Suburban discount outlets enjoy double-digit growth

Discount outlets run by top department stores like Lotte Shopping and Shinsegae Group that sell discounted items are proving recession-proof and are even attracting VIP customers.

Many are posting double-digit growth at a time when big retailers are struggling to see sales grow by single digits, according to the industry yesterday.

As the economic malaise spreads through all social classes, VIP members at department stores and shoppers in their 30s together make up around half of all sales at the outlet villages, where they can pick up designer garments at hugely reduced prices.

One such outlet run by Lotte Department Store in Paju, Gyeonggi, saw annual sales climb by more than 20 percent this year, beating its original target.

Lotte said VIP customers from its department store made up 60 percent of sales.

“The inflow of VIP customers from our department store in Jamsil [southern Seoul] and our headquarters is quite obvious,” said Park Min-ah, an employee at Lotte Department Store.

“These customers tend to shop at department stores during the week and travel a long way to outlets on the weekends.”

The Paju outlet also launched a community center - a new first for a domestic shopping outlet - offering classes in a range of subjects, which has further spurred sales.

Half of those who attend one of its classes make same-day purchases and they spend four times as much as the average shopper, Lotte said.

Lotte’s outlet store in Cheongju, which opened on Nov. 9, is also showing signs of a boom, posting sales of 4.5 billion won ($4.145 million) in its first four days.

Shinsegae Simon, a joint venture between Shinsegae and Simon Property Group, is also growing rapidly by piggybacking on the success of the outlet stores. Sales have jumped 15 percent in the first nine months of 2012 on-year.

Customers are also spending 10 percent more on average at Shinsegae outlets as of last month, the retailer claims.

The number of visitors at its outlets rose from 2.5 million in 2008 to 4 million in 2010 and 5 million last year. It is expected to hit 5.5 million this year.

Shinsegae Simon operates a separate VIP system from Shinsegae Department Store, and 50 percent of its customers were those in their 30s as of July-October period, while 30 percent of them were in their 40s.

Each customer spent around 350,000 won on average. Around 40 percent of customers at suburban outlets were from Seoul, and 30 percent was from Gyeonggi.

Shinsegae said its VIP members control 20 percent of total sales at its discounted outlets. It expects this share to keep rising.

“Our moves to popularize the suburban shopping outlets seem to be successful. Now we will embark on strengthening our marketing strategies to lure young customers and increase the amount of customer transactions,” said an employee at Shinsegae Simon.

By Kim Jung-yoon [kjy@joongang.co.kr]