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From Hut to Haute: The Evolution of Outlet Center Shopping

BY CSA STAFF

By Ann Natunewicz, national manager, Retail Research, USA Retail Services Group, Colliers International

The outlet shopping experience has morphed from warehouse settings offering damaged and closeout merchandise to today’s centers that are designed to maximize customer flow and sell merchandise from the most exclusive international designers.

The U.S. outlet sector, estimated by Citi Research to be a $30 billion industry, has benefitted from a convergence of attitudes among consumers, retailers, and investors in response to a weak economy, with the recovery now moving through its fifth year.

There’s no question that weak macroeconomic conditions accentuate shoppers’ focus on “value,” which includes seeking discounted high-quality merchandise, especially designer labels. As shopper demand intensified, retailers not only expanded their outlet real estate programs, but they also recognized the viability of outlets as a distinct distribution channel — not just a dumping point for last season’s unsold inventory. They developed custom product lines to differentiate outlets from their full-line counterparts. Shoppers, once confused by outlets because they didn’t know what they were getting, now appear more accepting of this hybrid merchandise mix. The result: outlet centers, once seen primarily as “destination” shopping venues, have become more relevant for customers’ daily needs.

As retailers shifted their product mix, they’ve removed one of the major barriers to outlet development: radius restrictions where vendor conflicts prevented outlet stores from locating too close to an existing regional mall. Current real estate portfolios reflect a higher degree of comfort with proximity. Nordstrom is one high-profile example: Colliers estimates that nearly two-thirds of existing Nordstrom Rack stores are located within five miles of an existing full-line Nordstrom, with around 45% within one mile of a full-line store. (In fact, Nordstrom Rack recently relocated across the street from Nordstrom’s flagship store in downtown Seattle.) We expect this trend to continue.

Higher sales productivity and significantly lower store operating costs have made retailers more receptive to rent growth. As those attractive financials persist, so will retailers’ and landlords’ push to develop new inventory. Including three projects that opened last month, there are now approximately 195 outlet centers in the U.S., representing 72 million sq. ft., or around 2% of existing retail. Colliers can confirm an additional 34 U.S. outlet projects that have either been announced formally or are widely reported to be under development, with rumors circulating about nearly two dozen more being considered. Despite this pipeline, retailers’ expansion plans within this category are robust enough to suggest a shortage of inventory. The pressure is already being felt: Capri Capital Partners recently reported that outlet mall occupancy rates stand at nearly 95%, versus 90% for traditional malls.

Shifting consumer and retailer attitudes will continue to drive project site selection, layout/design, and merchandising. Because of their smaller size, today’s outlet projects are more easily accommodated closer to city centers, such as National Harbor just outside of Washington, D.C., and Harbor Center on New York’s Staten Island. New outlet projects’ initial project square footage is trending smaller, which is not surprising given risk concerns in real estate financing. The existing U.S. outlet inventory — 195 centers — has an average square footage of 393,000, reflecting a “barbell” distribution of older, smaller projects (many less than 100,000 sq. ft.) and large developments that have either been expanded several times to 600,000 sq. ft. to700,000 sq. ft. The current slate of proposed projects averages 360,000 sq. ft., with the majority falling within a tight range of 350,000 sq. ft. to 370,000 sq. ft. Smaller projects are not necessarily disadvantageous, though, for they come as retailers are downsizing too. Even with less square footage, a smaller project can still offer the diversity of tenants and uses to keep shoppers engaged. And this engaged consumer helps lenders and investors, who are far more comfortable providing construction financing, or acquiring interests in outlets.

What’s ahead for outlets? Look for record revenues and competitive sales growth stemming from the holiday season and into 2013. Tanger Outlets projected that 2012 would end strong given that their portfolio was at 98.6% occupancy at the end of the third quarter. Foot traffic and purchasing activity appeared robust during the holidays, with outlet centers on track to achieve year-over-year sales growth above 10% — numbers recently seen more in e-commerce than brick-and-mortar. On the development front, we already know of eight projects that will open in 2013, and expect at least another 10 to 15 projects to be announced. The sector has a long way to go before it reaches Value Retail News’ projected saturation level, which is an additional 250 outlet projects, including conversions of failed or alternative-use retail projects.

The concept will continue to evolve, and developers in heated competition for both the shopping dollar and the best retailers will continue to upgrade the quality of their centers. We wouldn’t be surprised to see a new moniker for the sector. Obviously, it hasn’t hindered performance, but the “outlet” name itself may become less relevant as the sector matures.


