Top brands such as Ralph Lauren and Nike need to shift old stock. Consumers can't wait to get their mitts on it. The result? A boom in factory outlet centres, says Angela Morgan.
Upmarket factory outlets in Tewkesbury? Just what is going on? Cheap end-of-range clothing in a grotty corner of a scruffy Northern mill is a more traditional image. Yet the modern reality is of US-style factory outlet centres. They are springing up all over the country and are becoming popular with businesses and consumers alike.
Today's factory outlet centres are groups of shops selling end-of-range and surplus stock at heavily discounted prices. Each shop is operated by a manufacturer who uses it to clear stock produced by that company.
Well-known participants include Nike, Ralph Lauren, Benetton, Levi's, Edinburgh Crystal, Oneida tableware and Price's Candles.
There are two types of factory outlet centre trading in the UK. One is the conventional American mall style with rows of shops facing each other down a mock street. This can be seen at Bicester where developers Value Retail have created an upmarket discount shopping village; likewise at Chester, developers BAA McArthur-Glen have developed an enormous factory shopping complex. The other type of centre is a hybrid combining US ideas with British leisure style shopping aimed at providing a family day out.
A typical example is Hornsea Freeport, on the Yorkshire coast. It is a booming sector. From one factory outlet centre in 1990, there are now 12. Another 24 sites nationwide are planned or are under construction.
Reasons for the boom are not hard to find. Manufacturers, particularly clothes companies, generally have large quantities of excess stock. Markets and traditional discount outlets have been the main means of getting rid of it. But now brand names and corporate images are becoming more dominant, and no manufacturer wants to see his or her branded goods on a market stall. Operating a factory shop within one of the new US-style centres is increasingly seen a remedy. The manufacturer controls how the goods are sold and can make a profit at the same time. The demand for space is clear. Patience O'Connor, BAA McArthur-Glen's director of communications, says, 'We have a waiting list of tenants who would like to go into Cheshire Oaks while our Swindon centre, which doesn't open until next spring, is already 80% pre-let'. Consumers love it too. Brand-name merchandise costs a fraction of what they sell for in the high street. In addition, the centres are pleasant to visit and easily accessible.
However, there are problems. Developers have problems getting planning permission. To be effective and not harm established channels of merchandise distribution, factory outlets need to be away from major shopping areas.
In the US, outlets must be at least two hours' drive away. Here, a minimum one-hour limit seems to be the informal gentleman's agreement, so many developers are seeking to build on greenfield sites in touristy areas like Stirling, Tewkesbury, Chepstow. But this has not found favour with planners. Instead, conversion of existing factory buildings is being tried by companies like Acreground in Scotland.
High-street retailers have also been understandably touchy about factory outlets. They are not keen to see new merchandise they are selling at full price sold very soon after at discount prices in a factory outlet. In reality, the outlets almost always tend to stick rigidly to end-of-range and surplus stock.
Manufacturers have had to tread carefully in order not to offend retailers, and there are signs tensions may be lessening. Indeed retailers are starting to use factory outlets as a means of clearing stock from their own stores. Dorothy Perkins, for example, now has factory outlets at Cheshire Oaks, Chester and The Galleria, Hatfield. Despite the problems involved, factory outlets seem more than a passing fad - something which will please manufacturers, many retailers and consumers alike.