Here’s how Tanger Outlets will win the fight against e-commerce

E-commerce has been a thorn in the side of physical retail for some time now, but leading mall operators have done a good job of adapting. And although he still has work to do, Tangier factory outlet centers (NYSE: SKT) could become a big winner, even in a world dominated by e-commerce. In this fool live clip, recorded August 17, Matt Frankel, real estate analyst at Millionacres, CFP, and editor Deidre Woollard discuss what Tangier has already done and what else he needs to do to get there.

Deidre Woollard: Do you have the impression that the points of sale are changing roles? You mentioned the brewery thing, I think one of the things Tangier doesn’t do as well, maybe Simon (NYSE: SPG), is the food and drink aspect. Do you think that’s a place where they can grow a little bit more, get a little smarter about it?

Matthieu Frankel: Yes. I don’t know the Tangier property from you, but I know the ones from me, it’s very like a mall food court. As for a place for pretzels, there is a place for cookies. I think there is a hamburger restaurant near me, but it doesn’t get any better than this. Simon has really done a great job developing his food and drink options. The Simon Mall near me has an upscale steakhouse. There is a Cheesecake Factory (NASDAQ: CAKE) in there. There are places you would go even if you didn’t really need to shop. This is really the key. It’s as if Tangier needs to put places in its malls, not just food, drink, but other non-commercial items that people will go to whether or not they need to shop. Then when they’re there, it’s an integrated source of foot traffic for their stores, which Simon has really understood better than any other retail REIT on the market, in my opinion.

Oldest boy : Sorry to say, we’re already heading into Black Friday. I feel like we’re probably going to have an interesting year, because last year e-commerce has grown a lot. As you and I have talked about, it’s still not as big as people think. It’s not even a quarter of all purchases, but people do more of their vacation shopping online. You don’t feel like it’s a success or a breakup for Tangier, but is it something to worry about if the delta variant lasts a little longer and we don’t get as much foot traffic?

Frankel: One thing Tangier did really well at the start of the pandemic is to start pivoting towards omnichannel retail. I don’t know if you remember our conversation, I think it was on Fool Live about a year ago when Tangier rolled out its virtual concierge thing.

Oldest boy : Yes.

Frankel: They maintain that. They already have this infrastructure in place to move away from traditional retail. They are seeing many more of their tenants using their stores as fulfillment venues in addition to mere outlets, which is a natural use of outlets. That’s cheap square footage compared to, say, retailing a mall, from a retail store. Difference (NYSE: GPS) pays much less for a point of sale than for a mall. This is why Gap is moving away from traditional shopping centers. It is cheaper in square feet. This gives retailers more options when it comes to expanding omnichannel. Tangier itself has done a very good job with this, so far during the pandemic. They have really shown that they can keep their business alive.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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