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In the 1970s and through most of the 1980s, mall construction boomed, with malls of 400,000 square feet or more growing at double digit rates in many years. Then the recession of the early 1990s hit, and mall construction scaled back to only about 2% per year. Forecasts now are for that rate to be about the same for the foreseeable future. “There’s just too much capacity out there now,” says PricewaterhouseCoopers’ Chief Economist Carl Steidtmann. “Productivity in existing space needs to generate profitability in order to promote investment.”
So, just as mall operators added megaplex movie theaters and a broad mix of dining options-from pizzerias to fine restaurants-to their mixes as a way to keep consumers coming to the malls, today they are trying to find ways to integrate the Internet into malls. The newest way to do this is to add e-commerce options to the mall shopping experience.
By no means is mall construction dead. The International Council of Shopping Centers, a trade group, reports developers are planning 35 regional and super-regional malls with over 41 million square from 2000 to 2002. Between 1997 and 1999, developers opened 29 new malls with a total of 33 million square feet. And the council’s research shows that shopping center developers are stretching the perception of what malls can be, mixing indoor and outdoor layouts, combining different types of retail tenants as well as focusing on outlet-oriented complexes and dining and entertainment.
Clearly the proliferation of online shopping has forced mall owners and operators to expand their retail coverage to the Internet in order to service retail clients who rent mall space and to keep the interested eye of today’s consumers. Mall operators as well as retail tenants today are adding kiosks to mall locations and are making sure they provide an online presence, whether it is for mall information or to allow shoppers to make online purchases. John Konarski, senior staff vice president of research of the shopping center trade group, says that with the increased interest in multichannel retail strategies, it’s now becoming more important than ever for retailers and their shopping center complexes to become involved with the Internet. “If you want to be a well-known retail firm you’ve got to have a presence online,” he says.
And the mall market is responding to this demand: Such major mall operators as Cinncinati-based Simon Properties and Chicago-based General Growth Properties, two of the biggest in the United States, have developed electronic commerce strategies that tie into the current retail theme of multichannel shopping.
Simon Properties Group, which operates or owns interest in 252 shopping centers, malls and mixed use properties, promotes its web strategy to consumers and retailers. It targets shoppers through its Simon.com web site. The ShopSimon.com home page promises “one click” access to “America’s best malls and American’s favorite stores,” gives visitors the option of being notified via e-mail of sales and other events at malls and provides a mall locator.
Simon also developed its Clixnmortar subsidiary to create e-commerce products and services. Created in late 1999, the firm spent 2000 testing two web-related retail products. MySherpa.com was developed for time-constrained shoppers who could scan items at the store, pay for them at a kiosk then have them shipped. For the teen market, Clixnmortar developed FastFrog.com, in which teens use a barcode scanner at the mall to record gifts they want. Parents can view the goods and make purchases via a web site. Both tests are over now and Clixnmortar is developing a hybrid product, although no plans are set for a rollout. The product under development is called Clixlist, which shoppers can use to make an electronic shopping list of items that they can review, revise or purchase.
General Growth Properties launched its Mallibu.com e-commerce initiative in mid-2000 to help its retailers gain an online presence as well as provide information on its mall retailers and locations. A similar effort called MallibuDirect is a joint effort between General Growth and IBM to create interactive media stations enabling mall shoppers to access web retailers at General Growth mall kiosks. The deal offers web retailers access to mall shoppers as well as giving web retailers a physical presence without having to build stores. Mallibu launched the program at malls in Dallas and Michigan with such online retailers as ehobbies.com and art.com.
Clearly, the Internet’s impact on real-world shopping is only starting. Even with online shopping growing strongly from quarter to quarter while retail sales are flattening, the Internet accounts for only 1% of retail sales. But it’s a trend that mall owners ignore at their peril. “Adding e-commerce to mall operations is an important industry trend,” Merritt says. “The ongoing challenge for all retailers is to have the right product, in the right place at the right time. If malls can add kiosks to get transactions from consumers who are shopping online or may find items they didn’t’ see in the stores then the more likely malls will be to keep their piece of the pie.”