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Rocky Mountain Chocolate Factory deploys WhenToManage’s solutions

BY Staff Writer

Norwalk, Conn. — WhenToManage announced that its suite of retail operations solutions, including point-of-sale intelligence, labor scheduling and inventory management tools, is now being deployed by Rocky Mountain Chocolate Factory, an international franchiser, confectionery manufacturer and retail operator.

Previously limited by the POS software provided by the systems of its franchisees, Rocky Mountain’s enterprise IT team chose to switch to WhenToManage’s system-neutral software for significantly improved functionality, reliability, and data management capabilities.

In addition, franchisees now have the option to utilize WhenToManage’s user-friendly solutions on their system-of-choice for improved in-store operations.

“During our most recent evaluation of in-store IT we recognized that, with the introduction of variations in the RMCF brand, a one size fits all POS solution was no longer an optimal solution for our organization,” said Key Jobson, CIO, Rocky Mountain Chocolate Factory. “That’s when we took a step back and realized we no longer need to be restricted to a single POS solution and that vendor’s retail analysis and reporting tool set. After reviewing options in the marketplace, we selected WhenToManage for its ability to work with many certified POS systems, while meeting our consolidated data and analytical operations needs on a corporate and store-by-store basis.”

WhenToManage retail management tools are being made available to Rocky Mountain Chocolate Factory’s 235 franchisees and 15 corporate stores in the U.S. Early adopting franchisees are in the process of implementing the WhenToManage suite-of-solutions, which includes web-based labor scheduling, POS reporting, inventory management and more, all bundled into one reporting platform.

“WhenToManage is in our sweet spot because it’s well-targeted to specialty retail, franchisee owners, and the needs of a large, global franchisor,” said Jobson. “We are very satisfied with WhenToManage’s responsiveness in quickly applying their technology to our specific needs. Also, while we anticipate that most of our franchisees will adopt WhenToManage, the solution allows us corporately to collect, store and analyze data from all of our operators regardless of their participation.”

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OfficeMax launches into the Cloud

BY CSA STAFF

NAPERVILLE, Ill. — OfficeMax is ready to help its customers get more organized by offering them cloud service solutions.

OfficeMaxWorkplaceSM, the U.S. contract business for OfficeMax, has launched new cloud services powered by Xerox, making OfficeMax Workplace the only business-to-business office supplies and solutions provider to add Xerox’s cloud services to its holistic suite of work-better solutions for business customers. Additionally, starting in February, OfficeMax stores nationwide will also provide access to MiMedia cloud services for consumers and small businesses. Both cloud service programs allow OfficeMax to provide consumers and businesses of all sizes with a cost-effective way to access, manage, share and recover files from many mobile devices.

"Medium to small businesses are increasingly finding that the cloud can offer them technology solutions that allow for consolidation of separate applications, and reduced on-site support and software/hardware purchase," said John Kenning, EVP and president of OfficeMax Workplace. "Our new cloud service offering makes these businesses competitive and offers previously unavailable technology solutions that are cost effective, agile and flexible."

For small businesses and home consumers, MiMedia cloud services available through OfficeMax stores will provide an easy-to-use way to automatically back-up, store, access and share their files on demand, including many popular business files and presentations, and even music, videos and photos for personal use.

"Cloud storage isn’t just for large organizations. More entrepreneurs and consumers are using mobile devices to create content, and then leveraging the cloud as a preferred solution to store, access and share data that smart phones and tablets create," explains Michael Lewis, EVP and president of retail at OfficeMax. "We’re pleased to provide these innovators with access to sophisticated yet easy-to-use cloud solutions that don’t require IT staff to set up or manage."

The cloud-based services for business launched by OfficeMax Workplace and powered by Xerox deliver software and related applications through off-site data storage, allowing businesses and employees to gain access to their computers from virtually any place at any time. Organizations can also control much of their hardware, server, storage and networking management tasks from one streamlined online dashboard. Xerox’s cloud-based mobile device management service allows organizations to realize cost savings while simplifying how they identify, manage, secure, track and recover data across many employees’ work-related mobile devices, such as smartphones, laptops and tablets. OfficeMax Workplace provides access to trained technical representatives to answer questions and help organizations develop individualized cloud-based solutions.

MiMedia is the only retail-based cloud services provider to offer nine key high-demand features in one package, including automatic file back-up; cloud storage; real-time streaming across more than 100 photo, video and audio music formats; and easy file sharing across more than 20 social networks. The service also includes access to MiMedia’s apps for iPad, iPhone and Android.

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