Outlet: inside out and face
Managing Director of FASHION HOUSE Group Brandon O'Reilly "about why it is now more profitable for former customers of Warsaw and Milan outlets to buy in Moscow and St. Petersburg, how outlets without a roof still don't work in Russia, and how many more sale projects the Russian market will withstand.
"Mr. Reilly, the new Russian crisis, which, however, is already being called the "new era of Russian retail", is four years old. However, despite the growth of the exchange rate and the now seeming "disadvantage" of shopping in Italy or Spain, Russian buyers continue to call the prices in local outlets at least "indecent". Did the TSUM audience come to you as a result, and the one that used to fly to Italy, Austria, Poland?
During a crisis, people have to bargain, they like to bargain. The results of our outlet project speak for themselves: in three years, from 2014 to 2017, the attendance of the center increased by 45%, spending per visitor increased by 32%, the average transaction cost (ATV) increased by 30%. Russia is a country with huge potential, Russians like to dress well, and the concept of outlets (large brands and favorable cost every day) fully meets their needs. Participation in the formation of the outlet market was the main task of FASHION HOUSE Group when it decided to enter the Russian market a few years ago. Already at the first steps, as soon as we started developing our activities in the Moscow region, we were absolutely confident of success.
It seems that in 2014 in Russia everyone was already talking about the "time of outlets and discounters" and the inevitable decline of "ordinary" stores.
If you look at the world experience, the first outlet centers have always been opened in those regions where the concept of providing year-round discounts on the best international and local brands has become an interesting innovation for consumers. This is the biggest advantage of the outlet industry, with which you can go further, attracting new customers. If the investor has the appropriate know-how for commercialization and proper management of the outlet, he can count on a long-term growth of key performance indicators and, as a result, achieve significant profitability. At the same time, retailers who rent places in the center get an excellent tool to better dispose of unsold drains. They sell the leftovers in a convenient and controlled manner even in conditions of economic turmoil.
– However, in Russia, local outlet concepts have often been criticized and continue to be criticized for allegedly offering cheaper things in Moscow and St. Petersburg stores that were sold even cheaper yesterday, that is, in fact, they rewrote the price tags.
Look, there is one important factor here: the main purpose of the outlet is not the sale of goods, but the elimination of residues. Tenants of classic shopping centers need to remove past collections from their stores and sell them, for example, through an outlet. At the same time, a mandatory discount is provided, which is prescribed in the lease agreement, in our case, at least 30% of the retail price for a similar product of this tenant.
– But do you still control the reality of these discounts?
Yes, the tenant assumes the corresponding obligation by signing the lease agreement. In addition, in our company there is such a thing as price police, or "price police": we regularly check the tenants' compliance with the terms of the contract. For example, we study the price tags at our outlet and in shopping centers, we do an analysis, a report. If something is wrong, a notification is sent to our partners with a request to eliminate violations. Moreover, our operational team is ready to assist in the elimination of violations. But if the tenant systematically violates the terms, we have the right to take measures up to the termination of the contract.
Interviewed by Evgeny Arsenin
Photo:FASHION HOUSE Group
