The case of designer outlet shopping villages

Discount shopping is a major retail feature that attracts consumers to brands. In pursuit of the best value for their money, consumers are ready and willing to go an extra mile for certain types of products including fashion goods. It was on this premise that the concept of discount outlet centres was developed for fashion goods. In the early days of this phenomenon, discount outlets were found mainly in North America, and were often warehouse-style retail centres on the outskirts of major cities where mass fashion brands often went to 'dump' their old stock that was no longer desirable in the main stores. These goods were sold at exceptionally low prices to attract consumers and to clear the stock. This concept was highly successful as consumers were often willing to travel the extra kilometres for a good bargain. However, discount or outlet shopping was for a long time the domain of mass-market retailers. Today, this concept has encroached into the luxury fashion scene.

It began when Prada purchased a mass piece of land in the small town of Montevarchi, Tuscany, located between Milan and Florence in Italy, and began developing a shopping mall that would later serve as a discount village for the brand. Today, the outlet mall officially named 'The Space' retails Prada and Mui Mui products, including apparel and leather goods, at prices that are sometimes up to 60 per cent below the main store prices. Gucci caught on shortly after this and purchased an equally massive piece of land in nearby Leccio Reggello, Florence in 1999. There, the company developed a shopping outlet named 'The Mall' where the products of 20 exclusive luxury brands including Gucci and all the Gucci Group-owned brands are retailed at discounted prices, sometimes up to 50 per cent lower than the original prices. Unlike the Prada-owned mall, which retails Prada and Mui Mui goods, the Gucci outlet mall retails a wide range of 'outside' luxury brands like Burberry. The Mall, however, focuses exclusively on luxury brands that desire to sell their end-of-season stock at discounted prices and doesn't retail the goods of non-luxury brands. Giorgio Armani also has a factory outlet store in Vertemate, near Como, while Jill Sander's outlet store is located in nearby Cirimido.

The common factor these discount outlet shopping centres have is that they do not advertise themselves as Prada-owned or Gucci-owned or Armani-owned spaces. This is because the strategy of discount shopping centres is in contrast with the brand attributes that form part of the desire for luxury goods, like 'exclusivity' and 'enhanced image'. Also, luxury brands do not include the addresses of their discount stores as a retail location in their media advertisements, for the same reason.

Luxury fashion discount shopping has, however, been made more popular by the founders of the Value Retail Chain, which owns designer outlet shopping villages on the outskirts of 11 cities around Europe. The shopping villages include Bicester Village, located between London and Oxford (Figure 4.12), La Vallée Village close to Disneyland Paris (Figure 4.13), La Roca Village in the outskirts of Barcelona, and other shopping outlets on the outskirts of Milan, Bologna, Brussels, Dusseldorf, Munich, Frankfurt, Dublin and Madrid. The group currently has a portfolio of 300 fashion brands and more than 600 stores across its network of villages. The target consumer group is the upper-income fashionable consumer set aged between 25 and 55.

The Value Retail discount shopping villages are built to resemble small towns, but instead of housing they feature only shops and restaurants. More than 60 per cent of the brands that occupy the stores are international brands such as Versace, Kenzo, Max Mara and Givenchy, although exclusive domestic brands are also promoted. The discount outlet villages focus mainly on retailing fashion goods although cosmetics, house wares and interior decoration brands are also well-represented. The goods are usually end-of-season products marked down at prices ranging from 30-70 per cent of the original store prices. Although discount luxury fashion retail dominates the activities of the Value Retail villages, there is also the presence of mass fashion brands such as Mexx, Puma and Reebok. This raises the following question:

Do designer outlet shopping villages dilute the luxury brand image? Is this a luxury brand killer?

