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It gets smarter with every turn. Down one wide path is a young man selling artisanal Amorino gelato; down another, a bellboy in a jaunty red cap is photographing some young women as they pose in front of an autumn tree installation. Inside the Time & Gems store in the Bicester Village outlet complex, an hour from London, Pomellato jewellery and Girard-Perregaux watches sit in brightly polished glass display cases. A multilingual staff member carefully removes a Boucheron Biladom panda ring glittering with pavé diamonds and confirms the price: £11,300, reduced from £22,500.
Outlet malls were once filled with bargain-hunters happy to forgo expensive store fit-outs for hefty discounts on budget items like Donnay sportswear. The UK’s first was opened at Clarks Village in Somerset in 1993, the former site of the Clarks shoe factory and not far from the Shoe Museum. McArthurGlen, set up by Harvard-educated Joey Kaempfer, then started replicating US-style outlet malls in Europe with centres like Cheshire Oaks near Manchester.
Today there are around 30 outlets in Britain, largely a middle-class domain with aspirational brands and the environment to match. They are known as “designer” outlet malls and, while prices can be as much as 70 per cent off, the store fit-outs are no worse than their high-street siblings.
And now outlet malls are attracting even wealthy shoppers, as Time & Gems suggests: its brands belong to luxury conglomerate Kering, and it is the company’s first mixed-brand venture into a discounting village. Time & Gems offers last-season timepieces and jewellery, with discounts from one-third off.
Retail outlets are an outperforming format in a difficult market. Most UK outlet centres have had annual sales growth of 10 per cent in the last few years, according to Jonathan Adams, senior director of retail valuations at property consultants CBRE. That is ahead of trends for consumer spending: the Office for National Statistics said UK retail sales volumes rose 4.1 per cent in September year on year. Outlet malls have also outperformed full-price shopping centres in capital value, according to CBRE, increasing by 40 per cent on average since 2012; full-price shopping centres grew by less than 1 per cent.
“The sector has become a lot more sophisticated and not only has the retailer base extended, so has the customer base,” Mr Adams says. The operators and developers are “very active in how they manage the brands” with rent linked to brand sales, rather than a traditional landlord/tenant relationship. “You’ve only got to look at sales they generate to say it works for them. Most good retailers see it as one of their channels.”
As the outlets become higher-end, so do the shoppers. Value Retail, the owner of Bicester, the most upmarket of the UK’s outlet malls, says the wealthy and middle classes come to seek value rather than discounts — a fine, perhaps solely verbal, difference. Indeed, aspirational luxury shoppers might be less inclined to treat themselves to an entry-price jewel on Bond Street — but grabbing it half-price at Bicester is different.
A move into discounting makes sense in a tough sales climate. The watch industry is experiencing difficult times, with 15 consecutive months of declining Swiss watch exports, according to the Federation of the Swiss Watch Industry. Jewellery, once season-less, now must be refreshed and updated as shoppers demand change in their charm bracelets as in their winter coats. This means Kering has old stock to shift and, with the personal luxury goods market forecast to decline by 1 per cent in 2016, according to Bain & Co, new customers to seek out.
With the backdrop of slowing global economic growth, an anti-corruption crackdown on ostentatious “gift-giving” in China and terror attacks deterring tourism to elsewhere in Europe, high-end entrants such as Time & Gems offer an attractive customer base and decent margins.
Outlet malls are one of the fastest-growing channels in luxury, according to Bain & Co. The consultancy forecasts that they will account for 12 per cent — €29.5bn ($32.3bn) — of the personal luxury goods market, in 2016. Along with airports and ecommerce, they are among the few expanding formats.
You might not know that, however, from the secrecy luxury conglomerates apply to their activities in this area. Kering declined to be interviewed about Time & Gems, and there was no launch party or press statement. Neither Kering nor LVMH nor Richemont — the world’s largest luxury businesses — publicly states the value of so-called “off-price” or discounted sales in their annual reports.
“You have a clear issue selling in an outlet because the dilution of your brand is higher,” says luxury goods analyst Mario Ortelli from investment researchers Sanford C Bernstein. Watch and jewellery brands “want to create the perception that ‘we are expensive because there is inherent value, value in the material, and they keep their value over time.’ When you buy a watch or jewellery you will have it forever, or pass it on to your daughter, or sell it second-hand. So when you go to an outlet, the intrinsic value is not so high.”
In Bicester Village, where a £10 flute of champagne is on offer at the Veuve Clicquot stall, mall owner Value Retail is trying to replicate the full-price luxury experience. It is core to luring customers, says Sylvie Freund Pickavance, group strategy director at Value Retail, who frames the offering as reviving or refreshing, rather than flogging. “We provide the right experience for brands to continue to give life to products after they are discontinued or there are new things. It’s not more than a season old,” says Ms Freund Pickavance. “It’s similar to full price in terms of quality, service, presentation, but the prices are incredible.”
