Fashion brands do not want to get stuck with piles of unsold stock, especially if they are a season or two old. In the UAE, getting them on to “outlet stores” could well be the next big thing for the retail sector.
“Brand principals are trying to create a new layer within the retailer and distribution channels,” said Vijay Samyani, managing director of the Concept Brands Group. “For any stock that is a season or two old, they now want to have a direct alliance with outlet store operators to sell these. At the same time, the master-franchisee or retailer will only be responsible for current season merchandise.”
If such a direct alliance comes into effect, it would mean a radical makeover for the local retail sector, where until now master-franchises had a say in nearly everything. In most cases, they also took responsibility for liquidating unsold inventory.
But with the retail sector in the UAE and Gulf facing new realities, in terms of growth prospects and the challenge from online stores, brand owners are trying to recast the old ways of doing things.
But going about creating new outlet store locations will need careful planning, according to market sources, with the licensing fees for such stores tending to be 25 per cent higher than the standard. Plus, outlet stores by their very definition are not expected to engage in promotions, since their merchandise already comes at a discount to the current season prices.
But the appetite to sell through outlet stores is very much there, according to a market source. “We currently have about 100 brands wanting to sell directly through our Brands4u stores,” said Samyani. “Where possible, we will also find ways to source from local retailers who have excess stock. We have also started negotiations with certain brands whereby they create merchandise exclusively for the outlet stores. This is already being done in other markets… it will definitely make it to the Gulf.”
After opening its first outlet store (at Reef Mall in Dubai), Concept Brands Group has confirmed plans for four more, including one at Dubai Festival City and a possible stand-alone in Jumeirah. Combined investments could be in the region of Dh25 million, excluding the merchandise.
“Dubai Festival City will be our signature store, taking up 24,000 square feet,” said Samyani.
Just recently, the Al Ahli Holding Group — which owns Dubai Outlet Mall on the Dubai-Al Ain highway — secured Dh1.5 billion for an expansion. This will add to the Mall’s 1.1 million square feet built-up area another 3 million square feet. The project is likely to be completed by late 2019.
Plus, there is The Outlet Village owned by Meraas in Jebel Ali, with Phase 1 spanning 1.5 million square feet and subsequent phases likely to create another 3 million square feet.
“As with Reef Mall and Festival City, existing malls could open their doors to individual outlet stores,” said Samyani. “Such concepts have a big hand in driving traffic across malls, and that’s the reason why we believe the movement is only starting in the Gulf. We are hopeful that malls would also consider some sort of quid pro quo — lower rents for bringing in the traffic.”