Are outlet centers ready to resume growth?

Discussion
Rendering: Tanger Outlets
Jul 11, 2022

Tanger Outlets and Simon Property Group have both recently renewed investments in building outlet centers as inflation has consumers on the hunt for savings.

Tanger in March broke ground on a new development, a 290,000-square-foot center that will represent Nashville’s first open-air outlet shopping center. It is the first such development for the company in six years.

“Tanger Outlets Nashville will serve as an experience hub, immersing guests in all that Tanger represents — from best-in-class brands to partnerships with local causes, to celebrating community and culture in an inviting environment,” said Stephen Yalof, Tanger’s CEO, in a statement. “The center will also be steeped in Nashville flavor, with special attention to iconic entertainment and local dining favorites.”

Simon, in June, announced it was beginning construction on a Nashville outlet in 2023, resuming outlet projects in Los Angeles and Tulsa and expanding its New York State flagship, Woodbury Commons.

Traffic to outlet malls has reportedly recovered after being affected by a significant drop-off in tourist dollars during the earlier stages of the pandemic. Travel restrictions for most foreign tourists were only lifted in November 2021.

Outlet centers still face pre-pandemic challenges, including an over-reliance on apparel tenants. Adding more digitally-native and international retailers is supporting diversification efforts. Like shopping malls, developers are adding more experiential and dining concepts to drive foot traffic.

Although still offering a place to periodically clear older inventory, outlet malls are increasingly being relied on to drive customer acquisition and increase brand awareness.

In announcing plans last week to open Athleta’s first two outlet stores, Mary Beth Laughton, Athleta’s CEO, said in a statement, “Athleta is investing in new access points to reach new customers, deliver new value to customers who already know and love our brand, and expand our community of empowered women and girls.”

Escalating gas prices could create headwinds in the near term. Speaking to Wealth Management Real Estate, however, Tanger’s Mr. Yalof said he believes discount shoppers are more impacted by inflation. He said outlet center shoppers are “discerning, aspirational and looking to get the brands they love at a great everyday value.”

DISCUSSION QUESTIONS: What’s your outlook for outlet centers? What changes may be necessary to make outlet properties more appealing for brand tenants?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Though heightened price-sensitivity is a large draw for outlet centers, I think the trend back towards mall culture and experiential shopping is also extremely relevant."
"...overall the discretionary goods market will continue to be depressed until we have clarity around recession-fears that are looming."
"The demand for outlet stores will only grow in the next few years due to a confluence of causes."

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23 Comments on "Are outlet centers ready to resume growth?"


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Mark Ryski
BrainTrust

Outlet centers have the opportunity to out-perform. The investments being made in outlets are not wasted as consumers visit these centers to shop and enjoy experiences. Notwithstanding the current economic climate, I believe the broader attractions offered by some outlet centers make them more attractive alternatives to going to traditional malls and other places to shop.

Neil Saunders
BrainTrust

Outlet centers took a hit during the pandemic – partly because people were not buying as much branded apparel which is a big part of the offer. However they came back strongly in 2021 and have continued to grow in 2022. The value skew of the offer and the fact there are a lot of bargains on offer means they are appealing to those seeking value. For some consumers they are also a morning/afternoon outing that is combined with lunch or drinks and snacks. Overall, the demand is there although growth often comes by taking some share away from other retail centers.

Bob Amster
BrainTrust

I am not at all certain that it is wise to grow the number of outlet centers. It may be more prudent to grow the volume of the existing centers. We were overstored for twenty or more years and then there were massive retail closings. Let’s not forget that too quickly.

Melissa Minkow
BrainTrust

Though heightened price-sensitivity is a large draw for outlet centers, I think the trend back towards mall culture and experiential shopping is also extremely relevant. Consumers are looking to retailers to provide destinations for engagement, and outlet centers could be that.

Liza Amlani
BrainTrust

Outlet centers are ready to resume growth but they need to offer consumers more than just shopping. Like a shopping mall, outlets will require more than just stores to keep consumers coming back.

Experiences, entertainment, events and dining will give consumers a reason to keep coming back. The treasure hunter will continue to look for deals and a new price sensitive shopper will find solace in the outlets as they feel the impact of inflation on their spending.

Dave Wendland
BrainTrust

As the U.S. economy continues to sputter with no immediate signs of relief, off-price retail and outlet shopping will remain in favor. Such retailers attract customers with lower prices, the promise of a treasure hunt, or both.

Despite current challenges such as record-high gas prices, Coronavirus Omicron variants, and continued supply chain challenges, I suspect outlet centers to grow. Improving the overall experience is paramount, however. Here are three areas I believe outlets should focus on: 1.) Diversification of stores/formats (attract all age groups and interests); 2.) Appearance of centers and more use-of-space options (to get shoppers to linger longer); and 3.) curbside pick-up and buy-online options (omnichannel must be addressed).

Jenn McMillen
BrainTrust

Consumers hear “outlet” and are primed to think “deals.” As long as outlets exist people will flock to them, since shopping has become one of our national pastimes.

Gene Detroyer
BrainTrust

Many also think lower prices on prime products, which outlet centers haven’t had in years.

Carol Spieckerman
BrainTrust

Even though today’s environment presents challenges, it’s a good time to make an outlet push from a build-for-the-future perspective. Just as retailers are returning attention to brick-and-mortar and the digital rethinking of physical retail, mall operators must think ahead to what’s next. In addition to the potential to create immersive, tech-enabled experiences, I’m watching Simon’s hookup with Authentic Brands (SPARC) with occasional appearances by Brookfield. As outlet centers regain momentum, more brands in the SPARC portfolio (including future acquisitions) will have an instant home. Will the new centers be populated with ready-made brands?

