Destination trips

In previous reports we have discussed the polarisation of shopping trips between ‘destination’ and ‘local’ retail journeys. Local shopping trips represent a ‘needs’ based retail journey, while destination trips represent a ‘want’ based journey.

For destination retail trips the overall experience is paramount in order to draw people from distance for long dwell times. This allows for browsing and comparison of goods or services. Visitation is less frequent and consumers are typically prepared to spend more.

However, an increase in both the significance of local shopping trips and the growth of ecommerce means that destination retail has to work harder to compete for a reduced share of consumer spend. Where destination schemes have combined with other retail and leisure offers, or another consumer draw such as an arena or tourist attraction, footfall has remained high. The challenge is providing a point of difference in a market flooded with choice, value and experience.

Like regional malls and major city centres, visitation to outlet centres is typically destination driven and an evolution of the offer has been on the agenda of many operators and developers in the sector in order to remain in-tune with current consumer demand.

What continues to drive consumer visits to large retail schemes, is the notion that non-essential shopping trips are essentially a leisure pastime. Shopping has evolved from being considered an activity in its own right to part of a wider leisure experience. As such, many retail led schemes have become more of a hybrid between the retail and leisure offer.

^{Source: Savills Research}

Role of leisure in OCs

Clothing dominates the outlet market accounting for 41% of sales, but Mintel suggest that, discounting on the high street has eroded OCs unique proposition. Therefore schemes need to offer something more than price point alone, with browsing and leisure elements key drivers for the overall experience.

The most significant link between retail and leisure is with regards to food and beverage. F&B is increasingly heralded by retail landlords as an essential means to increasing footfall and extending dwell times. In outlet shopping the provision of F&B is increasingly important too, not least because for most visitors this kind of shopping predominantly constitutes a leisure activity.

Realm data indicates that half of visitors to OCs are interested in a combined retail and leisure offer. The rationale is to increase the attractiveness of schemes to a wider range of visitors, thereby increasing sales and footfall, as well as increasing the dwell time which should, in turn, drive turnover.

This not a new trend within large regional shopping centres, which have been evolving their leisure offer for some time. Consider any of the large retail developments in the pipeline, or delivered over the last decade and there is a significant leisure component to each of them. Eating out in particular is now an essential part of the retail experience. The outlet market has also been driving the growth of F&B forward in recent years.

The importance of these trends to the outlet market can be demonstrated in how the tenant mix has evolved over time on many schemes. Savills analysis has found that restaurant provision in OCs has doubled since 2011, while cafes/takeaways have increased by over a third. Restaurants now account for 8% of units on outlet schemes across the country, but increasingly account for more than 10% of provision. Total F&B provision on new or redeveloped schemes typically occupied 20-30% of units on new schemes.

This phenomenon shows that the UK outlet market is ahead of European countries, with typically twice as much space allocated to F&B as outlet centres on the continent. This increase in provision is driven by consumer demand. Global Data report that for consumers visiting OCs, 34% state that leisure facilities are more important on outlet schemes than other shopping locations, while 49% consider dining options an important factor for visitation. Realm have recorded from exit surveys that 42% of visitors ate while at the centre.

^{Source: Savills Research}

Other forms of hybrid

While the concept of an outlet being located within a ‘full price’ shopping mall is new, hybrid models themselves are not new and there are various schemes that work in harmony with adjacent retail schemes. In fact, a blended retail offer is already prevalent in the majority of shopping centres. The retail and leisure offer appeals as a draw to consumers seeking essential goods, or for leisure shopping trips.

Several OCs have taken other approaches to providing a point of difference. Princes Quay in Hull takes ‘hybrid’ in an innovative direction that comprises four levels providing a different type of offer on each. The Lower and upper floor are leisure and F&B focussed, with the middle floors split between an outlet offer and a full price high street line up.

Examples of F&B growth

The increase in food & beverage in outlet centres comes as a result of a decrease in the proportion of space given to Fashion goods 2011-2017. Comparison goods have grown marginally in the period. However, as many schemes have increased their F&B provision through extensions, the net decrease in Fashion units is actually less significant.

Recent examples of this include Dalton Park in the North East of England, which recently unveiled its Phase 2 with an extended leisure and dining offer that includes Cineworld, Prezzo, Frankie & Benny’s and Pizza Express.

Gloucester Quays reportedly had a rocky start to trading prior to increasing the ratio of F&B (now at 20%), resulting in a 70% increase in visitation over the following year. Ashford Designer Outlet’s expansion will add 30 new brands, including some international luxury designers, as well as six new cafes and restaurants to its offer to meet the growing demand for a strong F&B offering.

Greenwich’s O2 scheme is going in the other direction, by taking an existing leisure and F&B offer and supplementing the consumer experience by adding in outlet retail.

London Designer Outlet has embraced the need for F&B more than any other scheme, with 29% of units taken by cafes/restaurants. The scheme also benefits from being adjacent to Wembley Stadium and Arena.