How Gen Z is keeping in-store retail alive: Tanger CEO

Despite living in a digital age, 97% of Gen Z continues to shop in brick-and-mortar stores, according to a survey by the International Council of Shopping Centers. Following Tanger Outlets (SKT) second quarter earnings results, CEO Stephen Yalof joins Wealth! to discuss the state of the consumer.

Yalof observes that the middle price point "is really attractive to the consumer," with brands like Gap (GPS), Old Navy, and Banana Republic performing well. However, higher-priced brands are "not having the same sort of day that these particular brands are." With inflation remaining high, quality and affordable brands are particularly appealing to consumers.

Despite the evolving digital landscape, Yalof notes that individuals still seek the traditional store experience. "I think that the consumer likes the idea of window shopping online, but actually making their purchases in store," he says, adding that it's far beyond just shopping—it's about eating and enjoying the overall experience as well.

Watch the video above to hear how Yalof describes how Tanger is adjusting its spaces to meet changing consumer demand.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Angel Smith

Video Transcript

Despite the rise of Shean Amazon and all the other online only retailers, 97% of Gen Z shop at brick and mortar stores according to the International Council of Shopping Centers and Tanger is seeing that reflected in its second quarter earnings report to discuss what the report says about the state of the consumer.

We've got Stephen Yalow, who is the Tanger CEO joining us here in.

Great to see you once again.

Thanks for having me back.

Absolutely.

Ok.

So what are we seeing in the, in the pulse of the consumer right now?

We've got continued economic data readings that are showing that there is a, a battle weary consumer right now as the conference board, uh chief economist Dana Peterson told us.

So where are you seeing strength versus some pockets of weakness that the consumer is weathering through?

Well, first of all that, that middle pocket of price point is really attractive to the consumer right now.

So uh embedded in that category, we see a lot of the the family apparel.

So you were talking about uh the Gen Z consumer that consumer is buying, they're going back to the gap, they're buying Banana Republic, Old Navy J Crew uh brands like that and those are the brands that we see popping in our space, higher price point items right now.

Um Yeah, they're not having the same sort of day that these particular brands are.

And then we talked about Nike and you know, Nike, you know, had a few consecutive quarters of, of struggle coming back in our space now in a big way.

So it's interesting to see the evolution of the brands, you know, in, in a very inflationary time price deflation, particularly in the outlets where prices, you know, you get great value all day is very attractive to that consumer.

This is a time of mass digital investment for these brands.

How do you go to these brands and say you still need to be in brick and mortar and what's the response from them?

You know, I think that the consumer likes the idea of window shopping online but actually by making their purchases in the store, particularly in the power categories and the footwear categories, there's commodity that you can buy online for sure and reorder.

But um a lot of that, you know, when you make a decision to, to buy a suit, you're wearing a, a great suit today, I'm sure keep up with you, but I'm sure you tried it on before you, you know, so you wanna go to the store, you wanna feel the material, you wanna try it on.

And I think a lot of the consumer really feels that way, particularly in the categories that we serve when you think about that shopping experience and, and how that's changed because the consumer is having that discovery moment that's online.

But then having the tangible, let me feel the material, let me see how it fits.

They're having that moment in brick and mortar and IRL, how do then you look at the success rate for these companies?

What are they gauging that experience or at least using as their barometer to say whether or not it was actually a success for those consumers.

Well, well, first of all, just if I took one quick step back, part of what we're doing as the, the developer, the owner of the shopping center, in order to um make our facilities that much more attractive for the consumer is, you know, we've recognized that the shoppers not just coming for the shopping experience, they're looking for other things to do when they're there.

They're looking for better places to eat is a great people.

That's the number one request we get as well.

We, you know, would be great if we had better, better restaurants and we're delivering better restaurants.

So from Shake Shack to um, Dallas BBQ, all these different brands that are coming in, whether they're sit down, they're quick serve the restaurants really find in the outlet space now because we're, we're catering more to a local uh customer than we ever did before.

We used to be so remote 20 years ago because of the the competition, the sensitivity, different wholesale channels.

Then.

Now what we're finding is we're, we're able to build our centers a little bit closer and, and we have the benefit of a local consumer, the local consumers looking for more amenities, more food, more entertainment.

And that's what we're delivering in our centers.

How is it reflecting the retailers are really responding because they understand you're not just a place where people are going to come and gather and shop.

This is a place that people can do other things there as well and may come and visit us far more frequently, stay longer when they get there.

And ultimately, the combination of those two, we, we see him spending more money because of my own experiences um going into Tanger outlets over the years.

I'm always fascinated and uh we typically are able to get an update from you on just what the most attractive real estate looks like for Tanger in this environment where you would like to build more out.

What, what is that pipeline look like?

Well, so we just built a shopping center in Nashville, which we opened up in October of last year.

And you know, if you take a look at the Nashville market, that is the perfect location.

It's under retail from a full price point of view.

Um We are 12 miles outside of the city, we're on a major interstate that connects a couple of major cities together.

So there's that tourist traffic that's coming into Nashville, we're accessible to downtown.

But more importantly, a lot of the population that you see happening in Nashville right now is happening in that southeast quarter where our shopping center is.

So the combination of great local catchment as well as a great tourist population with not a tremendous amount of competition in the marketplace for shopping.

Um We find that we're seeing a lot of that customer come to our center just lastly here, you mentioned more and better food options.

I mean, it is what is going to keep the customer within that premises for a longer period of time.

Did you, do you need, need to bring in more gyms or, or more grocery stores to make sure that people while they've already driven the car there or taken the Uber ride there that they're making the overall payoff for the trip?

Makes sense.

Well, that for sure and, and that's what we're seeing is, our customer is really looking for a number of reasons to come for us.

The best thing they can do is park their car once and then be able to service all of those different categories that you mentioned.

I give you a great example, Sephora and Alta.

Now here's a category uh health and beauty wellness that has not had a lot of traction or a lot of opportunity in, in the outlet space.

But now it's something that's, that's critically important.

Um, Sephora, the, the Sephora stores, uh, that we have five of them currently under construction.

We've got a number of altas in our portfolio.

The customers coming, they come far more frequently.

They, and they, um, and once I get the, the Ulta consumer car in my parking lot, that's a great business.

Business is a business.

Ulta brings other brands but it also brings a lot of consumers and those, those customers, oh, by the way, they've got a whole bunch of other places to shop, eat and be entertained while they're there.

All right.

I know the value of beauty, especially as a person who puts on makeup every day for the show.

Thank you so much for joining us.

Always great for having me, Steven Yala, who is the Tanger CEO joining us here on Yahoo Finance.