What Tanger’s partnership with Fillogic means for retailers, consumers and landlords

Tanger Outlets has become the latest major retail property owner to strike a deal with startup Fillogic. The deal puts last-mile ecommerce logistics centers at Tanger’s properties. Fillogic, a logistics-as-a-service platform for retail, has opened its first “tech-enabled micro-distribution hub” at a Tanger property, this one in Deer Park, New York, on Long Island.

Fillogic, founded in 2018 by a retail logistics veteran and an e-commerce entrepreneur, aims to simplify e-commerce fulfillment for retailers, shoppers and carriers. The company picks up and consolidates online orders at stores and prepares them for shipping. Fillogic also processes returns and arranges shipping for shoppers. The company prefers to locate in malls and large open-air centers due to the density of stores, and Macerich, Simon and Taubman, which Simon recently acquired, also have signed up with Fillogic. This year, Fillogic raised $2.5 million in a seed funding round and plans to expand beyond its base of operations in the Northeast into the Mid-Atlantic and Southwest.

SCT contributing editor Joe Gose spoke with Tanger vice president of leasing Bibbit Mason.

How do shopping center owners benefit from a logistics user?

Fillogic provides a service for retailers and shoppers in virtually any space in the center, which allows landlords to fill vacant boxes or hard-to-lease space. The pandemic proved to be the perfect use-case for e-commerce fulfillment from the store, and providing a fulfillment partner onsite is one way landlords can utilize their real estate to create the infrastructure for a more efficient, omnichannel ecosystem, both at their properties and the markets in which they operate.

A retailer’s brick-and-mortar portfolio provides additional value to their overall ecosystem as a network of microfulfillment and distribution centers. If it were not for the positioning of these stores and the real estate they occupy, the speed with which they could deliver products to customers and the ability to competitively meet the demand would not be possible. When the store’s value to the overall fulfillment network increases because of its location and the efficiency that Fillogic brings, the value of that store to the retailer increases. In turn, that increases the value of the real estate as a whole.

How does the process work for retailers? Do they need to contract with Fillogic, or is the service available to them by virtue of tenancy?

The service is available to all retailers at the property. If retailer X has 50 outgoing orders for the day, they open the Fillogic app and schedule a pickup. The benefit to retailers is aggregation; the more retailers participate, the better the rates get. And instead of a shipper making 50 different stops at a shopping center, they are making one consolidated pickup at the Fillogic hub. That time saved is worth money to the carriers, and thus the rate improves for the retailers.

Are the logistic services available only to the shops in the property in which Fillogic is located, or can Fillogic work with stores in the immediate vicinity?

The aggregation for the parcel carriers is not limited to just the fulfillment occurring at the shopping center. Retailers within the vicinity are fair game, as well. Fillogic not only aggregates outgoing shipments for stores, but it also forward-stages inventory for retailers. That ability to warehouse products much closer to end customers allows retailers to offer same-day delivery, giving them a competitive advantage in the market.

How are leases structured? Is there a component of the lease rate that’s based on Fillogic’s volume? If so, is this a method for landlords to share in online sales for percentage rent purposes?

Landlords are not party to the agreement between Fillogic and the retailers and therefore not privy to the specifics of the volume running through the centers. But it is correct that leases historically have not attributed product fulfilled from a retailer’s premises to gross sales for the purposes of reporting sales and paying percentage rent. This topic is probably among the hottest points of debate and contention between landlords and retailers today given acceleration of e-commerce adoption brought on by the pandemic. The industry is transitioning and has not yet adopted updated metrics for the definition of a successful store. This is the first step in creating an efficient omnichannel ecosystem to enable our retail partners to maximize their asset — the store — and then start to change the conversation.

Does Tanger Outlets have plans to expand the partnerships beyond Deer Park?

Deer Park is a pilot for what we believe could lead to additional Fillogic hubs and services throughout our portfolio. Fillogic’s business model, logistics-as-a-service, can power other programs, services and amenities that we may look to add as we continue to evolve.