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Retail Shopping Outlets in Emerging Markets: A Shopaholic Box of Chocolate

Despite its universality, the shopping mall, as we know it, is at a pivotal juncture in its existence. A tsunami of torrential trends – in particular, the rise of floundering malls and underwhelming sales for luxury anchor tenants – has spurred mall owners to abandon the notion of commoditized shopping experiences and steer towards an aggrandized value proposition for consumers. Long gone are the days when going to the mall was simply about shopping; today, consumers seek experiences that go well beyond the traditional shopping excursion. Due in large part to rapid urbanization, rising living standards and spending power abroad, there is a tremendous desire among foreign consumers for open public spaces in which to mingle and rendezvous. To avoid being a retail anachronism, foreign mall operators and developers, retailers and investors have begun to expand their view of what the ideal shopping experience should be, and have embraced the notion that “shoppertainment” is the approach to enhance foreign consumers’ shopping experiences. Nowadays, a memorable shopping and leisure experience influence consumer behavior; therefore, developers and retailers have incorporated value-added elements that recast an outlet center as the new downtown center, replete with leisure, entertainment, and, most importantly, high-end retail. Foreign developers now envision themselves as purveyors and alchemists of “shoppertainment” seeking the appropriate mix of shopping and entertainment to survive in this ever-changing retail industry.

Undeniably, high-end fashion retailers and malls have taken one on the chin due to the struggles of the U.S. economy and yet another financial calamity across Europe. Despite being blindsided by this economic uppercut, foreign developers and retailers have gone back to their respective corners and changed their strategies leading to a proliferation of outlet centers across Europe, Asia and Latin America. As a testament to their economic resilience, outlet centers have outshined shopping malls and big-box retailers over the past decade as penny pinching consumers have turned to outlet stores in hopes of finding top brands at discount prices. This tour de force has even caught the eyes of certain domestic institutional property investors, such as the Simon Property Group and the McArthur Glen Group, who have recognized the allure of foreign outlet centers by investing considerable capital to entice even more foreign consumers to these outlet centers. The proliferation of foreign outlet malls in recent years has also been greatly aided by luxury heavyweights, such as Alexander McQueen and Prada, taking a “can’t beat em’, join em’ approach” and crossing their fingers that the outlet business will not result in brand dilution. Many retail industry cognoscenti believe that outlet centers will multiply on a global level in size and number over the next few decades as more and more high-end retailers embrace the outlet store concept.

The retail industry has always transformed with each new trend and cultural shift. In the here and now, foreign outlet centers are the new trend gaining significant traction as a means of enticing not only deal seekers, but also amusement seekers. Innovative outlet centers, such as Xanadu in Madrid and Bicester Village in the UK, beget big business, and their competitive differentiation from traditional shopping malls is the primary force behind their success. Across emerging countries, such as Brazil, China, and Bangladesh, outlet centers have outperformed traditional shopping malls by offering convenience as well as entertainment. To that end, emerging markets are now establishing themselves as an investors’ golden goose, and the increased spending power of these foreign consumers is a significant factor contributing to investors’ and developers’ eagerness to venture into these untapped markets and open new outlet centers.

Related topics: Retail