This story is part of The Great Mall Overhaul, a joint Modern Retail and Glossy editorial series looking into all the ways the businesses underpinning malls have been upended.
With inflation-weary shoppers hunting for bargains and over-inventoried retailers looking to offload merchandise, it’s a promising time for outlet malls.
The lower-price, suburban, open-air sibling of indoor shopping centers has faced a bumpy road in recent years with fierce competition. That’s come from online sellers, a growing preference among many consumers for convenience over shopping-as-activity and a wave of store closures during the pandemic.
But as shoppers prepare for a holiday season rife with rising costs and little if any additional budget, it makes sense that more are venturing to discount meccas.
“In situations where your dollar doesn’t necessarily go as far, you want to find a way to make it go further,” says Ethan Chernofsky, vp of marketing of Placer.ai, a location analytics firm. “Outlets are a really great way to do that.”
While, according to Placer-ai, monthly visits to outlet malls were down 4.8% year-over-year in October, the gap has been closing by the week, Chernofsky said. That’s especially notable, given that, last year, retailers pushed hard to get shoppers in-store early in the season to head off supply chain problems, resulting in an October traffic bump. Visits are also trending upward from the summer, when high gas prices and financial uncertainty likely kept many would-be shoppers away. Consumer cost-cutting can be a boon for outlets, but that’s only true to a point.
Those that do make it out to New York’s Woodbury Common Premium Outlets, Delaware’s Tanger Seaside Outlets or one of the many other top centers around the country will likely find it well-stocked. Retailers of all stripes have been sounding warning bells about excess inventory this year, as overly optimistic sales forecasts (a hangover from the pandemic consumption boom) compounded ongoing issues with delayed shipments.
As a result, retail inventories in the second quarter of 2022 were up 31% over the year prior, according to a report from S&P Capital IQ and FTI Consulting.
Rather than slash prices in full-price stores and risk diluting their brands, many are clearing out that merchandise en masse through outlets. As Stephen Yalof, president and CEO of Tanger Factory Outlet Centers said in an earnings call earlier this month, “Our channel is doing exactly what these retailers are paying for: being promotional, clearing excess inventory and … serving a purpose to the entire omnichannel retail ecosystem.”
Of course, shoppers today have a world of options for accessing discounted high-end and mid-tier apparel that didn’t exist when outlet malls boomed in the 1990s. Resale sites, online marketplaces and off-price stores like Saks Off Fifth and Nordstrom Rack offer perennial deals with just a few taps to checkout.
Outlet operators, therefore, have to make a stronger case than in the past for getting in the car — or on a bus, as many still do to Woodbury Common from New York City. To do so, these companies are mirroring some of the same tactics that have been successful for Class-A indoor malls in recent years.
Just as those properties have moved toward a more diversified mix of tenants — with food halls, fitness centers and co-working spaces taking over spaces once occupied by JCPenney and Pier 1 — outlet malls are also branching out from traditional apparel and lifestyle stores.
At Leesburg Premium Outlets, owner Simon Property Group revamped the food pavilion and common spaces with lounge seating, children’s climbing structures, updated landscaping and an outdoor fire pit.
At Tanger Outlets Phoenix, the company is partnering with the NFL to host events and promotions around the nearby 2023 Super Bowl. Tanger is also mid-construction on a Nashville center due to open next year. Executives have touted the new categories it plans to introduce and the top national and local food options it will offer.
Elevating the holistic shopping experience may also ultimately help bring in more than just new customers, said Brandon Svec, national director of retail analytics at CoStar Group. A vanguard of digitally native brands has recently entered the outlet space. Among them are Allbirds, Summersalt and Mack Weldon.
“Outlet centers being able to transform themselves into more destination shopping centers and less outdated-merchandise centers has helped attract digitally native brands and make them think, ‘Ok, this is a location for me,’” Svec said.