlet center developer defines the concept differently. Tanger has built its reputation by developing outlet shopping centers where the stores are operated by brands and manufacturers such as The Gap, Nike and Banana Republic. The Mills, on the other hand, has evolved their outlet centers along different lines, focusing on “delivering value for the consumer,” says Deborah Georgetti-Piro, senior vice president of specialty leasing. “We consider ourselves hybrid centers. We offer a unique brand of shopping with a combination of outlet, manufacturers and value-oriented traditional retailers, plus exciting dining and entertainment venues,” she says. The Mills, a Simon-owned outlet center collection, is typically not anchored by department stores but include big box retailers. Georgetti-Piro says the discount and value aspect of outlet centers are what defines them irrespective of the mix of retailers. “It is not totally comprised of manufacturer outlets,” she says. For example, in most Mills Centers, you can find a balanced mix of traditional value retailers such as Old Navy or Victoria’s Secret side-by-side with a J Crew Outlet or a Nike store.

At Craig Realty Group, “outlet centers are comprised of tenants that offer discounted merchandise at 30% or more off retail price,” says Jancee Aellig, Specialty Leasing Executive. Nowadays, many tenants at outlet malls manufacture products especially for their outlet stores; rarely do they sell seconds or damaged goods.

Mills Main Street

Birthing specialty retail

Specialty retail common area programs began almost at the same time that outlet centers came up. The very first specialty leasing program opened in a Mills property in 1989. At the time, it was leased and managed by Sales Dynamics who operated 15 carts. In 1993, the center began managing the program in-house and now all 15 centers are leased and operated by Georgetti-Piro and her specialty leasing team. In most Mills centers there is usually over one million square feet of gross leasable retail space, formed around a  “racetrack layout” and a common area bustling with temporary tenants. “Our programs are very large and consist of many RMUs and kiosks. They are leased with traditional specialty leasing products and traditional retailers. Due to the size of our centers and programs, you may find duplicates or triplicates of the same uses throughout the center,” Georgetti-Piro says. Some examples include foods such as Hickory Farms, and eyebrow threading.

Some outlet developers envision a value-oriented specialty leasing program. At Craig Realty Group, temporary tenants are required to offer goods and a value proposition. Craig’s specialty leasing programs are focused on bringing in tenants who will incubate into long-term retailers. “We expect our short term tenants to offer discount merchandise as well,” Aellig says. While several seasonal retailers such as Hickory Farms and Calendar Club operate in Craig Realty outlet centers too, traditional priced retailing is not their normal practice.

The Mills and Tanger Outlets lease to traditional specialty retailers and leave it up to the merchant to provide a value proposition option. The good news is that merchants are motivated to do so. Georgetti-Piro doesn’t require a value option proposition from the retailer, but the retailers try to conform to other outlet center retailers.

“We always need to modify our inventory and pricing slightly based on the demographics of a particular shopping center whether it’s an outlet or traditional mall, but we do try to keep our pricing 5-10% less at our outlet location,” says David Ferber, President of StreetTalk, a cellular and mobile device accessories operator. StreetTalk currently has over 200 locations throughout the United States; 22 of these locations are in outlet centers. The owners expect to grow their outlet business in the next few years as their business model seems to be consistently getting stronger in the outlet center. “We notice a much bigger diversity of shoppers at the outlet centers compared to traditional malls. It appears that shoppers will travel longer distances to visit an outlet mall and end up spending more to make their trip worthwhile.
And, these customers expect a discount,” Ferber points out.

In 2002, Automated Profit Products (APP, Inc.), a Shiatsu, full-body massage chair concept opened its first location in Concord Mills, in Concord, North Carolina. “It was one of our first locations and we learned very quickly that malls, not airports were the best launch pad for massage chairs,” says George McGuire, President of APP. “Overnight, the massage chair concept was a huge success and today, APP has 127 mall locations.” According to McGuire, outlet centers have provided the perfect demographic. “The racetrack design of the Mills outlet centers is ideal. We have 7-8 groupings of chairs in some Mills centers,” McGuire says.

