He's Having a Mall

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A decade ago, European designer outlet malls fell into two categories: bad and worse. The handful that existed were mainly grubby places in France and Italy. Not surprisingly, they weren't too popular, and retailing experts said that proved Europeans were suspicious of discount malls and cut-rate goods. But why were American outlet centers crammed with holidaying Europeans snatching up bargain brands by the suitcaseload? Washington developer J.W. (Joe) Kaempfer has provided the answer: Old World shoppers appreciate browsing for top-label goods at deep-discount prices, even at home so long as the place they do their shopping has style.

Kaempfer, 52, has shown Europe that discounting can be done with panache. Since 1993, his company, BAA McArthurGlen, has opened nine snazzy malls in Britain, France and Austria, and it plans to move soon into Italy and the Netherlands. Thanks to Kaempfer's vision, millions of Europeans can comfortably shop at places like the Parndorf Designer Outlet, east of Vienna, just as they can in Michigan or New Jersey, for huge savings on brand names like Nike and Gap. "BAA McArthurGlen is the pioneer of pan-European outlet shopping," says Clive Minihan, director of the Credo Group, a developer of retail and new-media business in London. Pioneering has paid off. BAA McArthurGlen has grown from scratch to a behemoth (revenues of $472.3 million in the fiscal year ending March 31) that must now contend with upstart rivals trying to match its accomplishments.

Success has not come easily. Compared with the openness of doing business in America, Europe's zoning procedures are often lengthy, land is costly and red tape plentiful. "In the States, real estate is location, location, location. In Europe, it's politics, politics, politics," Kaempfer wryly notes. His initial plans are almost always opposed by local retailers who fear loss of trade. It has taken four years of court squabbles, which have set his company back $15 million in design and legal fees, for Kaempfer to be able to plan on breaking ground on a 28,700-sq-m, 100-store suburban Berlin mall. Kaempfer understands local concerns but calls them misplaced. "We're not threatening anybody," he asserts, because outlet sales are no more than 3% of the European retail pie.

He's proving his point in Ashford, a thriving, small city some 55 kilometers south of London. In March, BAA McArthurGlen opened a mall there, and it is drawing 60,000 shoppers a week seeking everything from leisurewear to luggage at bargain rates. Ashford's downtown retailers were nervous at first, admits Jo James, manager of the local Chamber of Commerce. But so far, losses to traditional retailers have been "minimal, on the whole around 1%." Moreover, James explains, the mall draws mostly shoppers from outside the region who wouldn't normally shop in Ashford at all.

Kaempfer launched his career in Europe after hitting a wall in the U.S. He grew up in Connecticut, graduated from New York University and Harvard Business School, then moved to Washington in 1973 to work for home developer (and co-founder of the original McArthurGlen) Alan Glen. Kaempfer started his own home-building business four years later and then created one of Washington's top office developers, Kaempfer Co. Trouble hit in the early '90s, when the capital's property market collapsed and left Kaempfer Co. wallowing in $1 billion worth of red ink. (It avoided bankruptcy and is once again profitable.) Meanwhile, Kaempfer invested in McArthurGlen, once America's largest outlet-mall developer, which built 32 centers across the U.S. When its big-name tenants, including Liz Claiborne and Nike, urged a European expansion, Glen told Kaempfer, "I'm too tired, I'm too old, I'm too busy. So if you want to do it, you do it and give us a small piece of it." Kaempfer took him up on the offer and launched McArthurGlen Europe. He quickly joined with the British airport operator BAA in a fifty-fifty partnership. Eventually, he spent $7.25 million to buy out the retired Glen and other U.S. investors.

He moved his family Kaempfer and his wife have a daughter and son permanently to London two years ago, after five years of fortnightly trips to Washington. "I can't imagine leaving here. It's wonderful, and there are great business opportunities," Kaempfer says. He's itching to develop some office projects in London. And he's starting to add megasize movie complexes to his malls complete with all the latest embellishments, such as stadium seating and digital sound, which are relatively new to European filmgoers. Kaempfer reckons that discount designer gear isn't the only staples of the American lifestyle that can take root in Europe.