Watches and jewellery account for a low single-digit proportion of overall sales at the shopping village, says Ms Freund Pickavance, though it has doubled in the last year and she expects it to surge. There are already single-brand outlets from TAG Heuer, fine jeweller Annoushka and crystal store Lalique, with a mid-market offering from Links of London, Pandora and Swarovski. Swatch Group also opened a mixed-brand outlet called Hour Passion in January this year.
Value Retail has made a proprietary venture into luxury, opening its first store in Bicester, the watch outlet L’Atelier, where shoppers can browse brands like Theo Fennell and Baume & Mercier under Baroncelli chandeliers. High-end jeweller Chopard has a counter where a mother-of-pearl watch with pavé diamonds is on sale for £21,000.
L’Atelier operates much like a department store where brands control the stock and staff while paying rent and a percentage of sales. Watches start from around £100 at the Rotary concession, but further along the marble floor is the most expensive item in store. Behind a locked glass door, a £62,500 Porsche Design P6910 Indicator black titanium chronograph watch, made by Eterna and reduced from £125,000, is on display alongside a model Porsche.
Internal studies shows 85 per cent of people who buy at Bicester will consider buying at full price, according to Ms Freund Pickavance, who says credit card purchases confirm this, without giving more details. It is the open-door policy at all stores, the marble-floored waiting room at the train station, the personal shopping service and Soho House Farmshop restaurant which combine to give shoppers “the experience of luxury”. She says this ensures they are more open to repeating that again at full price.
Gucci chief executive Marco Bizzarri told investors in June that “the overlap between consumers, between the off price and the full price, is very, very limited, so with the off price with the old collection I can talk to a customer that will maybe never come into our full-price shops. On those, I can start creating the desire for this customer to move to full price.”
Not everyone concurs. It is the lure of the bargain that draws most shoppers in, says Mark Ellwood, discount expert and author of Bargain Fever: How to Shop in a Discounted World. While Ms Freund Pickavance claims most customers are likely to go on to buy the same brands at full price in future, Mr Ellwood disputes this. “The chemistry of our brain prevents that from being true,” he says. Dopamine, the chemical our brain produces when we see a discount sign, is “what makes us like bargains — it’s bonus juice. Your brain operates and it codes that reaction. It makes you want it again.”
It has taken Value Retail, which opened Bicester Village 21 years ago, until now to lure Kering into the space for watches and fine jewellery; previously the mall was “less established”, Ms Freund Pickavance says. “The crux is it has to be the right environment — 10 years ago it wasn’t.” The store sits opposite an existing Gucci boutique, next to upmarket shoemaker Roger Vivier. The village also boasts Givenchy, Céline and Saint Laurent stores. They were not all there 10 years ago.
A common criticism of outlet malls is the quality of the inventory because shoppers are unaware that products can be made specifically to be sold in these outlets. Value Retail is keen to point out stock is not “made for outlet” in the watch and fine jewellery segment, but rather is from the brand’s previous collections or is part of a selection of reconditioned stock.
Some are sceptical that this reflects well on the brands. Having discontinued or unsold stock to fill these outlet stores suggests either poor inventory control or companies manufacturing specifically for the outlets, says Mr Ellwood, talking about the broader retail outlet scene. “[The consumer is] getting a really cute watch, but they’re not necessarily getting a cute watch that’s worth any more than what they paid for it. Cover up the higher price and look at the lower price, because that’s the most reliable indicator of what it’s worth. Go in assuming, more often than not, that what you see was made to be sold cheaply. It’s not a bargain, it’s just cheap. It’s a different thing.”
Fine jewellery brand Annoushka, which has a no-sale policy in its boutiques and in department-store concessions like Harrods, Harvey Nichols and Saks Fifth Avenue, uses the Bicester Village outlet as a high-end environment to sell discontinued stock and samples. Chairman and co-founder John Ayton says they do not mass-produce jewellery, “but inevitably through the design process there are samples we make, there are items we discontinue, where the opportunity to sell those items in a luxury environment is very valuable.” In its Bicester store, situated between an N Peal cashmere outlet and Timberland, gold hoop earrings with three hand-painted butterflies have been reduced from £11,000 to £6,600. A full-price catalogue shows a similar motif but not the same item.
“It performs very well,” Mr Ayton says. “The average spend is less but the number of pieces people buy is probably more. People often come and buy, instead of one amulet, they buy three and treat themselves to a chain.”
Given the contraction in the luxury market that Bain predicts, Bernstein’s Mario Ortelli expects more luxury conglomerates and independent brands will open fine jewellery and watch stores in outlet malls. He says companies are keen but cautious: “They need to get rid of inventory so they are trying different channels, but the main point is to try not to dilute the brand too much,” he says. “You are used to . . . a markdown season for ready-to-wear, shoes, even leather goods. You’re not used to it in hard luxury. So the companies need to manage it very, very carefully.”
On a busy Saturday in autumn, two well-dressed Chinese students join the 30-deep queue outside Prada at Bicester Village. “We love it here,” says Linda Chang, with her Gucci monogrammed handbag swung over her shoulder. She also has three bags of shopping worth close to £1,500, including some Marni earrings. “We come a lot, it’s a really nice, smart place to shop. We’ve been here all day and we’ve still got more to see.”