Talking to Dr Fiona Ellis-Chadwick, Value Retail's chairman Scott Malkin explains:

  • how outlets like his provide an entry point for consumers to sample brands;
  • why immediate gratification will always have a place, even in an online world; and
  • why an internet version of the outlet mall concept is unlikely.

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Scott Malkin and Fiona Ellis-Chadwick were talking after the recording of an episode of The Bottom Line.

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Dr Fiona Ellis-Chadwick:  I know that you’re a very successful entrepreneur, so first of all I’d like to ask you is entrepreneurialism, is it innate, were you born with those skills to succeed?

Scott Malkin:  I think it’s a blend of one’s personality and one’s experiences.  Certainly the willingness to accept challenges and look them in the eye, and also to see differences, that’s fundamental.  If one is conditioned to embrace a hierarchy and to fit in, I think that’s a less natural source of inventive thinking.  And there is this long discussed difference between peacetime generals and wartime generals if you like, so the agility, the responsiveness that allows for survival in a complicated and competitive environment, I think that people who can emotionally and intellectually address those challenges tend to be entrepreneurs.  But they develop the ability to handle those challenges through experience and often through example as well.

Dr Fiona Ellis-Chadwick:  Well we’re certainly operating in very challenging times for retailers these days.  So what would a retailer actually get, what are the benefits of being somewhere like BicesterVillage in Oxfordshire? 

Scott Malkin:  Well Bicester Village is fundamentally about allowing the brands,  as opposed to a multi-brand retailer, the brands themselves to take their surplus, because surplus always exists for reasons of weather or timing or design, and move that surplus away from the full priced locations where it doesn’t distract or for that matter insult the consumer who says I’m not interested or it’s not for me.  Instead it moves away from the centre, and someone who’s willing to make the commitment of time and energy and petrol can go to BicesterVillage and discover those items a year behind at half price.  And secondly that person often is aspirational, is willing to step forward and discover a brand when it’s in a less intimidating format, or to learn about new things, the prices and desires, it would have been, I’ll try the brand, I’ll try the item.  And thirdly tourism is fundamentally today about shopping, that’s what the credit card companies will tell you, and BicesterVillage specifically is fundamentally built upon long haul tourism.

So while outlet shopping in the UK would be, other than BicesterVillage, fundamentally domestic, BicesterVillage is trying to create a neutral and comfortable international zone where people from all different backgrounds can feel at ease.  Typically they’re coming to buy gifts to take home.  They might well buy for themselves but the journey is often about buying a number of items to deliver back to emerging market economies with a gift that actually establishes or helps to establish and define a brand’s equity and currency in those emerging markets, emerging economies, where the brand is then purchased later on full price by the recipient of the gift.

Dr Fiona Ellis-Chadwick:  That’s interesting isn’t it, because we do sometimes shop very much as a leisure activity, whether we are tourists or whether we’re having a day out to go shopping, but do you think as a nation in the UK that shoppers actually are falling out of love with the idea of out of town shopping?  We’ve got online, we’ve got government initiatives encouraging us to shop in city centres, we are thinking about car miles now.  So are we really turning away from out of town shopping?

Scott Malkin:  I think what the internet does is it establishes fundamentally and convincingly that the consumer is in fact right after all: the balance of power has shifted from the producer and the retailer to the consumer.  And I think consumer behaviour is fairly predictable, which is that everything should be perfect and at the best price possible and available immediately.  So in fact the consumer will be more demanding, and the consumer will absolutely be interested in out of town where it makes sense.  If town centres or central locations can deliver better or even equal convenience offer they will thrive, and if the internet can deliver it on your doorstep tomorrow you might just go with that route but immediate gratification is still a strong motivator.  And those behavioural patterns are built around the click and collect phenomenon where you buy online at home and you go and pick up at the store yourself.  The brands love that because you typically buy something else when you go to pick up what you’ve already purchased.

So it will be multi-channel or what in Britain they call omni-channel, and all of the store-based formats will shrink and consolidate, and the strong ones will get stronger and more in favour, but the peripheral ones will essentially vaporise and disappear.

Dr Fiona Ellis-Chadwick:  One last very quick question: are we likely to see in the near future an online BicesterVillage?

Scott Malkin:  It’s not likely, for two reasons.  Number one the internet is the great commoditiser, and the brands are focused on not having their goods online openly priced available from remote destinations, because it undermines and cannibalises the full price positioning and the definition of value.  The second reason is that in our model we are like a department store that provides the location and takes a royalty.  So those boutiques, those individual boutiques in BicesterVillage are owned as it were by the brand, who pays for the staff, provides the stock.  We don’t take ownership of the stock.  And the fundamental imbalance is that the brands either want to have control or sell and have a simple life based on the idea that the buyer is someone acceptable to the brand, and how the stock will be handled is acceptable to the brand.

So stock risk and ownership of stock is a huge financial risk and commitment, particularly when the stock is a year old, not necessarily what sold out, so there’s an uncertainty to that acquisition of stock.  So I think that the collective components don’t take us logically towards a BicesterVillage online; however online as a source of information, as a source of goods, is going to grow substantially including in fashion over the next five to seven years.