With a culture of collaboration and partnership underpinning the success of outlets, what else could be adopted by the wider retail sector?

Shopping habits were evolving long before the first lockdowns were introduced last year but few will dispute that the past 14 months has seen an accelerated change in our industry and immense pressure on physical retail environments to adapt.

Resilient through recessions and pandemics, bricks and mortar outlet retail has shown itself to be particularly well-positioned to respond. Two keys to this success have been a larger long-term commitment to customer experience, as well as a flexible and more collaborative approach to partnership.

It was no surprise that upon the reopening of non-essential retail in the UK last Spring, footfall figures at Realm-managed schemes quickly reached 85% of the numbers achieved the previous year. When comparing this performance to full price shopping centres, footfall levels were only achieving 40-60% of historic numbers offering evidence that outlets possess inbuilt future-proofing and immunity which can be cloned and adopted by landlords and operators across the retail space.

Historically outlets have been out of town and had to work harder with a more commercial work ethic to attract footfall whereas city centre schemes have been more reliant on efficiently converting plentiful footfall into shoppers. The difference may be subtle but a business run as an attraction has its roots embedded in experience.

Communicating as partners

The past year has reinforced the ever-growing importance of forging stronger partnerships to tackle many of the issues facing the retail sector which simply cannot be solved alone. Only now are some retailers beginning to work as partners and many landlords have remained resolutely adversarial in their stance.

Outlets are in effect joint ventures that have equality running through their veins by virtue of the use of turnover rents, a model that requires a more dynamic and collaborative management structure.

Fuelled by the shared objective to maximise sales, turnover leases are the ultimate foundation stone of a more commercial and retail-savvy breed of asset management.

An outlet landlord becomes a surrogate retailer with far greater understanding of their occupiers’ different businesses and with this insight comes a greater sharpness of focus and effective decision making. Recent scepticism regarding the willingness of some retailers to submit turnover data only serves to illustrate the short sightedness of some when there are so many benefits of establishing transparency over trading performance. The good can be bolstered to become even better and the under-performing can be helped far more quickly with mutually agreeable interventions – moving to a smaller unit, changing store layout or a shift in marketing – all decisions that can be made mutually.

With ongoing advice and granular support on everything from store recruitment to visual merchandising, we find that not only do most retailers choose to either extend short term leases but many transfer into becoming a permanent occupier. This higher level of support makes for a smooth transition into the space and is something Realm sees as a further advantage of a genuine partnership approach.

Open to new ideas

Outlet retail destinations have had to be inventive to position themselves as more than discount or clearance operations. They offer additional distribution channels, test beds and are a way of moving stock to increase cash flow, with minimal negative impact on brand value. Throughout the Realm portfolio there are clear examples of retailers, distributors and manufacturers extending their reach into a bricks and mortar outlet as a way of broadening their customer base and testing new markets within new geographical areas.

The entrepreneurial culture of outlets allows new initiatives to be given the best chance to succeed. Whether trialling home delivery, WhatsApp consultations or staging a calendar of summer events and promotions, a modern outlet destination is vibrant and constantly seeking new opportunities which can be put into action very quickly. This flexibility requires hard work but certainly pays dividends.

Crunching the numbers

The leasing model within outlets opens up an abundance of data that has yet to be matched within a full price retail environment. It allows retailers to refine their offer and maximise the opportunity in front of them through the interpretation of KPIs and insight supplied by the landlord. It covers crucial areas for analysis including trading hours, spend per head, conversion, basket size, dwell time and demographics, to name a few.

The rich data also provides operators with the opportunity to analyse specific areas of growth, and to respond accordingly – not from customer exit surveys where responses can be skewed, but from thousands of actual transactions. This takes the risk out of many expansion projects or targeted leasing efforts to attract specific brands, broaden categories, extend dwell time and increase the destination credentials of a scheme.

Data underpins most decision making within outlets and feeds into the business models and plans which ultimately deliver the returns landlords are seeking. In many ways, outlet operators combine the financial rigour required of any modern business with the insight and lightness of touch that can only come from being literate and conversant with what it is to be a retailer. Many have predicted that retail property companies of the future will have their own commercial operations divisions and few would bet against the adoption of other practices that we now see as tried and tested within the outlet sector.

To find out more about Realm and the services they provide to the retail industry, click here.

This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.