All Outlet Eyes Turn to Asia - Value Retail News

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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 (continued on page 6)
© Value Retail PLC 2010 THE Chic Outlet Shopping® VILLAGES Discover Europe’s leading luxury outlet shopping experience, created and operated by Value Retail www.ChicOutletShopping.com Bicester Village, London • La Vallée Village, Paris • Fidenza Village, Milan Las Rozas Village, Madrid • La Roca Village, Barcelona • Ingolstadt Village, Munich Maasmechelen Village, Brussels / Düsseldorf • Wertheim Village, Frankfurt • Kildare Village, Dublin Alexander McQueen, Anya Hindmarch, Armani, Bally, Burberry, Calvin Klein, Carolina Herrera, Celine, DKNY, Diane von Furstenberg, Diesel, Dior, Dolce & Gabbana, Dunhill, Ermenegildo Zegna, Façonnable, Givenchy, Gucci, Hugo Boss, Jimmy Choo, La Perla, Loewe, Loro Piana, Marni, Matthew Williamson, Max Mara, Mulberry, Paul Smith, Polo Ralph Lauren, Salvatore Ferragamo, Smythson, TAG Heuer, Tod’s, Valentino, Versace and many more RUN BY RETAILERS AND SERVING RETAILERS 19 BERKELEY STREET, LONDON W1J 8ED, ENGLAND +44 (0)1869 323 757 WWW.VALUERETAIL.COM
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