DeAnn Campbell
BrainTrust

The demand for outlet stores will only grow in the next few years due to a confluence of causes. Supply chain challenges and stocking missteps have resulted in an increase in excess or unwanted inventory that brands benefit from getting out of their full priced store environments as quickly as possible. In addition, more direct-to-consumer companies are realizing the folly of the online-only business model and looking to grow more wholesale and partnerships, which are often ideally suited for outlet environments.

Cathy Hotka
BrainTrust

Outlet centers can resonate with consumers IF they take cues from TJX and lead with visual merchandising. Romancing the product can be very effective.

Dave Wendland
BrainTrust

“Romancing the product.” Love this, Cathy!

Rich Kizer
BrainTrust

It’s like revving up the motor. Anything we can do to get consumers to think of shopping as entertainment, like they did pre-pandemic, will help form new habits and determine how they see and feel about what is “more normal.”

Lisa Goller
BrainTrust

Our shifting pandemic habits fuelled demand for outlet centers. Outlet centers’ compact design and curbside service offer superior speed and convenience compared to malls. As more consumers work from home, neighborhood outlet centers blend into our lifestyles.

Intimate design, localized tenants and mixed-use spaces make outlet properties more appealing for brand tenants. High-frequency venues like gyms or grocery stores could drive consistent foot traffic to these properties.

Dave Wendland
BrainTrust

Once again, Lisa, we are definitely like-minded. Your ideas around intimate design with mixed use spaces (e.g., gyms, grocery stores, etc.) are great suggestions.

Scott Norris
Guest

Localization is essential! I was in Long Beach for a convention last month – the outlet mall across from the C.C. and waterfront may have been a good idea five or 10 years ago but should be upcycled with amenities better suited to the influx of tourism as well as the boom in walking-distance residential. A mini-Target, CVS, swimwear store, and cookware store would be ideal adds there, for instance.

Nicola Kinsella
BrainTrust

The key thing is experiences. That means a curated list of tenants that includes alternative entertainment options is essential. It will be interesting to see if there are more arcades, VR experiences, escape rooms, mini golf courses, spa services, play areas, etc. in the future mall offerings. Also important is the breadth of dining options. From quick cheap eats, to longer meal experiences — and maybe more international themes, or the addition of locally focused/farm to table/microbrewery/winery options. Something to make it feel “different,” not boring, and cater to a wider range of shoppers.

There are far too many “just another outlet mall” locations. But a true experience destination will make the gas price to get there worthwhile for many. Excited to see what the future holds.

Shikha Jain
BrainTrust

In the current macro-environment of high inflation, consumers tend to trade down or look for value items to stretch their wallets. I think outlets will see somewhat of a spike similar to dollar stores and other value chains, but overall the discretionary goods market will continue to be depressed until we have clarity around recession-fears that are looming.

Craig Sundstrom
Guest

It can also be pointed out that outlet centers, being outdoor, rather than indoor facilities, have additional flexibility if (when?) another contagion should hit.

That having been said, I’m going with flat: store-based retail continues to lose share to online — at least in the long-term, if not specifically 2022 vs 2021 (or 2020) — and much of the attraction of outlet centers was their novelty … America seems to have perfected the art of doing something-to-death almost instantly.

Kai Clarke
BrainTrust

Outlet centers walk a delicate balance between malls and discount stores. To survive in today’s environment they need to offer a unique experiential community that is appealing to the value conscious consumer as well as one that draws on brand-name premium products and experiences. Each community is special and this needs to be a part of every outlet center, as today’s consumer becomes ever-more demanding and discerning.

Ricardo Belmar
BrainTrust

As consumers feel inflationary pressures, they will look for better deals on almost any product category. Outlet centers carry a value perception with most consumers that causes them to seek out these centers over traditional malls. While that does mean there is an opportunity for existing outlet centers to drive more foot traffic and increased sales, it’s not clear there is more success to be found by building more outlet centers. we often hear about how the U.S. is over stored, but I contend it’s more about where the existing stores are located than the total number of them. Many brands have too many stores within a reasonable distance of each other yet leave vast geographic areas underserved. It’s those underserved areas that may cry out for more outlet malls while denser areas likely don’t need “yet another mall”. Perhaps the opportunity is in converting older malls that are not getting any foot traffic and turning them into outlet centers instead!

Brian Delp
BrainTrust

Outlet centers were outpacing malls prior to the pandemic, so now with a shift back to normalcy it is reasonable that that trend would resume. However, the consumer now is not the same. They crave socialization, so creating community hubs versus just shopping centers is the key.

Gwendal Cobert
Guest
1 month 3 days ago

As far as Canada is concerned, we’ve seen traffic and sales bounce back much stronger in the outlets than in the malls. People want to be outside and find as much entertainment in the outlets than in the malls. Outlets are also cheaper to build and easier to convert, which makes them more “future-proof.”

wpDiscuz
Braintrust
"Though heightened price-sensitivity is a large draw for outlet centers, I think the trend back towards mall culture and experiential shopping is also extremely relevant."
"...overall the discretionary goods market will continue to be depressed until we have clarity around recession-fears that are looming."
"The demand for outlet stores will only grow in the next few years due to a confluence of causes."

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