Thomas Reichenauer (ROS Retail Outlet Shopping): Brands are increasingly aware of the potential of outlets as a profitable sales channel

Outlet centers are growing faster compared to traditional shopping centers and are increasingly recognized by numerous global brands. They are considered a resilient sector, and the European outlet market, emphasized Thomas Reichenauer, co-founder and CEO of ROS Retail Outlet Shopping, is establishing itself as one of the most successful formats in recent years. He noted that outlets have proven particularly attractive in times of economic uncertainty when rising living costs affect consumption.

They are a suitable solution today, he said, as consumers are more price-conscious and seek better offers and promotions, or a better price for desired products. ROS Retail Outlet Shopping from Vienna is also responsible for managing Designer Outlet Croatia, a center in the Zagreb shopping zone of Rugvica.

How do outlet centers attract customers?

– Outlets offer a high concentration of fashion and lifestyle in one place with permanent discounts. In fact, a record number of new brands entered the outlet industry in 2023. We are pleased that brands are becoming more aware of the potential of outlets and consider them a profitable sales channel, which we see in the growing interest from new brands and an increasing appetite for expansion among the more established ones.

The new generation of outlet villages aims to be an attractive shopping destination, meeting higher customer demands with leisure activities, food and beverage offerings, while considering digitalization and sustainability. Likewise, architecture and shopping experience, as well as a modern mix of categories and brands, are key.

Outlets are often positioned as perfect day-trip, cross-border, and weekend destinations and often benefit from tourism as a means to further attract traffic and increase sales.

How do they differ from traditional shopping centers?

– Outlets strive to become attractive shopping destinations where visitors can enjoy a unique shopping experience, affording fashion and lifestyle brands thanks to discounts of at least 30 percent. As an outlet operator, we are more consumer-focused than regular shopping centers, which means investing in state-of-the-art destination marketing, both classic and digital, as well as maintaining lasting partnerships with brands to enhance performance. Our leasing approach is also more active in terms of re-leasing, property management, and reconfiguring centers for the future. We follow a comprehensive 360 approach, meaning it is essential to understand the needs of customers, brand partners, communities, and investors, with the latter benefiting from our traffic-related rental model.

Where in Europe are the most outlet centers located?

– The United Kingdom is one of the most saturated outlet markets in Europe, while Germany, France, Spain, and Eastern Europe show the greatest potential. As highlighted in the 2023 Outlet Center Performance Report by the German market research company Ecostra, Germany, France, and Spain are the main markets where brands seek expansion.

In which markets are you present?

– ROS covers the entire lifecycle of designer outlet properties as an independent operator. We are focused on increasing long-term value for customers, brand partners, investors, and communities, and we aim to redefine outlet shopping for the future. Since the establishment of ROS in 2011, we have developed and opened five designer outlets and taken over eleven. We currently manage twelve premium outlet shopping destinations in seven European countries: Germany, Poland, Hungary, Croatia, Portugal, Spain, and Belgium.

How do you manage your outlet centers? What will you invest in?

– ROS applies a holistic management approach with dedicated local teams that collaborate and provide a fully integrated range of leasing, marketing, retail operations, property management, and finance services. Our business model has proven particularly effective in improving performance and growth for brands, investors, and other stakeholders in our premium outlet destinations. It is important to note that ROS is a top independent service provider for outlet centers and that our private and institutional investors appoint us as operators. We look forward to upcoming projects, including the expansion of Designer Outlet Gdansk in the last quarter of 2024, as well as the expansions of Designer Outlet Algarve and Designer Outlet Croatia, and the new development of Designer Outlet Kraków, which is scheduled to open in 2025.

What does the expansion of Designer Outlet Croatia by 2025 entail?

– Designer Outlet Croatia expects an expansion of 6,000 square meters with 30 new attractive stores and an additional 200 parking spaces. In addition to the expansion of the outlet center, the construction of the INGKA retail park with a gross rental area of 12,000 square meters and 10 new stores is planned. In this way, we will offer all our visitors an extraordinary shopping experience and a unique shopping destination where they can find everything they need in one place.

How do prices in Croatia compare to Europe?

– Prices in Croatia are generally comparable to other Central and Eastern European countries, somewhat lower than in Western Europe. The standard of living in Croatia has increased in recent years, especially after the country joined the European Union in 2013. However, inflation has now taken its toll, with a rate of 4.7 percent, making Croatia one of the European countries with the highest inflation. This has also been influenced by the introduction of the euro as the country’s new currency just last year. Despite this, retail prices in the fashion industry have not been as affected by inflation, unlike, for example, transportation and hospitality.

What has caused the labor shortage?

– The spread of COVID-19 has caused many disruptions in everyday life, and lockdowns have severely impacted businesses worldwide, including the retail industry, highlighting its instability and increased uncertainty. The labor shortage in retail shows little sign of slowing down, also due to rising inflation. As a result, many companies are struggling to find and retain the necessary number of staff to fill positions and run their stores. Therefore, it is more important than ever to invest in people and employer branding as a means to support our brand partners. Employer branding is crucial for attracting potential employees and maintaining a competitive advantage. ROS supports brand partners in recruitment and hiring through digital solutions such as Recruiteea in Designer Outlet Luxembourg and Designer Outlet Soltau, as well as organizing job fairs and continuous training.

How do you address challenges with stock replenishment?

– First of all, we must clarify that we are not responsible for the procurement and logistics of goods. However, our retail managers regularly check the offerings in stores and, if necessary, inform the regional management or headquarters about low stock levels. Therefore, it is very important for us to maintain a good partnership with brands.

What are the possible threats to your business?

– The European outlet market continues to expand and gain market share as more retail brands show interest. It is important to continue to maintain and protect the unique selling point of outlets with guaranteed minimum outlet discounts and excellent standards of retail, marketing, and facilities to remain successful and competitive. We also face further challenges, including tough leasing conditions, ESG (environmental, social, and governance) investments, rising service costs, and a shortage of retail staff. There is currently also a trend of using the outlet concept as a tool for revitalizing mature shopping centers. Although this is a potential opportunity, success depends on location, gravitational area, economic environment, and architectural possibilities.

How do you manage ESG requirements?

– As one of the leading European outlet operators in the space design industry, ROS is committed to a wide range of ESG requirements that elevate business, create value for our shareholders and investors, support our employees and customers, and show respect for the local communities in which we operate.

ROS develops an individual ESG strategy with each investor for different projects in the portfolio based on the 17 United Nations Sustainable Development Goals. The main goal is to improve the environmental performance of built facilities through sustainable management by optimizing resource consumption and general environmental measures. For example, we use Predium in Designer Outlet Soltau and Measurabl in our Polish designer outlets and Premier Outlet Budapest to enhance ESG.