Tama J Shor, Publisher of Directory of Major Malls (TJS): David, please give us a little history about your several decades of background in the retail shopping center industry. You started as a retailer, didn’t you?
David Hinkle, Principal of The Outlet Resource Group (DH): Yes. I started my career helping grow one of the early retail pioneers in the temporary tenant sector, The Book Market, in 1990. This before “temps” became sophisticated and are now known as “pop ups”. I was told countless times “We’ve never done that” but sometimes ignorance is bliss. Over a 17-year period, we leased over 1,100 locations in most of the continental US doing short term book sales. Running parallel, I got involved in the outlet sector and we grew our sister company, National Book Warehouse into the category leader with over 100 stores. I ended up running the business in my early 30’s and later bought the business from the ownership group. At our peak, we operated almost 200 stores and had over 1,000 associates.
(TJS): You are a partner in The Outlet Resource Group. Fill us in further about that.
(DH): I co-founded TORG (as many know us) seven years ago with Lisa Wagner. Our vision was to build an international platform with a focus on the outlet sector. Part of our strategy was to acquire properties, of which we have six assets that we are the managing partners of on behalf of our financial partner. Today, we have clients domestically and internationally, in addition to our core asset base. We’ve become a “go to” for many large scale financial groups, including REITS, as well as developers that have an interest in the sector but doesn’t have the expertise in the sector. We have a talented team of leasing and marketing professionals that help us deliver results for our clients.
(TJS): As a landlord, how has the COVID crisis affected your properties?
(DH): The initial impact was re-visiting all elements of the operations prior to re-opening. A clean, safe environment was critical to our discerning customers as well as our brand partners. The customer was also telling us that they wanted an open-air environment. The evolution continues as operating hours; curbside pickup, et al continue to be evaluated as we work though the pandemic together.
(TJS): What are some of the things you and other landlords can learn from the pivot at their properties to handle the pandemic?
(DH): Communication is the 1st place to start. We are proactive in our communications with our brand/retail partners as well at the center level with our operations team and the staff of the retailers. We are fortunate that we can still function with an entrepreneurial mindset and not be bogged down with a lot of bureaucracy in the decision-making progress. If you trace the history of retail, on the retailer and developer side, many great entrepreneurs set the tone for our industry. Our industry has lost some of that spirit along the way.
(TJS): How do you think retailers going forward will change what they do in business to avoid major impact by a crisis such as COVID or the potential of others?
(DH): Personally, I believe we saw the importance of “bricks and mortar” during the initial “Covid shut down” period. Walmart, Target and the large grocery operators exhibited the strength in being able to take care of the consumers needs marrying the e-commerce business with their store fronts. This has trickled down to specialty retailers as well. The strategies are still being assessed but the big-time winners are the ones that have multiple touch points with their customer base.
(TJS): How do you think the outlet industry has changed over the years?
(DH): The outlet sector was the original “Direct to Consumer” retail model. The roots of the sector harkened back to overstocks and remnants, often being sold in a warehouse store adjacent to the factory. The early manufacturers realized that customers were showing by the busloads (literally and figuratively) to shop. This led to changes as to how goods were sourced for outlets. The evolution of merchandising mixes has become far more sophisticated with strategies often differing amongst the tenants.
(TJS): What is the impact of e-commerce on Outlet Centers?
(DH): E-commerce and the outlet sector go hand in hand. As I noted earlier, the outlet sector is the original DTC model. Key brands Nike, Under Armour and others are now denoting outlet stores as part of their overall DTC sales. Re-opening from Covid afforded brands to control the messaging and margins to move seasonal goods and bring in new inventory. Many of these brands had waiting lines to shop at the stores as pent-up demand for great brands in a bricks and mortar setting is as strong as ever!
(TJS): What do you think is the future of the outlet shopping center?
(DH): Though I have been involved in the sector for over 30 years, I believe the future is incredibly bright. Needed changes such as better food options as well as the addition of other retail or entertainment concepts that make the destination shopping experience stronger are somewhat obvious. Our European counterparts have done a much better job as they learned from our shortcomings when they started building outlet centers after the sector started in the United States.
In addition, the dirty little secret with e-commerce companies is that many are being choked with returns. We’ve seen reports with the return percentage being as high as 37% from the just concluded holiday season being anticipated.
The outlet sector has proven three critical strategies, year after year;
- The ability to solve inventory issues (cash is still king!) and maintaining your messaging to the consumer with an outlet store(s) is a competitive advantage
- Outlet stores are a gateway to introduce brands to new consumers. This has been proven by an independent market research by a major school of business and more importantly, big name manufacturers have grown into a very profitable channel using their outlet stores.
- Consumers flock to a great collection of brands in an outlet shopping center. It’s still a magical shopping experience, one that the consumer tells us is the last form of “bricks and mortar” that they enjoy. Travel times, dwell times and the number of stores that they buy goods in are at the top of the charts in the retail sector.
(TJS): In the next five years, do you think that many of the brands at the outlet centers are intending to expand their presence or do you think they’ll be retracting it and why?
(DH): I would expect to see both. The strong brands will continue to monitor the sales performance of their portfolio, potentially closing lower volume stores and replacing them with new outlet formats in existing centers or centers that will be built.
(TJS): Any final words to share?
(DH): I have always been bullish on opportunities that present themselves in our world. With so much disruption, transformation and evolution going on right now, if you can look through all the noise, you can find countless opportunities.
About David Hinkle
Principal, The Outlet Resource Group (TORG)
David is co-founder and a principal of TORG.
TORG is a global retail practice comprised of experts that delivers a truly comprehensive approach to outlets. Their deep experience and thorough understanding of the every facet of the outlet industry- from finance and acquisitions to leasing, marketing and more- enables TORG to deliver informed, integrated solutions.
TORG is the operating partner of six outlets located coast to coast.
David is a passionate entrepreneur and consults with cities; financial groups and is a strategic advisor to August Moon Drive In and Automat Kitchen.