WWD.com/fashion-news/fashion-features/europe-s-growing-outlet-opportunity-762267/
government-trade
government-trade

EUROPE’S GROWING OUTLET OPPORTUNITY

MAASMECHLEN, Belgium -- Competition between designer outlet centers is intensifying in continental Europe.<P>Value Retail PLC last week opened Belgium's first designer outlet mall in this eastern border town, with shops such as Versace, Tommy...

MAASMECHLEN, Belgium — Competition between designer outlet centers is intensifying in continental Europe.

Value Retail PLC last week opened Belgium’s first designer outlet mall in this eastern border town, with shops such as Versace, Tommy Hilfiger, Scapa and Benetton. Competing 30 miles away, in neighboring Holland, is England’s BAA MacArthurGlen, opened last November with tenants including Dolce & Gabbana, Adidas, Nike, Puma and The Body Shop.

Compared to England and America, the European continent remains relatively untilled, especially in the upmarket segment. However, developers are rapidly making up for lost time.

Next year, Scott Malkin, chairman of the London-based Value Retail, said he plans to open centers in Fidenza, Italy, near Milan; and Wertheim, Germany, near Frankfurt. In 2004, he has plans for an additional center, near Munich.

Last year, Malkin launched a designer outlet center just east of Paris, called La Vallee. He operates two centers in Spain, in Madrid and Barcelona, and one in Bicester, England. Tenants in those centers include DKNY, Paul Smith, Burberry, Valentino, Ralph Lauren and Dunhill.

Meanwhile, MacArthurGlen opened a 350,000-square-foot complex near Milan a year ago. It houses 110 stores and such brands as Prada, Etro, Frette, Versace, Bulgari, Nike, Diesel, Dolce & Gabbana, Bally and Diesel.

MacArthurGlen chairman Joey Kaempfer said he plans to open at least two other centers in Italy.

Although several other companies operate outlet centers in Europe, MacArthurGlen and Value Retail attract the brands with the most international recognition.

The concept, which did not exist in Europe a decade ago, mirrors the American phenomenon of offering brand name goods for at least 30 percent off.

Kaempfer asserted that Europe is ripe for outlet shopping, partly because European fashion companies have warmed to the prospect of turning a profit on their excess stock. He said fears of damaging the brand image by discounting have faded.

Malkin said his centers are geared for the top brands, such as Gucci and Christian Dior, though both have yet to arrive. “Eventually, we believe they will see the benefits of being in our centers, which are high class and consistent with maintaining a brand image,” he said.

MacArthurGlen, with 12 centers in England and Europe, expects sales of about $1 billion this year. Value Retail, with five centers, expects sales of about $230 million this year. Value Retail’s new Belgian center, called Maasmechlen Village, is a 150,000-square-foot complex with 54 shops. A second phase, set for next year, will double its size. Located on the eastern border, near Maastricht, Antwerp, Brussels and Dusseldorf, about 20 million people live within an hour-and-a-half drive from the center.

Kaempfer said MacArthurGlen lost to Value Retail in the selection process for Maasmechlen, underscoring the growing level of competition for prime spots.

Meanwhile, as outlet centers sprout up across Europe, Kaempfer and Malkin worry the market may quickly become overcrowded.

“Eight years ago there were very few of us in the game,” said Kaempfer. “Now there are a dozen companies doing this.” As an example, he pointed to Italy, where some four outlet centers are under construction near Milan.

“Northern Italy will be overbuilt by this time next year,” Kaempfer predicted.

Malkin said Europe could be saturated with outlets within the next five years, followed by an inevitable wave of consolidation.

But he asserts that there remains little competition for his upscale outlet model in Europe. Whereas Value Retail only operates so-called luxury outlet centers, MacArthurGlen, and others, operate mass-market and luxury centers. “We are geared for the top brands,” said Malkin. “We are good for their image.” He called MacArthurGlen more mass market oriented, pointing to the McDonald’s restaurants in their malls. “We have no fast food,” he said. “We are architecturally first class.”

Kaempfer said: “I have a lot of wealthy friends, and they all eat fast food. When I’m in Paris I appreciate going to L’Ami Louis. When a family shops for a bargain, I don’t think they mind fast food.”

In any case, both are jostling for the best brands.

“I admit it’s difficult to get the best brands,” said Kaempfer. “You need recognized brands to attract business. But it’s not always the big brand names that generate the highest sales per square foot.”

Malkin said Maasmechlen Village, open since last fall, has generated sales of about $2,700 to $3,600 per square meter so far. He projects sales will reach about $4,600 to $5,500 per square meter within a couple of years.