Steven Tanger on Evolving the Outlets
Steven B. Tanger has his classic line: “In good times people love a bargain, and in tough times people need a bargain.”
“The quote is still true today — probably more so than when I said it 30 years ago,” Tanger said. He’s adamant about the relevance of Tanger Factory Outlet Centers Inc., and how it’s up to the challenges posed by rising online shopping and the pandemic.
“Our traffic is back to about 90 percent of where it was a year ago,” Tanger said in his measured and assured manner. “People probably are tired of dressing from the keyboard up and want to buy a new pair of shoes or a handbag. There’s tremendous pent up demand to go out to shop and the outlets offer a unique distribution channel where you can buy direct from the manufacturer, unlike other channels.”
Last month, Tanger transitioned to executive chair of the board of directors of Tanger Outlets, after serving as chief executive officer for 12 years and presiding over the company’s most aggressive growth period from 2009 to 2016, when 12 outlet centers were opened. Still, he’s kept the expansion in check — and managed conservatively — with a handful of property dispositions and joint ventures, and achieving consistent occupancy rates in the mid-90 percent range. He’s widely recognized as the standard bearer of the outlet industry.
“This is the next step in my journey at Tanger. It’s not retirement. I’ve been at the company for close for 37 years — the last 12 as CEO,” said the 71-year-old Tanger during an interview. “I have a contract to be the executive chairman for another three years and at that point I will discuss with the the board what my ongoing relationship will be.
“As executive chair, my job is to work with Steve Yalof, our new CEO, to help him as an adviser. Steve and I have been friends for over 30 years. We’ve worked side-byside for the past nine months, during the transition. Part of my job will be to work with Steve and the board, to free Steve up to focus on operating the business, and I will work together with Steve to make presentations and communicate to the board. The board and management approve strategic decisions,” such as last month’s decision to reinstate the dividend.
“Steve is developing a long-term strategic plan,” Tanger said, and leading efforts toward “a digital transformation of our marketing focus and transforming the company to a field-based operation where general managers and marketing directors act as individual ceos of the center. A holistic review of every department from leasing to IT is underway. It’s a broad-based overview,” Tanger said.
Tanger Factory Outlet Centers Inc. operates and owns or has an ownership interest in 37 outlet centers in 20 states and in Canada, totaling 13.7 million square feet. The company was founded in 1981 by Tanger’s father, the late Stanley Tanger, when he opened a cluster of factory outlets in a strip shopping center in Burlington, N.C. In 1984, Steven joined the company as its fourth employee. Steven assumed the CEO reins from his father in 2009, after a series of positions of escalating responsibilities over the years.
“The most memorable time of my career is the day my father and I stood on the floor of the New York Stock Exchange on May 29, 1993, and the first trade of our stock, with symbol SKT, crossed the tape. It was a lifetime dream to have a company we started listed on the stock exchange. To see that dream become a reality and share that with my father is something I will never forget.”
Tanger, a real estate investment trust based in Greensboro, N.C., remains the nation’s only publicly held, pure-play outlet center company. “Although it’s been tempting over the past 30 years to allow certain trends in, we have remained exclusively focused on brand-name outlets. We don’t sell cheap products or cheap prices. Our environment is open-air, customer-friendly and beautiful.
“Instinctively people feel safer in our centers. It’s been that way both before and after COVID-19. People want to be where there is lots of room to breath and fresh air. We remain comfortable with the business model and we have no intention to change it.”
Three years ago, Tanger told WWD that brick-and-mortar retailing would not be swallowed up by the internet, though it’s taken a big chunk out of it. Asked if he’s changed his outlook, he replied,
“Each has its place. It is easy to purchase commodities online and let’s be clear (at Tanger) we sell fashion items, with sizes, colors, and everybody has a different body shape and coloration. People like the tactile experience of feeling the fabric. We deal in the fashion end of online sales, with things that are discretionary, basically. We don’t sell commodities like paper towels, bottled water or wine, things that during the stay-at-home order and afterwards people have found very convenient to buy online.
“Brick-and-mortar stores have done all kinds of studies to show how much they help the finest brand names maintain their position in the market. People can start their fashion search online and come to a Tanger center for what they want and try it on. Then they know it fits. They know they like it, and can bring it right home with them.”
Nevertheless, he sees the Tanger portfolio evolving, embracing omnichannel capabilities and extending the scope of the product offerings in the outlets.
“During the mandated stay-at-home periods, we decided not to furlough or lay off any of our employees. We kept our centers open as best we could, but we put up a Tanger virtual shopping program where our customer service people in the centers went to the stores, shopped for customers, then shipped the items to them. That was a great bridge to keep Tanger involved with our millions of consumers while they were not leaving their homes. Now we are looking at that as part of our digital transformation program. It’s one of Steve’s strategic initiatives.
“We are looking at new and and exciting uses for parts of our properties. We’re talking to unique, smaller local grocers to enhance our presentation to consumers. We are talking to various beauty suppliers, home goods, jewelers, all different products we could sell to consumers that might not have previously been available in our apparelfocused outlet centers.”
Tanger also said some of the centers have excess land that could be developed into restaurants, ideally unique, local restaurants, not necessarily national chains. In Tanger Outlets Sevierville, in Tennessee, for example, “We opened a Smith Creek Moonshine tasting store. It’s those type of uses that make us unique.”
In addition, “We are working hard to develop programs to enhance our Tanger VIP loyalty program, to provide extra incentives and advantages to VIPS for coming to shop with us.
“Outlets started as a clearance vehicle for excess merchandise but due to the consumer loving to buy direct and loving the value, that excess was used up quickly,” Tanger said. “That led to brands manufacturing specifically for the outlets to maintain full assortments and discovering that the outlets often became the most profitable part of the brand’s business.” He added that the amount of clearance merchandise versus what’s made specifically for the outlet, varies greatly depending on the brand, anywhere from 5 to 95 percent.
Though the outlet product is less expensive and typically made with different fabrics, “the product produced is virtually all made in the same factories,” Tanger said. “The thing that does not change is the name and the label. The CEOs of every brand we work with tell me their number-one job is to protect and enhance their brand. They are not going to jeopardize their brand for any product in any distribution channel.”
He’s long maintained that the his outlets are not competing on price, though the lowest advertised prices are guaranteed. “We are selling brand name products direct to the consumers. We do not sell generic products at the cheapest price,” Tanger said. “It’s a unique experience, people like the fact we have anywhere in the range of 150 different brand names in each center. They’re open air centers and you can pull your car up very close to the brand name or designer store. Most of our properties go from New England down through Texas — there’s one outside of Phoenix — and most are in warmer climates, near resort communities, such as Tanger Riverhead, N.Y, on Long Island, which is the company’s second-largest center at 729,706 square feet, and among most productive. It draws a large Hamptons audience. Tanger Deer Park, also on Long Island, is the largest center in the portfolio with 749,074 square feet, and among the most productive Tanger properties. About half of the properties are in the 200,000 to 400,000-square-foot range.”
Tanger maintains “a shadow pipeline” of sites that could at some point be developed. “There are several sites in our shadow pipeline either underserved or do not have an outlet center,” Tanger said. “We have identified one in Nashville. At the right time we intend to develop that site. Nashville is a growing, exciting market.
“I believe outlets have an opportunity to continue to grow. We are a small percentage of the shopping center industry but a growing percentage.”
He’s continuing as executive chair and has passed the ceo baton on to Stephen Yalof, another veteran of the outlet business.