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05/26/2021

As Shoppers Return, Outlet Malls See Big Opportunities

With shoppers returning back to stores eager to spend, there’s one sector of the retail industry poised to gain a lot of traction--outlet mall centers.
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With open-air environments, outlet malls saw foot traffic return and sales increase as COVID-19 pandemic measures lifted throughout 2021. And with a revival of in-store shopping, coupled with pent-up demand for certain products and more cash in pockets thanks to federal stimulus, there are some visionaries looking to enhance and innovate the outlet center shopping experience. 

Creating new experiences--from enhanced food and beverage choices to immersive retail --that influence customers to spend more time at outlet centers is one of the goals of David Hinkle, principal of the Outlet Resource Group, a boutique consulting firm that also operates a handful of outlet mall centers. As pandemic restrictions continue to ease and shoppers grow even more confident in returning to retail and entertainment environments, Hinkle views outlet centers as ripe for enhancement.

Outlet Center Revival

 

While all retailers faced an immediate fallout when pandemic first hit in the U.S., outlet malls may have been able to weather the storm slightly better than other brick-and-mortar stores due to their open-air environments. For Hinkle and his clients, ensuring that centers were enhancing their safety and cleaning measures, as well as communicating those efforts to customers, was critical to get shoppers back.

“The consumer was looking for a safe, clean environment with open air,” Hinkle told Retail Leader. “We were able to check that box. What we've seen through the past five or six months is that consumer demand has come back really strong, and we're starting to see traffic counts and sales that exceed 2019 levels.”

After spending more than a year tucked inside their own homes, consumers have rushed back out into malls, and specifically outlet malls, once the national vaccination program began to roll out and lockdown measures eased. In fact, discount retailers of all kinds, including TJX and Ross Stores, have seen a surge in demand over the last few months. 

Other figures support this. Mall traffic began to rebound in March and April 2021, according to data from Placer.ai. In April, mall traffic skyrocketed compared to 2020 levels, but was still down 18.7% from 2019 levels. However, the April 2021 traffic levels were the best mark since the pandemic began in March 2020. 

“In the short term, outlet malls will clearly benefit from their outdoor orientation, but in the longer run, their real asset is their approach to value and the unique experience they can provide,” Ethan Chernofsky, vice president of marketing at Placer.ai, told Retail Leader. “Outlet and indoor malls certainly compete, but the experiences they offer are not identical--enabling them to thrive harmoniously. The key for any center is delivering an overall experience that maximizes its retail approach and location, and speaks to the needs and wants of its specific audience.”

Enhancing Retail Experiences

 

As shoppers return, retailers across the industry are looking for ways to recapture their dedicated customer base--and being an open air environment or promoting enhanced cleaning and safety measures likely isn’t enough. For many retailers, that means creating new attractions, promotions and engagements within retail experience.

“The experience is increasingly as important for retail store visitors as it is for an actual experiential tenant,” Chernofsky said. “Omnichannel retail has created a powerful opportunity to expand the way we look at physical locations and better understand the full value they provide. If a shopper visits a retailer to find the shirt with a perfect fit and buys one, that's great. But if the experience is so strong that they develop a relationship that leads to ten more purchases of the same item in different colors online, that's even better. This realization is pushing more brands to maximize authentic experiences that create real and lasting relationships.”

Brands like lululemon and Nike, which both recently launched recommerce programs to allow their customers to sell their gently used items, are ahead of the curve on this, according to Chernofsky. Additionally, Nike has refocused its business model to become more direct to consumers by reducing its relationships with wholesalers. This DTC model is also the basis of outlet mall centers, which were first created as a way for manufacturers to transition inventory. Now, outlet malls offer customers bigger selections than department stores and other retailers and allow customers to go directly to the brands. Not to mention, many shoppers enjoy the hunt of the deal for their favorite brands, finding unique value at these malls. 

But when it comes to enhancing the retail experience, Hinkle is looking even bigger with immersive and themed retail opportunities. Outlet malls, which are often near tourist destinations or are destinations in and of themselves, have higher dwell times for customers already. Lengthening the amount of time shoppers spend at outlet centers will only improve traffic and sales. 

One ongoing project that aims to reposition an outlet center and has garnered attention is the August Moon Drive-In, an immersive indoor drive-in movie experience within a 45,000-square-foot air supported dome. The project, which is opening sometime in 2021, is located in Pigeon Forge, Tennessee, near “an outlet center with a tourist destination,” according to Hinkel. The drive-in has 40 retro cars as seats and multiple beverage and food options, offering visitors a new reason to stay at the outlet center longer and engage in something immersive and unique as part of their retail experience.

“It’s like taking something out of disney or universal and putting it in a shopping experience,” Hinkel says of the concept. “Consumers are telling us they want that. We think that's a big part of the future as we evolve as an industry.”

As retailers add more attractions and enhance their experiences--through their stores or digital presence--it’s plausible that some will even leverage techniques used by amusement parks like Disney.

“The things retailers care about--repeat visitation, loyalty, stickiness or length of stay--all those are things we’ve been doing in the theme park business for years,” Bill Coan, president and CEO of ITEC Entertainment, told Retail Leader. “Retailers are picking up on those techniques and how to work them into destination shopping.” 

ITEC Entertainment works with theme parks, real estate developments, resorts and more to create entertainment spaces through storytelling and thematic approaches to physical space. Coan and Hinkle have been searching for ways to work together on potential deals around outlet centers, leveraging theme park techniques to create an enhanced retail experience.

“We had been involved with design teams at some outlet projects, but what we saw as designation attraction designers that was happening at outlets that’s different from an enclosed mall was to make it more of a destination with integrated entertainment, leisure experiences and events,” Coan said. “Because of the outdoor nature, there's more space and flexibility to allow outlet centers to start making connections between the tenants and the spaces and the circulation to turn it to a comprehensive destination rather than just a bunch of storefronts surrounding a parking lot.”

It remains to be seen if outlet malls will reinvent themselves as larger tourist destinations, but the ongoing evolution of the retail environment in a post-pandemic world is creating many new innovations that will certainly capture and charm consumers.