All Outlet Eyes Turn to Asia - Value Retail News

ChiNa
Outlet development in China:
Opportunities and challenges
By LINDA HUMPHERS
Editor in Chief
In recent months the global outlet
industry has been intensely focused on
Asia in general and China in particular.
Although purpose-built outlet
development started in China nearly a
decade ago, the country is still the new
kid on the block for the Western-style
concept that retailers are most comfortable
tenanting. But for its sheer size
and potential, China is quite properly in
the spotlight. In fact, Chinese shoppers
and their well-documented passion for
luxury brands have become sought-after
and targeted by outlet-center operators
in Japan, Europe and the U.S.
The opening of Yansha Youyi Shopping
City in 2002 was quickly followed
by a spate of imitators that gathered a
hodgepodge of brands under one roof,
generally outside a main city, usually
near an expressway interchange. Some
say more than 200 such value centers
are masquerading as outlet projects,
whereas Yiqun Wang and Xingo Jian,
in their report for ICSC on the rise of
FOCs in Mainland China, count around
30 solid outlet centers tenanted by
mostly authentic outlet merchandise.
With estimates on China’s middle
class rising to nearly 280 million
households in the next 15 years, various
analysts predict that between 100 and
300 cities qualify as outlet markets in
China. And everyone knows that Chinese
shoppers love the outlet centers in
Japan, Europe and the U.S.
But there are some basic challenges
to developing outlet centers in China.
For instance, the Chinese government’s
control over land is often mentioned as
the reason that outlet sites there often
aren’t ideal. Another area of concern is
the lack of high standards for maintaining
the outlet proposition of price,
quality and selection.
Outlet veteran Gary Skoien says the
lack of brands doing business in China
is a major challenge. On the other
4 InternatIOnal Outlet JOurnal SummEr 2011
hand, he says, “I really
believe the demand for
brands is so great that
it will not be difficult
for retailers to thrive,
especially if the centers
employ Western
standards of service,
quality and design
while incorporating
an understanding of
the customer and local
traditions.” Skoien
is CEO of Horizon
Group Properties,
which is working with
RichlyField in China.
Ivano Poma would
agree with Skoien.
The managing director
of RDM Asia, which is
about to open Florentia
Village, its first
outlet center in China,
says the establishment
of consistent management
standards is
the industry’s most
pressing concern there,
but strong consumer
demand will help the industry flourish.
“All the major fashion brands are aggressively
– even frantically – planning
their outlet offer so that they don’t miss
the opportunities in China,” Poma said.
“We believe that this trend will inevitably
create the base for our industry to
prosper. Furthermore, as opposed to
the typical path in the West, we think
that demand in China will be supported
by increasingly sophisticated supplychain
management at the local level.”
For Poma, the key to developing and
tenanting an outlet project in China is
experience. “Our Western logic gives
us a competitive advantage for defining
strategies and approaches,” he said, referring
to RDM’s partnership with McArthurGlen
in developing designer outlet
centers in Italy during the last few years.
Chris Milliken, commercial director
Citygate Outlets
of Freeport, points out that “In China
there are only a handful of properly
run outlet centers with a relevant mix
of international brands. Most are poor
imitations with little or no connection
to the brand or master franchisee.”
Additionally, the availability of stock
can be an issue for international brands,
Milliken says, noting that import duties
in China are 24 percent of the full
retail price of a product. For companies
that manufacture within China,
there are also regulations and tariffs for
the movement of goods around the
country, all of which means that prices
– even outlet prices – are high in China.
For Milliken, operating standards
are vitally important and the reason
Freeport has joined Outlets China as
an advisor on the developer’s planned
portfolio of Palette Outlet projects.
The first is set to open in Foshan in
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