An examination of tenant evolution within the UK factory outlet channel

Purpose – The research paper examines the commercial evolution of retail tenants within the UK factory outlet sector. The research aims to identify the key characteristics of commercialisation and the resulting strategic positions occupied by tenants. Design/methodology/approach – The paucity of research surrounding the research objectives necessitated exploratory research based on 32 in‐depth interviews conducted with factory outlet tenants, managers and owners. Findings – The research presents four tenant segments used to analyse commercial evolution. Although many tenants are initially pushed into the channel to solve a physical stock problem they invariably increase their level of commercialisation as they apply the experience curve, economies of scale and opportunism. Ultimately, the key to commercialisation lies in the ability of a factory outlet tenant to make adjustments to their retail business model, through sales productivities and improved cost ratios. The single biggest adjustment lies in the potential of made for outlet merchandise which secures both product continuity and enhanced margin. Originality/value – The research provides a conceptual framework for evaluating the relevance of current factory outlet leasing and performance management programmes. Practical application of the framework will require a correlation to be established between the stages of commercialisation and actual sales performance across a wider sample of tenants. The finding provide possible stepping stones to further research within the sector, not least the evolutionary pattern of factory outlet tenants across Europe. The findings provoke many questions related to the role of outlets within a tenant's overall multi‐channel distribution strategy. The sophistication of certain tenants' outlet business models and the high level of integration across channel of distribution suggest factory outlet centres are becoming increasingly accepted as part of mainstream growth strategies.