Jessica Dalton, Director of Specialty Leasing at Tanger Outlets says the company gets “to work with a different group of merchants who test temporary stores before they enter a market. We do our deals directly with the manufacturer or brand.” Some of these retailers include Lacoste, Escada, BCBG, Soma, Direct Tools, Stanley Black & Decker, Reebok, Adidas, Nike, and Carter’s. “They test outlet stores as temporary inlines to see if they want to mature to a permanent store,” Dalton says. She works closely with the permanent leasing department to ensure smooth transitions.



Tourist attractions

Many successful outlet centers are located in tourist destinations such as Myrtle Beach, NC; Charleston and Hilton Head, SC; Nashville, TN; Park City, UT or in locations in more rural areas around densely populated major cities like Baltimore, Newark, Dallas, and Los Angeles. In the latter case, the attraction is the outlet center’s large geographical and diverse demographic reach.

Tanger centers are major tourist attractions welcoming more than 180 million bargain hunters annually. Nine of the company’s 39 properties have specialty leasing programs.

Jersey Gardens, a Glimcher owned outlet center in Elizabeth, New Jersey is just one mile from the Newark International Airport.  With over 15 million visitors per year, this outlet center has become one of the most prolific tourist destinations along the East Coast corridor and because of its location, it offers airport visitors shuttle bus service to and from the center every 30 minutes. Denise Monahan, Specialty Leasing Representative, says the specialty leasing market caters to the tourist who is seeking souvenir type products and traditional merchandise, like cell phone accessories.  She says the market demands cutting-edge merchandise and products and it tends to get the first line of new products before other centers, simply because of the sales volumes a retailer can produce there.

A unique feature of Jersey Gardens is the Jewelry Exchange, a 6,342-square-foot destination with 13 tenants (11 jewelers and 2 repair shops) who only sell fine gold, silver and high-end watches. Not dissimilar to the jewelry souks in the Middle East, this was originally a space built for 20 jewelry vendors. Over time, tenants have doubled their store size. In addition, the Jersey Gardens specialty retail program, soon to be renovated, includes 39 RMUs and 25 kiosks.

Certain products such as sunglasses, cell phones/accessories, jewelry and flip-flops, seem successful across all outlet centers. Interestingly, according to Dalton, demonstration products don’t sell well because often the customer can find the same product at home. Aellig agrees, “I changed from regional malls to outlets 10 years ago and people come to outlets for the brands, especially clothes and shoes. Therefore, not all cart products work,” she says.  Impulse products that may work in the traditional mall don’t always translate to the outlet center.

Glimcher Jersey Gardens

The way of the future

As outlet centers mature, management is facing challenges similar to traditional shopping centers. “The RMU designs are [getting] a smaller footprint to eliminate visibility issues with inline retailers,” says Georgetti-Piro. “At the outdoor centers, we are focusing on larger tops to provide shade and heaters.”

The same is true in Canadian outlet centers. According to Heather Kane-McLeod, Manager, Specialty Retail and Partnership for Ivanhoe Cambridge’s CrossIron Mills, in Rocky View, Alberta, cart and kiosks have changed to fit the centers’ design criteria.  “All carts and kiosks must have renderings pre-approved. In the centers I have managed, it usually coincides with a renovation or in the case at CrossIron Mills—a brand new center—they have two styles of carts to suit each neighborhood,” she says. This program includes 30 RMUs with a traditional mix of retail products. Ivanhoe Cambridge owns two outlet malls in Canada: CrossIron Mills and Vaughan Mills, located in Vaughan, Ontario.


CrossIron Mills

Adapting to change

Outlet shopping is here to stay and the down economy has fueled business success. “We have seen our business in the outlet centers get stronger as the economy has struggled. It does seem that shoppers are flocking to outlet centers for better deals while still being able to get the quality brand names,” Dalton says. Whatever the deal, it is clear customers love shopping at outlets and that the future for outlet centers and related specialty retail programs looks rosy.

Duffy C. Weir

Duffy Weir is the former vice president and director of specialty retail and marketing at The Rouse Company of Columbia, MD. Now an independent retail marketing and sponsorship consultant and writer, Weir travels the world searching for what she says "makes marketplaces tick." She can be reached at or 410.252.8885.

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