Japan’s Gotemba Premium Outlets, in the shadow of Mt Fuji, is the latest example of a winning formula: huge shopping venues selling high-end brands in spectacular settings.
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Snuggled in a forest at the foot of Japan’s Mt Fuji, Gotemba Premium Outlets is in a location that is picturesque, to say the least. It’s a view that shoppers have been able to enjoy for more than 20 years, since the centre opened the first of its four phases. At the time of opening, it almost doubled the size of the largest existing outlet centre, and represented a tipping point for the factory outlet concept in Asia.
Since then it has added three more phases, the most recent of which opened with the pandemic in full flight. It has added nearly 17,000sqm and introduced 13 brands to Japan, maintaining the centre’s top ranking for store floor area. Only Mitsui Fudosan’s Mitsui Outlet Park Kisarazu, across Tokyo Bay from Yokohama, has more stores (310), but its store floor area is 15,000sqm less than Gotemba’s.
Gotemba is only a couple of hours by train from central Tokyo and has 7 million inhabitants living within a 90-minute drive. To boot, Mt Fuji and the national park in which it is situated are meccas for visitors from both Japan and abroad. It takes a great centre to do justice to the location alone, and Gotemba qualifies. Above all though, Gotemba and the genre of outlet centres to which it belongs represent a triumph of retail branding, and of operational and design excellence.
The centre is co-owned by Mitsubishi Estate and America’s Simon Property Group in a 60/40 joint venture, and falls under the umbrella of Simon’s Premium Outlets brand. Simon operates 69 of these Premium Outlets in the US and another 33 outside, nine of them in Japan – Gotemba was the first. Two more are on the way: Fukaya Hanazono, in Saitama, northwest of Tokyo, is due to open in the Northern Hemisphere autumn of 2022 and Kyoto Joyo will open near Osaka but currently has no fixed launch date.
The Premium Outlets in Japan have been a smashing success from the moment Gotemba flung open its doors. Simon’s outlet brand may have been perfected in America, but it found fertile ground to be seeded in the Land of the Rising Sun. So much so that Gotemba’s most recent expansion was opened confidently in the middle of the pandemic, bringing its store floor area to 61,000sqm and its store count to 290. Occupancy has consistently been near 100 per cent. The centre’s tenant lineup is a who’s who of high-end retail, featuring designers from all around the world.
Prior to Gotemba, Japan’s retail market was tightly regulated and the industry in bad shape. Government statistics show that at the time of Gotemba’s opening, retail sales in Japan had fallen for 42 consecutive months. The country had been in recession for a decade and the people of Japan had become inveterate savers. The reputation of Japan’s consumers for splashing cash on only the latest and greatest became somewhat dated; they were more receptive to a concept that allowed them to get more for less.
Gotemba Premium Outlets, then, was the right concept in the right place at the right time.
What are the competitive advantages that make Gotemba and other members of the Premium Outlets brand so successful? A number of factors are involved.
Taking their inspiration from the European town square, Gotemba and other Premium Outlets are open-air streetscapes with upscale building facades, street furniture and landscaping that shoppers find are pleasing to the eye and encourage long stays. Moreover, in 2020-21, open-air centres generally perceived as more Covid-19 safe by consumers, which was a factor in the relative outperformance of both village-style outlet centres and open-air lifestyle centres in the US.
While many factory outlet centres are distribution points for the remainders of low- to mid-end brands, Premium Outlets like Gotemba focus on upscale brands. The presence of discounted high-end brands provides consumers with an access point to luxury that may result in them becoming full-price customers later. Other than that, high-end brands situated in the less offputting milieu of a factory outlet store may entice shoppers who feel uncomfortable going into the full-price stores of the same brand. It gets them over the intimidation factor.
Retailers in the Premium Outlets are kept to a higher standard than in other outlet centres, in terms of store fitouts, showcasing, and service. This is serious retailing, not just a dump depot for stuff that didn’t sell somewhere else.
Higher-end brands are more inclined to distribute merchandise through Premium Outlets because they can maintain greater quality control over the way the merchandise is presented and sold, thus avoiding erosion of brand integrity. This lends itself to deeper and more complete assortments than in mid-market outlet centres.
Simon and its international partners, like Mitsubishi Estate, strive for scale to beat their rivals. Thus, three expansions at Gotemba. There is no question that scale in the outlet industry is a huge factor in competitiveness and even survival, as it has proven to be in other retail sectors.
Not surprising then that Gotemba caused so much excitement on opening day. The first two weeks of trading when the first phase opened, back in 2000, attracted as many visitors as the owners had expected for the full year. Hundreds of tour buses ferried shoppers to the centre and the Tomei Expressway, a key road on the approach to the centre, became so gridlocked that centre management had to openly discourage people from coming on weekends. On two occasions, even Gotemba’s sewage treatment system became overloaded.
Not all of the Premium Outlets in Asia have been successful from the get-go, though. In the very same month as Gotemba was opening its Phase 4 in June 2020, Simon opened another Premium Outlet in Bangkok, Thailand, in a joint venture with Siam Piwat, a premier Thai retailer and shopping centre operator. The timing for Siam Premium Outlets turned out to be a bit of a shocker, since the Thai border had closed to international tourists in early April and Thai outlet centres were far more vulnerable to being shut off from international tourists than their peers in Japan. With Chinese tourists not coming and tourism from Japan, Europe, and North America still very much at a low ebb, the new centre is still marking time. Its owners have an eye on the future though, and the track record for Premium Outlets suggests a happy ending for its first foray into Thailand.
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