Flogging or flagging?

As High Street stores continue to slash prices, does the world still need factory outlets and their culture for bargains? BQ revisits an outlet pioneer to find out.

Outlet stores have come a long way since their inception in the 1930s. Back then shoe factories on America’s East Coast opened stores on their ground floor to sell off damaged goods to staff – and eventually their friends and family.

Several years, a tipping point and a few opportunists later and a phenomenon was born. When their modern format eventually reached Britain, an unwanted patch of land on the Tyne’s north flank became the location for one of the first such retail experiences in the country in 1996.

Much has changed since then. Less shell suits and more blue-chip brands there maybe, but also a closer focus on the pleasantries of High Street shopping and a recognition that bargains alone will not attract the required footfall.

Today Royal Quays is looking to develop an outdoor garden centre as an extra draw to customers. The outcome of a planning application for land adjacent to the centre’s flagship Next store is eagerly awaited but manager Judith Ramshaw is hopeful for a green light on the project soon.

Despite ongoing roughhousing between city centre shoppers and big retailers, trading here remained brisk thoughout the third quarter. “Although we have had a 4% drop in footfall, we have a 2 to 3 % growth in average sales across the centre’s 52 stores.

“Customers are making less frequent journeys to the park, but spending more money when they get here,” she says.

Nationally the number of major retailers falling into administration in the third quarter fell by 15% to 28 compared with 33 in the same period last year, according to Deloitte.
The promising news was tempered with a warning that, while the pressure is easing, the retail sector is still fragile. “The real test will come in January once the busy Christmas trading period is over. Forecasts for the festive period are mixed,” Deloitte said.

Ramshaw admits that at Royal Quays too, there will inevitably be some closures – or what she calls “voids” – in January.

But the outlook for the centre in general is one of change rather than decline, she says, as it continues to target niche retailers.

Previously owned by a pension scheme, the 139,000 sq ft, 500-staff centre was bought by a London-based investment firm called North Shields Investment Properties five years ago – the takeover corresponding with a more hands on approach in attracting independent retailers as well as stellar brands.

“We always want to keep our voids to a minimum but we have lost a number of young fashion stores that were competing against Primark and finding it difficult.

“We realised a few years ago that we needed to reposition our shops differently and bring in some smaller independent retailers.”

Part of this strategy includes competitive and flexible rent agreements that can be linked to store performance as well as expert advice from the on-site management team on marketing, shop design, presentation and sales.

“We’re moving into more specialist retailers and working with the Federation of Small Businesses to change the perception that this is an expensive place to start a business. There’s a fantastic support mechanism here and this is a great place for a new business.”

Such specialist markets might include the snowboarding and surf industry inhabited by Dutch retailer Protest, which recently opened its first UK store in the park.

The Amsterdam ferry link situated an anchor’s fling away from park had nothing to do with the Dutch deal though. In fact the retailer has an existing office in Newcastle and needed a place to show off its wares to the public.

The ferry link does invariably bring other positives to the park however.

More than 560,000 passengers used the route in 2011, a rise of more than 7,500 passengers from 2010.

Perhaps surprisingly, then, ferry-related trade only accounts for around 10% of business at Royal Quays, according to Ramshaw.

“We get a lot of business from the crews and from people on their way home to Holland with a couple of hours to kill but I wouldn’t say we were totally reliant on the ferry.”

In actual fact the majority of Royal Quays shoppers are from within a 40-mile radius of the centre, driven by bargains from headline brands like M&S, Nike and Next - and increasingly, independents with their own individual charm.