TECHNOLOGY

The retailer with the best customer experience is…

BY Marianne Wilson

Consumers have spoken, and they have identified the retailers, supermarket chains and fast food restaurants that are tops (and bottom) in overall customer experience.

According to the 2016 Temkin Experience Ratings, an annual ranking of companies based on a survey of 10,000 U.S. consumers, True Value took the top spot with a rating of 78%, placing it third overall out of 294 companies across 20 industries.

Furthermore, out of the 46 retailers included in the Ratings, True Value was the only one to improve its score from last year. Amazon.com and O'Reilly Auto Parts tied for the second spot, each earning a rating of 76% and an overall rank of ninth. QVC and Dollar Tree also made it into the top 20 overall, as each received a rating of 75%, which put them both in 12thh place. At the other end of the spectrum, RadioShack was at the bottom of the list for the sixth straight year, earning a rating of 55% and an overall rank of 199th.

Overall, the retail industry averaged a 69% rating and came in third place out of 20 industries. The average rating of the retail industry decreased by five percentage-points between 2015 and 2016, dropping from 74% to 69%.

The top 11 retailers in the 2016 Temkin Experience Ratings are as follows: True Value (78%), Amazon.com (76%), O'Reilly Auto Parts (76%), QVC (75%), Dollar Tree (75%), Sam's Club (74%), Dollar General (74%), Lowe's (73%), PetSmart (72%), Michael's (72%), and BJ's Wholesale Club (72%).

The bottom 14 retailers are: RadioShack (55%), Gap (58%), Foot Locker (59%), Old Navy (60%), Kmart (62%), Macy's (62%), OfficeMax (63%), Marshalls (63%), GameStop (63%), Office Depot (64%), Wal-Mart (64%), Best Buy (64%), Toys 'R' Us (64%), and Sears (64%).

Bed Bath & Beyond (-15 points), Old Navy (- 12 points), Advance Auto Parts (-11 points), Costco (-11 points), OfficeMax (-11 points), and Marshalls (-11 points) declined by the most percentage-points between 2014 and 2015.

In addition, for 2016 supermarkets earned the three highest scores in the entire survey. Publix took the top spot for the second year in a row with a rating of 81%, putting it in first place out of the 294 companies across 20 industries. H-E-B came in second with a score of 79%, while Kroger and Save-a-Lot tied for third place, each with a score of 78% and a 3rd overall ranking.

Of the 20 supermarkets included in the Ratings, two more — Wegmans and Aldi — also made it into the top 10, ranking seventh and ninth respectively. At the other end of the spectrum, Vons spent its first year in the Ratings at the bottom of the industry with a score of 63% and a rank of 125th.

Among fast food chains, Chick-fil-A took the top spot for the fifth year in a row with a rating of 78%, tying it in third place overall. Subway, meanwhile, came in second with a rating of 75% and an overall ranking of 12th.

At the other end of the spectrum, McDonalds and Burger King tied as the lowest scoring fast food restaurants. Each received a rating of 65%, putting them in 100th place. Only three other fast food chains failed to earn at least a "good" rating: Baskin Robbins, KFC, and Domino's.

Overall, the fast-food industry averaged a 71% rating and placed second out of 20 industries. The average rating of the industry decreased by five percentage-points between 2015 and 2016, dropping from 76% to 71%.

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TECHNOLOGY

C-Suite: Steve Tanger on the outlook for outlet centers

BY Mike Troy

Tanger Factory Outlet Centers operates, owns or has an ownership interest in 42 shopping centers nationwide that encompass 14.3 million square feet. The company’s centers are home to more than 3,000 stores operated by 470 different retailers, which affords Tanger President and CEO Steve Tanger a unique vantage point on the retail industry. He spoke recently with Chain Store Age about the outlet shopping industry his father pioneered 35 years ago.

CSA: Congratulations on the 35th anniversary. The outlet shopping center industry looks a lot different than it did in 1981 when your father opened the first outlet center in North Carolina. What stands out for you?

ST: When we first started, the outlet stores were clearance stores. If there was excess or imperfect inventory, it went to the outlets. Over time, the excess inventory was sold and no one intended to produce excess inventory. Our tenants reached a punctuation point in time where they had to decide if they would establish outlet stores as a distribution channel and operating division or maintain as a clearance unit. Almost without exception our tenants decided that this was a real and huge business opportunity that they wanted to grow. When the outlets became a distribution channel, the manufacturers created retail stores that reflected the image of the brand. That’s the biggest difference [between then and now].

CSA: Talk a little about the concept of an outlet center and how you think the word “outlet” has evolved in the minds of the consumers over the past three decades, especially as the number of outlet centers has grown. When consumers hear the word “outlet,” what do you think they think?

ST: We were the pioneer in using the outlet term and I believe we were the first shopping center developer to brand its shopping centers as outlet centers. The business model that we helped create is that of an outlet center for outlet stores in which brand names sell direct to the consumer. You cut out the middleman and consumers understand that. The consumer buys direct from Polo as opposed to Polo selling to a department store and then the consumer buys from the department store; there is a profit in between, so inherently the consumer would pay more. The business model is simple and elegant and has had a long life cycle.

CSA: How do the off-price concepts developed by department stores factor into your tenant mix?

ST: We have mixed in with the branded outlets a few of the department store off-price stores. We have a couple of Saks Off 5th stores and one Neiman’s Last Call but we have no Bloomingdales, Lord & Taylor and no Nordstrom Rack stores. Somewhere between 90 and 95% of our stores are brands selling direct.

CSA: Should we expect to see more of the department store off-price concepts in Tanger centers going forward?

ST: Tanger will continue to adjust our tenant mix to meet customer demand and deliver on our commitment to creating an exceptional shopping experience when they shop Tanger.

