Editor’s note – April 13, 2023: Senior Editor Dorothy Crouch conducted this interview on November 10, 2022.
Shopping center operators are facing a new call to action: Evolve and elevate your experiences or lose your customers forever. Tanger Outlets has responded to this message with urgency as it aims to engage and acquire a younger demographic of consumers.
“We’re pivoting away from being a real estate company and leaning into being an experience company,” said Stephen Yalof, CEO of Tanger Outlets in an interview with Retail TouchPoints.
These efforts are paying off steadily for consumers, retail partners and Tanger Outlets alike. Yalof shared in the company’s Q4 2022 earnings report that leasing occupancy grew 170 basis points year over year. In addition, total tenant sales increased 11.8% in the 2022 fiscal year compared to 2019, thanks to the changing mix of retailers in the comparable pool as well as retailer expansions that occurred during the year. Tanger Factory Outlet Centers, Inc. will announce its Q1 2023 earnings on April 28, 2023.
But the work is not done. Yalof explained that Tanger Outlets has a long-term vision, built around the experiences the company aims to create to drive traffic and foster long-term loyalty. “Rather than simply providing real estate, we curate the experience customers are going to enjoy and let them vote for what they want,” Yalof explained. “We engage, we listen, we execute. And we’re finding that customers want to stay longer because we’re creating a far more well-rounded experience for our customers.”
Yalof shared more insight into how Tanger Outlets has evolved and how it is using data and technology to support its focus on experience.
Retail TouchPoints (RTP): How do you believe the shopping center has evolved?
Stephen Yalof: The shopping center is becoming far more experiential and it’s becoming far more important to the community that it serves. It’s a community gathering place and, in turn, it’s the responsibility of the owner and programmer of that center to make sure that it has all of those things that keep the customer there, brings them in more frequently and encourages them to stay longer.
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RTP: How has this reality impacted Tanger Outlets specifically?
Yalof: Our vision statement is really pivoting from a real estate company to a customer experience company. Embedded in that is the next iteration of shopping experience centers. If you go back to what we looked like before COVID, it was a “power” shopping experience: you would move from one store to the next to find amazing bargains. Food and beverage options were basically a hot pretzel; that was the official snack food for outlet shopping. Our traditional customers, who we call our tribe, know this, and we’re trying not to change our concept completely to distance ourselves from our tribe. We market to them, we communicate with them, we reward them for their loyalty.
But we think that there’s a completely new customer, a younger customer, that we need to cultivate, and we started to see them during COVID.
RTP: How does this customer differ from your “tribe,” and how have you responded to their needs?
Yalof: We had an advantage because we have open-air shopping malls, which became gathering places and community centers. We used these spaces for people to stand up food drives, blood drives, COVID testing and even voter registration.
Now, we’re studying this much younger consumer. Tanger outlets are still community gathering spaces, but now people are looking for different amenities and experiences. The first thing we thought of was food and beverage because hot pretzels aren’t going to sustain a customer who’s coming for something more than shopping. That’s why we have more food and beverage options, more entertainment options and overall, more experiences.
RTP: Have you noticed increasing demand for omnichannel fulfillment following COVID, too?
Yalof: Yes, we’ve seen more customers jump in to shop with us because they’re a little bit nervous shopping indoors, while some people want to use curbside pickup. We’re setting up all of these new amenities so they’re available to our shoppers. These realities support our digital transformation, which we embarked on about four years ago.
That transformation was focused on how Tanger could become an omnichannel universe where customers could engage us either in the brick-and-mortar environment or online and have a similar experience regardless of their entry point. That involves providing more information to the customer and making that information readily available. If they’re interested in curbside pickup, how is that facilitated now? Individual brands will facilitate the transaction, but then we inform the destination for parking and pickup to make it seamless for the retailer and the customer to communicate on that front.
We retrofitted specific areas of our centers to create designated curbside areas, so it’s completely seamless for the shopper. In new spaces, there’s more room to try innovative things. With existing spaces, you need to retrofit without taking away that familiarity of the space. That loyalty is bred from familiarity so we ask how we can make those distinctions in the space.
RTP: You noted that more food and entertainment options are being incorporated into Tanger Outlets. But how are you diversifying your retail tenant mix?
Yalof: We’re now bringing direct-to-consumer brands into our shopping centers that have never been in the retail format before. These brands are finding our channel because it provides them with a great opportunity to use their excess inventory and keep their stores clean. But for us, there’s an opportunity because they draw in younger consumers.
RTP: And how are you using data and technology to drive traffic and engagement?
Yalof: One technology that I think is evolving quickly is cell phone technology that allows us to have a lot more information about customers’ locations. It can tell us that a customer came from this geography to our shopping center, spent this much time there, and we can even see via a heat map the path they traveled and the areas they dwelled in the longest. It’s amazing for us as asset managers.
This data helps us inform decision-making because it helps us understand where customers shop, how many stores they visit and how much time they spend in our centers. That dwell time is a critical metric for us. It also helps us allocate our expense dollars more effectively.
RTP: Overall, how are your investments in experiential impacting bottom-line results?
Yalof: The things that we’re executing towards are now coming to fruition. We wanted to raise occupancy by diversifying our mix and we’ve executed on that. We said that we wanted to get a younger customer to come shop with us by bringing in younger, relevant brands; we’re executing upon that. We said we wanted to monetize our peripheral land with more experiential and entertainment-type uses and we’re executing upon that. I think our execution is allowing us to return to our shareholders. That’s the most important point and all of the key data [from our results] represent that.
RTP: Can you share your longer-term vision is for Tanger Outlets, say three years down the road?
Yalof: We’re constantly thinking about our younger consumer and the evolution of the consumer. we’re out in the marketplace, looking for that inspiration every day, and the best way to do that is to be in the locations where things are starting to develop, where the innovators are. First you see art galleries, which have a tendency to spring up in these really cool areas. Then, what typically follows is food and beverage. Then all of a sudden, you have a little district and then retail comes in next. That’s why we’re paying attention to where the ground is moving in a lot of those geographies; where the cool is happening. That’s where we’re going for inspiration. Then we’re looking at sports stadiums because they’re pretty well aligned with our business. A year ago, we’d go to a sports stadium to watch a game. Now you go to a stadium because the food is really good, the environment is cleaner, there’s entertainment, there are TVs all over the place, there are VIP experiences for loyal fans. They’ve figured out how to keep 75,000 people occupied for three hours during a game week after week after week. We’re taking a lot of cues from those environments and sharing them across our enterprise.
