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By Will Noyes ’17 and Stephanie Deutsch ’18
Theatrical lighting, an abundant floral landscape and world-class luxury brands. Scott Malkin, the founder and chairman of Value Retail, is leading the way with a new type of experience in outlet shopping. In fact, you’ll never hear Malkin refer to these shopping centers as outlet malls; rather, they are distinct “villages” developed for a sophisticated and international clientele in mind. With eleven villages located on the border of major urban cities within Western Europe and China, Malkin has created what he calls an “oasis where you can embrace the joys of shopping.” At the Columbia Business School Real Estate Symposium, Malkin shared his thoughts on the future of retail and the trade-offs between efficiency and experience in a fireside chat with LeFrak Managing Director and Adjunct Professor, Camille Douglas.
As Douglas expressed in her introduction, Malkin is no newcomer to the world of luxury retail. Before Value Retail, Malkin developed and sold 2 Rodeo Drive, the ultimate trophy asset. Malkin credits this experience in helping him understand how to create an unparalleled street level retail destination catered to the desires of women. The brands that shoppers find on Rodeo Drive are the same ones that are featured in each village. Malkin approaches his relationship with each brand as an operational partner, and manages the villages like a hybrid between a department store and a high-end shopping center; but while department stores and traditional malls are struggling, Malkin’s business is thriving. The average village size is 250,000 square feet, and the sales at Bicester Village center were approximately $4,000 per square foot last year, which would appear to be the highest in the world. Instead of taking monthly rents from each of the tenants, Value Retail arranges a license agreement with each brand and receives a royalty on sales. To enhance the shopping experience, Value Retail takes an active approach in promoting the brands and training the staff to better connect with each visitor.
However, Malkin’s special ingredient to success is his ability to intertwine the best of hospitality with retail. Around 70% of visitors who shop in the retail villages in Western Europe are from outside the European Union. With that in mind, Malkin refers to each shopper as a guest, rather than simply a customer. Malkin is acutely aware that there is “something meaningful about purchases made while traveling.” He goes on to explain that “you remember how, why and where you received this gift.” Just like hoteliers, Malkin focuses on the need to “surprise and delight” each guest by evolving the shopping experience, but notes that “as expectations rise, so do the costs of trying to exceed those expectations.”
The challenge of creating an outstanding in-store retail experience has become more important than ever with the surge of online shopping. Instead of looking at this trend as a competition between brick and mortar and online, Malkin sees this as a consumer’s personal choice between efficiency and experience. Malkin imagines a not-too-distant future where 3D printers will allow consumers the ability to purchase and receive a product in the comfort of their own home – an example of a consumer choosing efficiency over experience. However, Malkin reminds the audience that “people are inherently social and want to be around each other” and while “technology is an enabler, it’s not the solution.”
Will Noyes ’17 double majored in finance and economics while at the University of Massachusetts. While there, he was also a member of Army ROTC and commissioned as a Signal Corps officer upon graduation. Over his military career, he lived and worked in South Korea, Savannah, Georgia and Wiesbaden, Germany. Throughout his time in the military, Will led teams that provided voice and data communications across platforms with multiple classification levels. In addition to being the VP of Finance he is also a member of the Military In Business Association and the MicroBrew Society. This summer Will was an intern at Equity Residential in their NYC office.
Stephanie Deutsch ’18 is a Los Angeles native and a first-year student focusing on real estate development and investment at Columbia Business School. After graduating from the Gallatin School of Individualized Study at New York University, Stephanie spent four years working in product development and global marketing within the Luxe division at L’Oréal. In addition to her role as the AVP of Alumni & Mentorship in the REA, Stephanie also serves on the board of the Hospitality and Tourism Association as the AVP of Events. Stephanie is an avid traveler and has visited six out of the seven continents, and hopes to combine her passion for hotels and real estate development.