CSA: What does your research tell you that shoppers like most about the outlet center concept versus other shopping venues?

ST: The ability to buy brand names direct from the manufacturer. It is a business model that has not been repeated and it is hard to repeat. We have survived and grown along with TJ Maxx, Walmart and Target and all the other hot retail success stories. We each have a particular role and people cross shop. Ours is a unique business model, not really a head-to-head competitor with mass merchants.

CSA: Does the concept of an outlet store run the risk of being diluted as more brands enter the space and retailers source goods specifically for outlet formats?

ST: I don’t think so. We do business with more than 400 of the finest brand and designer manufacturers in the world and any one of our centers has between 95 and 120 stores averaging about 3,500 square feet. We mix and match tenants depending on location and which retailers are growing their store counts and which ones are not. The fashion industry is constantly changing so some of the major tenants that we dealt with 10 years are no longer in existence. Liz Claiborne used to be in every one of our centers and now it’s a brand sold in one of the mass merchants. I could go down the list, but the point is that our top 10 tenants 10 years ago are dramatically different than our top 10 tenants today. More brands and retailers coming into the outlet centers does not dilute the concept, it keeps the concept fresh.

CSA: Tanger’s occupancy rates are at near record levels and that’s after adding four centers totaling 1.4 million square feet last year. On top of that, retailers are paying higher rents. This strong demand for physical space runs counter to the notion that physical retail is losing out to e-commerce. What’s causing this disconnect?

ST: There is a place for e-commerce with certain types of products such as commodities. E-commerce is more difficult in fashion and shoes where you are dealing with sizes and colors and different fits. The dirty little secret with apparel sold online is anywhere from 30% to 50% of it is returned. A lot of our tenants have an online presence for informational purposes because the first portal to a brand today is through a web site, but the outlet product is only sold on about 6% or 7% of our tenants’ sites, which is very low.

We are extremely profitable. The reason we can raise our rents and still have the lowest cost of occupancy for our tenants of anyone in our peer group is that the sales in Tanger centers go up. As sales go up, we work with our tenants to charge a fair rent and our tenants are also very profitable. It is a business model that should last for a long time.

CSA: And you’ve got two more centers coming online this year, Columbus, Ohio, in June and Daytona Beach, Florida, just ahead of the holidays. What makes these projects special as far as new features, amenities or service elements that facilitate retailers’ omnichannel efforts?

ST: With all of our projects we try to be unique in the marketplace. In Columbus and Daytona Beach there really are no outlet centers in those markets. We are a regional shopping destination, not a local shopping center. We bring people from 30 to 50 miles around.

CSA: What kind of interest are you seeing from online retailers who want to establish a physical presence?

ST: We are talking to several of them but most of them have no credit. Most who are trying to open brick and mortar are doing so because it allows them to know their customers better and it extends their brand. We will see how it evolves. We dealt with the catalog companies 30 years ago and omnichannel is a digital catalog. We worked with catalog companies 30 years ago to open their first outlet stores and now most have outlets stores and their catalogs have gone away.

CSA: Longer term, what’s the latest on the new outlet center that is part of the Champions Circle mixed-use development adjacent to Texas Motor Speedway?

ST: We are moving forward and have received terrific tenant response. We are not quite at our threshold of pre-leasing 60% of the space, but once we get to that level we will buy the property and start construction. We do not build anything on speculation.

CSA: Is there a projected opening date?

ST: Not yet. Once we close on the land and start construction we are happy to provide a projected date, but right now it would be just a guess.

CSA: Lastly, looking back over the past 35 years and how far the outlet center industry has come, with about 175 locations currently, is there a number where you start to think the U.S. has become saturated and how far away are we from it?

ST: Over the next 10 years I envision the outlet center industry will add another 75 or so. I think when we get to 250 centers we can reassess the growth outlook. Keep in mind, the average size of our centers is only 350,000 square feet. There is one billion square feet of regional mall space and right now there is, give or take, 70 million square feet of outlet center space. We’ve got a long way to go.

CSA: How many of those 75 new centers will be Tanger centers?

ST: That would be speculation, but I can tell you that Tanger is a growth company and stringently evaluates potentially underserved markets for development opportunities on an ongoing basis.

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TECHNOLOGY

Study: Mobile promotions pay dividends for retailers

BY CSA STAFF

Purchases from mobile devices continue to rise and upping ad spend is driving results for retailers.

According to data from Rakuten Marketing., purchases from smartphones that originated from a display ad on a computer increased by 52% between the third and fourth quarter of 2015. During that time tablet purchases that resulted from a display ad on a computer grew by 125%.

For the full year 2015, there was a 106% increase year-over-year revenue attributed to mobile campaigns. The beauty & personal care vertical benefited most with a 383% year-over-year increase. Average mobile campaign performance improved 283%. In comparison, social campaign performance rose 46%.

Other notable findings include:

  • The apparel & accessories vertical increased its spend on mobile campaigns by 609% between the first and fourth quarters of 2015, with 51% of that spend occurring in the fourth quarter.
  • Apparel & accessories brands benefited most from mobile campaigns, with an average 2,518% increase in year-over-year performance.
  • Beauty and personal care brands led social campaign performance with an average 54% year-over-year increase in results.
  • Advertisers doubled down on display marketing (retargeting and prospecting) on social networking platforms (Facebook and Instagram) where ad spend increased 100% during 2015.
  • For 2015 year-over-year revenue growth, Rakuten Marketing clients experienced 102% growth in same-store revenue attributed to display campaigns. This includes revenue from campaigns across devices, inventory sources and campaign strategies measured for same store clients across campaign types and key verticals including retail, consumer goods and auto.

Rakuten Marketing analyzed a year’s worth of data how its clients’ advertising campaigns performed in 2015.

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