ht. When viewed from an international perspective, there certainly seems to be an undersupply of outlet space. The chart shows a measure of outlet leasable area per 100 inhabitants for various regions around the world. However the raw numbers are adjusted in a couple of important ways. First, they are converted by a factor that eliminates disposable income differentials across countries. Second, since international tourists are such a key component of the outlet customer segment, the outlet-space-per-100-inhabitants numbers are adjusted for international tourist flows. What you see is striking. Australia, though lying fourth after the US, Turkey and UAE, has roughly 35 per cent of the adjusted outlet retail space per 100 people. What are the arguments for more outlet centres, apart from the fact that shoppers seem to love them? Recent academic research in the US suggests that outlet shoppers may increase their spending at ‘full-priced’ stores. In the US, where factory outlet centres arguably originated, they have usually been located where they are both visible and accessible from major freeways. By distancing themselves from metropolitan areas, they have been able to take advantage of lower land costs, which flows through to rents and helps outlet retailers to offer high-quality merchandise at discounts of 30-70 per cent. There is another good reason too: retailers don’t want their outlet units too close to their full-priced ones. That, it was always thought, would lead to cannibalisation of mainstream store sales. A 2013 study conducted by Marietta, Georgia-based August Partners found that, on average, the US outlet shopper drove more than 45 minutes to a centre. They didn’t really want to drive that far though. They would much prefer to go to outlet centres closer to where to they lived, if only they existed. In Australia, outlet stores are closer to mainstream stores, but to this point there are too few outlet centres to really bother anyone. Now, apprehension on the part of retailers and brands that outlet stores are cannibals is beginning to ease, even in the US. A recent study by academic researchers in the US suggests that not only are cannibalisation fears overdone, but the interaction between outlet and full-priced stores might actually be a positive. Their findings suggest that cannibalisation is minimal and that mainstream stores actually benefit from a sales lift when outlet and mainstream stores are proximate. The study was authored by Gonca Soysal of University of Texas and Lakshman Krishnamurthi of Northwestern University, and is entitled:  How does adoption of the outlet channel impact customers’ spending in the retail stores: conflict or synergy?. The researchers’ dataset consisted of transactions at a specialty apparel chain with approximately 300 regional centre stores and 100 factory outlet stores. A key point is that the retailer avoided using its outlet stores as a clearance channel, as is commonly the case in Australia and Europe. All of its factory outlet merchandise was ‘made for outlet’, and it was an average of 50 per cent of the price of merchandise in its full-priced stores. The study found that customers who shop at both the outlet stores and the full-price stores spend nearly 10 per cent less in total across the two channels than customers who only shop the latter. But customers who visit factory outlet stores after shopping at the mainline stores actually increase their spending at the full-price stores substantially. The authors estimated a 43 per cent increased probability of shopping at the full-price store in any given month. The positive spending impact at the mainstream store amounts to an estimated 34 per cent increase. Far from impairing the brand, the retailer created clear differentiation between the outlet and mainstream channels. If this finding is generalisable, then made-for-outlet merchandise in the outlet channel facilitates greater proximity of outlet centres to mainstream centres. This is no less the case in Australia. US department store retailer Nordstrom is one retailer enthusiastic about the ability of off-price stores to lift sales at full-priced ones. Nordstrom has sometimes located its Nordstrom Rack units very close to Nordstrom mainstream stores, and one spokesperson for the company said that there was 60 per cent crossover in the customer base. For retail chains operating in outlet centers outside of the US, there remains a differentiation problem. They are still supporting their outlet stores by flowing product from their full-priced units. The made-for-outlet model is anything but the global norm and opening more outlet stores based on the old clearance model closer to mainstream stores may have a negative impact on the latter, in terms of both sales and brand perceptions. And that includes Australia, where room for new outlet centres may be limited by both by site availability and the ability of the tenants themselves to create a true differentiated shopping experience. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.