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 Germany, 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 sizable (revenues of $472.3 million in the fiscal year ending March 31) behemoth 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 took four years of court squabbles, which set his company back $15 million in design and legal fees, before Kaempfer was cleared to break ground this summer on a 309,000-sq.-ft., 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 35 miles 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.