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Outlet shopping catches Asia's fancy, specialty malls bloom

Sales in China tipped to rise 25% annually, overtaking online growth

SINGAPORE (Nikkei Markets) -- Online retailers are the rising stars in many parts of developing Asia, but a little corner of the brick and mortar world is also showing strength in the battle for the consumer dollar.

Despite a relatively late start in the region, outlet malls are drawing shoppers with stores selling cheaper versions of branded goods as well as an ever-widening range of services. Such malls are typically located far from the city-center to avoid cannibalizing sales at full-priced boutiques.

In China, the Sasseur Group has grown from operating one outlet mall in 2008 to 10 mega-properties across the country. Four of these - in Chongqing, Hefei, Bishan and Kunming - are held by Singapore-listed Sasseur REIT, which reported total sales of 1.2 billion yuan ($173.7 million) in the first quarter of 2019, an increase of 24% from a year ago.

During the same period, total retail sales in China grew 8.3% while e-commerce giant Alibaba Group Holding said sales at its Tmall platform rose 33%.

According to stockbroker CGS-CIMB, sales at China's outlet malls tripled to 49.1 billion yuan between 2012 and 2016. It expects annual sales growth in the region of 25% in the next few years, surpassing the estimated 20% growth in online sales.

In Malaysia, the Johor Premium Outlets, which opened in late 2011, now receives more than 4.5 million visitors annually, Genting Group chief executive Lim Kok Thay was quoted as saying in recent reports.

A joint venture between Genting and Simon Property Group, the U.S. company behind the well-known Woodbury Common outlet outside New York, the Johor mall targets visitors from Malaysia and neighboring Singapore with luxury brands such as Bally, Salvatore Ferragamo, Furla, Ermenegildo Zegna and Coach.

The joint venture has since opened another outlet mall at Genting Highlands, which is an hour's drive from Kuala Lumpur.

Singapore-based fashion retailer and distributor FJ Benjamin, which also operates in Malaysia, said sales at the company's outlets "have grown nicely" over the past few years. FJ Benjamin's brands include Givenchy, Loewe, Tom Ford, Guess and Superdry.

In Thailand, retail conglomerate Central Group is building an outlet mall near Bangkok's international airport that will focus on high-end international brands and include a hotel. Simon has also waded into the market with a tie-up with retailer Siam Piwat.

The concept of discount clothing stores is not new in Asia. In the region's apparel manufacturing hubs, such as Thailand, Indonesia, and China, it was common to see a street, or a drab building, with shops offering export rejects and surplus, many of dubious quality. While the stores made it to many must-visit lists, the experience was often grimy and harried.

Analysts say Asia's growing ranks of middle-class consumers have fuelled a change, and outlet stores are now found in much swankier settings. Shopping has also become a social activity for families and friends.

Pascal Martin, a partner at OC&C Strategy Consultants in Hong Kong, compared the outing to a theme park trip. "An outlet mall generally features pleasant architecture, ample parking space, offers great convenience, nice restaurants and an attractive shopping experience," he said.

In order to better target customers, some newer malls cater to niche interests.

For example, Sasseur REIT's mall in Bishan in the western part of China, has a section focused on children with facilities such as an early childhood education center, a photography centre and a children's theater.

"Customers come specifically with the intention to buy," said Sasseur REIT CEO Anthony Ang. That differentiates visitors to outlet malls from those who go to regular shopping centres or browse online sites.

For retailers and makers of luxury goods, outlet malls offer a wider reach and lower rents. Coach, for instance, generates about 40% of its sales through outlets, Martin said.

There is no reason why China cannot replicate Japan's success with outlet shopping given that it has just over 60 outlet malls compared to the more than 300 in the U.S., he said.

However, Regina Yeo, adjunct senior lecturer of marketing at the National University of Singapore Business School, said Asia's outlet malls may never be as appealing to well-heeled Asian shoppers as their western counterparts.

"Because most of the designer brands come from the U.S. and Europe, shoppers may feel that they want to get the designer item from the brand's country of origin, which helps to preserve the memory of the places they visit," she said.

--Kevin Lim

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