Brendon O’Reilly: “No need to be afraid of outlets”

Last few months have brought good information for Russia’s retail. High levels of consumer confidence and household spending have a positive influence on sales. The country is increasingly attractive for foreign investors. Brendon O’Reilly, Managing Director of FASHION HOUSE Group – the company co-creating the outlet industry in Russia – sees a good climax to expand the outlet business, both for developers and tenants of the schemes.

– What is the situation of the outlet industry in Russia?
– Russia’s economy returned to growth in 2017, what is a very important factor for foreign investors. The market is capable of absorbing another 20-25 outlet centers in the next 5 to 8 years. As the industry, we have to focus on educating prospects about the outlet advantages. Let’s look at the key performance indicators of FASHION HOUSE Outlet Centre Moscow, the first fully enclosed scheme of this type in Russia. 2017 was the next year of growth in this outlet centre. In comparison to 2016 sales increased with 11,4% and conversion with 12%. Tenants operating full year 2016 and 2017 achieved annual double-digit growth in sold items. This is a great result both for our business partners and FASHION House Group.

– But there are brands skeptical about opening stores in outlets. What would you tell them?
– There is no need to be afraid! I represent the company that has been building and managing outlet centres for many years – in different markets and under different business circumstances. FASHION HOUSE Group guarantees a highly skilled team of experts, experienced in leasing and management, who can precisely advise our tenants how they should start and optimize their outlet business.
The effective leasing process creates a partnership between a scheme’s owner and a tenant. Our outlet vison has convinced many top international brands. They had joined us first in other European countries and then came with us to Russia in 2013, when FASHION HOUSE Outlet Centre Moscow was opened – adidas, Reebok, Puma, Tom Tailor and US Polo, just to name a few.
Outlets under the FASHION HOUSE brand show how the management team works for a common success. We focus on close interpersonal relations. Every year we organize Principal Meetings for all tenants of the outlet centre – to share the best practices, present summaries and discuss strategy. The dedicated management team members support retailers in daily operations. Tenants are offered a wide variety of free of charge tools for shop fit-outs, value merchandising communication (displays, in-store areas) and B2C marketing (website, newsletters, media and social media campaigns).

– And what about customers? Besides the price, how else can you lure them into outlets?
– Today’s consumers want outlet centers to offer leisure shopping experience. People visit schemes not only to buy but also to spend a great time there. To constantly increase footfall, we need to give consumers something unrepeatable and unforgettable – a venue in which they want to be, meet with friends, take a picture etc.
Leisure shopping experience is shaped i.e. by the outlet centre’s exterior and interior. FASHION HOUSE Group is well positioned for this. Our idea of the fully enclosed scheme (instead of an open outlet village) best fits to the climate of Russia and ensures comfort under the existing climate conditions. The architecture of our schemes is connected with the region in which they are located – to bold local history and traditions. FASHION HOUSE Outlet Centre Moscow reflects a “traditional Moscow classic architectural style”. The newly developed FASHION HOUSE Outlet Centre St Petersburg’s architectural theme will be Amsterdam and the Low Countries, with which St Petersburg has had trading and cultural links for centuries. We also pay a particular attention to interior uniqueness. Our projects in Russia base on an exclusively prepared concept of “Window to Europe” – taking customers to shopping streets from various European cities.

– Today major outlet centers are concentrated mainly in Moscow …
– The leading position ofThe Moscow’s leadership position results from its enormous catchment (12 million people living in the city and up to 6 million within the district) and citizens’ purchasing power. Our tenants, including premium brands, can really benefit from these factors. In FASHION HOUSE Outlet Centre Moscow we have a unique setting for luxury – perfectly located “Red Carpet Alley”, which is fully leased by i.e. Furla, Meucci, Pinko, Escada, Kenzo, Motivi, Max Mara, Etro and All Seasons Comfort (by Silk & Cashmere).
There is a room to develop new profitable projects right here or extend existing ones. We did it in 2016, opening the 2nd phase of FASHIION HOUSE Outlet Centre Moscow. Our scheme has now 20,100 sqm and only a few free units. It has entered 2018 with an additional leased area of 1,258 sqm and six new brands.

– But what about the prospect of expanding to the regions?
– As the latest JLL report states, Moscow remains the main investment destination in Russia. Nevertheless, last year higher investment activity was recorded in St Petersburg, whose share had increased from 9% in 2016 to 16% in 2017. This ascending trend is not surprising. The city is a major trade gateway and one of the biggest financial, cultural and industrial centers of the country.
The FASHION HOUSE site to the southwest of the city, with over 5 million inhabitants million people within the 90-minute catchment, is an excellent place to locate our 2nd outlet centre in Russia. Our business partners are also convinced about this. We have already secured such fantastic tenants as adidas, Guess, Henderson, Kenzler, Lacoste, Meucci, Nautica, Nike, Puma, Ralf Ringer, Rebook, Superstep and Tru Trussardi for FASHION HOUSE Outlet Centre Petersburg.
Among other potential locations for outlet centres are counted such cities like Yekaterinburg or Krasnodar. However, we predict that they will become investment destinations after saturation of the markets in Moscow and St Petersburg.

– And how is your St. Petersburg outlet center project developing?
– Our site in the south-west of the city has already been prepared. More than 5 million people live within a 90-minute drive time, so that’s an excellent location for the second FASHION HOUSE Group project in Russia. Our business partners are also convinced of this. The lessees such as adidas, Guess, Henderson, Kenzler, Lacoste, Meucci, Nautica, Nike, Puma, Ralf Ringer, Rebook, Superstep and Trussardi have already confirmed their involvement.

– How do you evaluate the potential of e-commerce in the outlet industry?
– The latest country report on retailing in Russia (by Euromonitor International) shows that the development of omnichannel strategies is an increasing priority for major retailers to create multichannel communication with consumers and increase their loyalty. I would highlight that having an effective omnichannel strategy is crucial for every player with aspirations to be a leader in retail – the outlet industry is not an exception here.
That is why in 2016 FASHION HOUSE Group introduced its omnichannel strategy to offer the best of outlet shopping, both in brick-and-mortar schemes and in the digital environment – what is important for our tenants. FASHION HOUSE Online Shopping, the first online outlet centre in this part of the world, is available for over 40 million customers in Central and Western Russia. Moreover, people are able to pick up items (ordered online) directly from FASHION HOUSE Outlet Centre Moscow. The online tenants offer more than 20 top brands and the e-store portfolio is constantly expanded.

Information

Brendon O’Reilly is an experienced manager with a proven track record in the retail and outlet industry. Since 2010 he has been managing all FASHION HOUSE Group’s activities, building trust and awareness of FASHION HOUSE Outlet Centres among retail partners, customers and industry experts.
FASHION HOUSE Group is a leading player in the European outlet sector and the largest developer/operator in the CEE and Russian markets, with a proven track record of opening up and dominating the outlet sector in emerging markets. Its portfolio of already delivered projects includes 5 successful outlet centres in Poland, Romania and Russia of a total lettable area of almost 100,000 sqm. The company is part of the Liebrecht & wooD Group.