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The Importance of Local Catchment and Tourism for McArthurGlen

Adrian Nelson from McArthurGlen Group about new outlets of the company in France and Spain.
We recently spent some time having a fascinating conversation with Adrian Nelson. He is the Group Leasing and Brand Development Director for the McArthurGlen Group, who operate a number of designer outlets across Europe.

He started off by explaining that they have a big project that is close to completion now. This development is in Provence, close to Marseille. This new French center will be opening in April of 2017 and will contain 25,000 square meters. Adrian described it as a “premium luxury” location with a “really lovely design”. Other projects he told us about were the extensions just opened in Serravalle and in the Noventa center in Venice. Another extension being worked on is at the Parndorf location in Vienna, with phase 5 due to be opened just before Easter 2017. Yet another project is at Roermond near Dusseldof, which is their “biggest and most successful” outlet and has a “huge phase” of 11,000 square meters due to opened just before Easter 2017.

McArthurGlen Designer Outlet Provence
McArthurGlen Designer Outlet Provence

Indeed, with the new Provence center added in the company is due for 3 openings in just 10 days in April of next year. We then moved onto discuss the possibilities offered by the impressive new McArthurGlen project in Malaga.

The Designer Outlet Model Explained

At this point, we decided to ask Adrian what the fundamental differences are between a traditional shopping center and the type of designer outlet that they run in terms of tenant mix. After giving it some thought, he started off by saying that their model is always to have a minimum of a 30% discount on products. He said that it is of no use to them to have a brand that offers products for sale at such a low price that a handsome discount can’t be given at their outlet. In this way, he stated that “mid to premium is your level” as a minimum for an outlet center, with possibly a luxury brand mix too. Another crucial part of the model is that they “like to deal directly with the brands.”

McArthurGlen Noventa Di Piave
McArthurGlen Noventa Di Piave

In this way, Adrian said that essence of McArthurGlen is to allow customers “to experience the brand” and “to get a real feel for a brand with a good range of products at a discount”. This in turns drives good turnover and good rental income.

The Domestic and International Mix

Looking past the starting point of the premium mix, Adrian said that like any developer they look at the customer mix and whether there is some type of tourism present in the areas where they operate. In this context, he pointed out they consider domestic or international tourism to be when someone travels more than 90 minutes to go shopping, as this is someone who is coming from outside the catchment area.

He then commented that their business “has always been focused on local catchment” rather than tourism. This means that the people who live within 90 minutes travelling time are key to their decisions. However, he then pointed out that being in an area with domestic and international tourism leads to dealing with different types of customer who all arrive with varying expectations. This has to then be taken into account together with the wealth, shopping habits and expectations of those people who live in the catchment area. After this, the company can decide whether there is an opportunity for the tourism sector to be included in the overall brand mix.

As an example, Adrian pointed out that in Venice they have a “very strong international mix” because of the city’s popularity as a tourist destination. On the other hand, Bridgend in Wales is an example of the type of location suited to a “very regional focused business” rather than being strongly tourism-oriented.

The Pattern of Repeat Visitors

At that point, we asked whether it is normal for an outlet to have a big percentage of first-time visitors or repeat visitors. He pointed out that from those living within the 90 minute catchment area there will be repeat visitors. However, unlike visitors to city center shopping centers, they tend to make a more focused trip with the serious intention of buying. Visitors might only go there 3 or 4 times a year, but they will typically spend a lot of money each time. Adrian also pointed out that international tax-free shoppers will also make annual trips to their outlets to go shopping, with this going to show the “loyalty of consumer” that they attract.

We pointed out in North America it sometimes seems as though retail outlets are firmly aimed at foreign tourists. However, Adrian stated that at McArthurGlen their strategy “has always been first to focus on the local catchment” and then to look at extras such as tourism. He then added that it is important to give the “full price experience” by including the best brands in each segment presented in such a way that the customer recognizes the brands. However, going too far into the luxury side of things could alienate the local customers. 

When we asked about international brands that they work with from regions such as the US and Asia, he started off by telling us that most brands only open an outlet store when they are already present in the market in other ways, such as full-price or wholesale. He also pointed that they “haven’t done a lot with Asian brands”. Instead, they will look at what brands already operate in Europe and are successful. Specifically, they will look at brands that are popular with the type of visitor who frequents each center.

He then told us that their business isn’t as simple as it appears. In fact, it is “becoming more difficult to find good sites” to develop. He went on to say that “there are very few easy sites now”.

McArthurGlen Designer Outlet Malaga
McArthurGlen Designer Outlet Malaga

In terms of the future for European outlets, he said McArthurGlen has a 5 year plan to grow from 600,000 to 900,000 square meters with sales predicted to grow from 4 billion to 6 million. Overall, he doesn’t think that the “market can grow all that much”, although there are opportunities. In this respect, their new developments are part of their long term plans and are “coming to fruition at the right time”, rather than being a reaction to current market conditions.
When we asked about their main ways of promoting their centers to international visitors, Adrian said that it is a “very mixed” approach, with an awareness that digital marketing is becoming ever more important. They are “beginning to get heavily involved” with digital channels and seeing positive returns from this work, with more plans to develop further in the future.  Radio advertising is still used for local customers but for international visitors they work in each country to attract customers.

Adrian finished off by pointing out that the new Malaga Designer Outlet Center will be the 24th McArthurGlen center spread across 10 different countries.

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