An evolving retail format

Factory outlet centres (FOC) have become more than stores selling leftover fashion stock in sparse sizing, and are increasingly used by brands as incubators for new shoppers. To capture a wider audience, brands are integrating outlets into their multi-channel business models, alongside full-price stores and e-commerce, in order to reach the consumer through multiple retail forums.

For operators to attract new brands into schemes, FOCs are evolving to increase footfall and capture a higher market share by widening their retail offering. As older schemes also risk the departure of key brands for more exciting new centres, operators are incentivised to reinvent the traditional FOC format. The integration of FOCs into mixed-use developments, the increasing provision of food and beverage (F&B) options, and the entry of new brands are supporting the growth of the outlet centre.

As these centres adapt to the changing retail environment, they not only provide consumers with significant discounts but also create new opportunities for brands to engage with their audience. In doing so, the FOC format is becoming increasingly significant in the wider European retail landscape when compared to the likes of shopping centres and retail parks.

A fuller retail offering

Successful operators are starting to explore opportunities in more traditional retail settings. Some are opting for locations next to existing full-price retail establishments, such as shopping centres, to reach a wider customer base. Key examples include the McArthurGlen Designer Outlet in Malaga, Spain, and the upcoming Designer Outlet Kraków in Poland, scheduled to open in Spring 2025. The latter will be part of a mixed-use shopping complex that includes supermarkets and major retail stores nearby.

As well as new schemes locating alongside full-price offerings, some FOCs have themselves evolved from simple big-box retail spaces into destination retail locations. These centres offer amenities akin to those found in shopping centres, along with the added attraction of discounted goods. A notable example is the Alegra FOC in San Sebastián de los Reyes, which features F&B options alongside discount retail shops. This centre is part of a larger complex that includes a cinema, bowling alley, and a children's entertainment area, highlighting how FOCs are increasingly becoming independent destination and leisure locations.

Increasing focus on F&B

The strongest connection between retail and leisure lies in F&B, which retail landlords increasingly view as a vital way to boost foot traffic and lengthen dwell times. In Gunwharf Quays Designer Outlet, the provision of F&B outlets increased from 10% in 2019 to 16% of total units in 2024. Of the units that opened during the same period, 22% were restaurants or cafés, highlighting that F&B is becoming increasingly prominent within the market.

Pop-up stores gaining popularity

Pop-up stores are another way to encourage consumer visits and offer brands a strategic way to temporarily enter an outlet centre, bringing several advantages. They enhance brand exposure, connect with new customers who typically may not have explored the brand before, and can be aligned with seasonal events like Christmas or peak shopping periods. Additionally, they allow brands to sell surplus stock as needed, making them appealing to occupiers exploring outlet opportunities temporarily. For instance, beauty brand Charlotte Tilbury has successfully utilised pop-up stores at Bicester Village multiple times.

Brands expanding into FOCs

Outlet locations are utilised to both sell surplus inventory but also enhance brand visibility and reach the consumer through multiple retail forums. Indeed, we are observing a growing number of beauty and cosmetics occupiers enter into outlet centres following successful trading on the high street. Many consumers value the hands-on experience of testing products in-store, which has played a key role in the success of physical beauty retailers. Beauty items also need replenishing at a faster rate than other retail items, creating a repeat customer base. Elemis and Neom are two examples of premium beauty brands that have opened stores in Value Retail’s Bicester Village scheme in the UK.

Another retail sector gaining prominence is the home market, and more specifically home furnishings. The success of national brands outside of the outlet centre market has led to brands looking to increase exposure through other retail forums. In the UK, in the McArthurGlen Cheshire Oaks Designer Outlet, the provision of home occupiers increased from 3% in 2019 to 6% in 2024, which included the opening of Villeroy & Boch and ProCook. In Spain, Oh'Gar, Zara Home, Delsey and Muy Mucho are some examples of successful brands that have expanded into outlets.

Outlet centres to grow in significance

Outlet centres are maturing from traditional discount-focused destinations to evolving retail hubs that offer a diverse mix of shopping, dining, and entertainment experiences. The consumer preference towards value, variety and leisure position outlets key locations for brands seeking to expand their reach and enhance consumer visibility. For operators, broadening the brand offering and enhancing the overall customer experience will be crucial in driving foot traffic and attracting an expansive, more constant customer base.

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