“When should an Outlet Mall be considered for an emerging market?”
This question occurred to me having recently read that there are plans afoot for Outlet Malls to enter the Indian market within the next 2-3 years.
There has been an undoubted and significant growth in the number of Outlet Malls in key markets around the world in recent years. They have rapidly become tourist destinations within these markets, whether it is Bicester Village (UK), Serravalle in Milan, or the Lotte Luxury outlet mall in Seoul, offering deep discounts of 20%-70% against the full prices for items.
The target consumer is clearly not the usual considered Luxury consumer but aspiring shoppers who simply want to ‘bag a bargain’, with the most popular brands being those that are strongly identifiable with overt brand logos. There is nothing ‘Quiet Luxury’ about Luxury Outlet malls, and according to the (admittedly unscientific) ‘branded carrier bag’ count in a recent trip to Bicester Village with a friend from India, this hypothesis appears to have been confirmed.
But what is the damage that is done to the brand image? Gucci is a dominant brand in many of these Outlet malls, with a queuing system to keep crowds down, but within the ‘real’ Luxury world it’s a brand that is not doing well. Is there a link?
Ubiquity and visibility of items on people with whom you do not identify as being ‘like me’ is a killer for any Luxury brand. Just look at the case study of Burberry and the whole ‘Chav Check’ brand issue in the early 2000’s to see the consequence of poor brand management.
The experience in store is also of course not 'Luxury', being more like a desperate scrum of people trying to find anything in their size. How could it be anything else? The assistants are purely transactional, and the ones that I’ve observed are not always honest in their assessment of how something looks on the customer, being focused on their next commission or bonus. If integrity is the foundation of the Luxury trusted relationship then it is absent here – and that’s not surprising. Most of the customers will never be seen again – or certainly not until their next overseas shopping ‘trawl’.
So, if Outlets are potentially brand damaging, and the consumer doesn’t get to experience the Luxury world, why are they continuing to grow? I was offered a 2019 jacket in the Canada Goose store at Bicester Village, so clearly inventory management and disposal is a motivation for the brands.
But here’s an important question: Is the presence of Outlet malls a symbol of the unsustainable production volumes of Luxury brands? And if so, when sustainability in Luxury really kicks in (assuming it ever will), possibly aided by AI technology in future, will there be enough inventory to support these Outlets?
And a final question that I’d like to open up for further comment and debate is “When should Luxury Outlet malls enter a market?”
Going back to my opening lines, India is likely to see Luxury Outlet malls opening within the medium term, but this is a market that is only just learning what consumer Luxury really means. A brand surely needs to become established and maximise its potential full price consumer base before opening up in a Luxury Outlet that is all about ‘stock clearance’. The consumer is already confused about what Luxury is, and my worry is that brands will quickly become traded commodities. If brands become known for being focused only on price (and the Indian consumer is very price motivated) and therefore unable to deliver the Value creation that will help them sustain a reputation in the market, will they have a long term future? The experience of brands such as Paco Rabanne that used to be considered 'Luxury' until it became heavily discounted and lost its Luxury status should be a lesson for all.
Whilst India has a strong heritage and culture associated with Luxury, it has been as the suppliers and traders historically, not as consumers, which is why price is such a critical signifier in the market.
Activities that devalue the Luxury brand perception may backfire, resulting in some brands exiting the market as fast as they have entered it.