Figure 4.12 Discount shopping outlet, Bicester Village, near London, 2004

Figure 4.12 Discount shopping outlet, Bicester Village, near London, 2004

Shopping VillagesRoca Outlet Village
Figure 4.13 La Vallée Village discount outlet village, near Paris, 2006

The sale of luxury goods at discounted prices is not a new practice, although it is not widely publicized, and is a practice that has amplified in the last decade. The adoption of the mass discounting strategy for luxury goods is a result of several factors in the changing environment of luxury fashion retailing. These factors have placed an emphasis on sales returns and commercial results, driving luxury brands to adopt discount selling strategies. Notable among these factors are the following:

1 Consumers have become wise to the variety of choices they have in terms of luxury and mass fashion goods. They increasingly know where to go to find what they want and are ready to reject the brand that doesn't meet their expectations in terms of value for money and product design.

2 The luxury market is expanding rapidly and the competition level has more than doubled in the last decade. This has put a lot of pressure on luxury brands.

3 The ownership structure of luxury brands is changing as several non-luxury companies have acquired luxury brands. This has increased the performance pressure on luxury brands with more emphasis on sales turnover, return on investment and shareholder value.

The answer to the question: 'Do designer outlet shopping villages dilute the luxury brand image?', is yes, placing luxury brands in discount outlet shopping villages undoubtedly affects the 'exclusivity' attribute associated with luxury brands. This is even more enhanced at the discount centres that mix luxury goods discounting with mass fashion discounting.

The answer to the question: 'Is this a luxury brand killer?', is no, the presence of a luxury brand in a discount outlet centre is not a brand killer. However, this strategy needs to be meticulously managed by luxury brands to ensure that the long-term benefits outweigh the costs in relation to the brand equity.

So how should this delicate strategy be handled? The following points act as guidelines for luxury brand retail positioning in discount shopping centres:

• Select the discount outlet centres that only retail goods from luxury brands. This factor retains the exclusive location attribute associated with luxury brands even though the prices of the goods have been lowered. It also minimizes the shoppers' impression of shopping among 'junk' goods.

• Provide only end-of-season goods at the discount shopping villages and avoid goods that are in the current collection in the main stores. This way, when consumers travel the several kilometres to the discount villages, they know that they are getting the previous season's goods at reduced prices only because the goods are 'last season' and no longer available in the stores, and not because the brand is a 'discount brand'.

• Provide expert and unparalleled in-store customer service at the discount store. This will give shoppers the impression of being in a special place and among highly crafted goods although they're being sold at reduced prices.

• Provide in-store animation and entertainment. The main stores of several luxury brands such as Roberto Cavalli and Chanel have plasma TV screens that showcase the fashion show of the latest collection. These features will enhance the atmosphere of the discount store even more.

• Maintain the brand personality and aura. Discounting is not an excuse for luxury brands to forget who they are and what they represent to the public. Consumers that visit outlet centres also shop in the main stores so the same attributes that are found in the main stores should be extended to the outlet stores.

In conclusion, store location, store merchandizing and atmosphere are intricate aspects of luxury fashion retailing that contribute to the public image projection of the brand. These aspects of retail need to be constantly innovated in the rapidly changing luxury market. Also, several aspects of fashion retail strategies like the convergence of both luxury and mass fashion brands ^ need to be meticulously monitored and managed. For example, Avenue des

Champs Elysees, Paris, which is considered as the epitome of luxury location, currently has stores of non-luxury brands Zara and Naf Naf, among others, in addition to Louis Vuitton and Cartier. In the same manner, London's Knightsbridge is the location of Burberry and Harrod's as well as H&M, Zara and several other mass fashion brands. The Sloane Street area which was previously exclusive to luxury brands has also seen the encroachment of non- « luxury brands like Zadig & Voltaire, which recently opened a 1,300 square -o foot store on the street.

The implication of these changes is that luxury brands need highly refined retailing techniques more than ever before. Luxury brands are expected to develop creative and innovative retail techniques to add to a more meaningful relationship with consumers. The strategic goal of luxury retailing should not only be to reach sales targets, but also to satisfy customers through implementing strategies that enhance brand value. This means that it will take much more than the brand name and product designs to maintain the long queues in front of luxury fashion stores.


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