Anthony V. Lupo Examines What Brands Need to Consider When Opening Outlet Stores
CNN Money recently reported that consumers have dialed back on retail spending. The article quoted Jennifer Lee, senior economist at BMO Capital Markets who said, “Despite steady job gains, homes that are worth more, [and] record high stock prices, US consumers are staying cautious when it comes to buying.” With consumers still weary of a weak economy, high end stores are turning to outlets to draw in bargain shoppers and increase sales. Outlets are often profitable, provide a controlled sales environment for inventory that can no longer be sold for full price, and allow brands to reach new audiences.
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Ms. Weiss noted several ways in which an outlet store lease differs from a traditional retail store lease. For example, outlet landlords require that all or a significant portion of merchandise be discounted from the full price. Additionally, rent in such leases is largely determined by a percent of the gross revenue as opposed to a largely fixed minimum rent. “That way the landlord has a stake in the revenue of that particular store, it has a stake in supporting that store, to drive revenue together with the tenant,” said Ms. Weiss.