Malls move to capture sales lost to the Net

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The nation's two largest mall owners are taking steps to tap the shopping benefits of the Internet.

The moves by General Growth Properties and Simon Property Group are a long way from last holiday season, when an independent mall, the St. Louis Galleria, barred its retailers from even mentioning corporate e-commerce sites on the property.

"[Malls] are the world's largest physical portal," said Charlie Graves, senior VP of e-business at General Growth Properties, which has 136 shopping centers in 39 states. Mall operators must move beyond traditional services, such as trash and snow removal, he said. "In the future, we will start to offer technological amenities."

Simon Property Group Chief Technology Officer Bob Covington put it this way: "E-commerce in itself is a huge opportunity for more revenue."


While mall operators needn't concern themselves with their place in America's culture -- "Going to the mall is a culturally ingrained phenomenon," noted Lisa Strand, Internet analyst at Nielsen/

NetRatings -- mall operators are concerned about the harm Internet sales could do to their bottom line (See story on Page 46).

At the same time, the Internet's role in shopping is growing in other ways. A recent Jupiter Communications study concluded online consumers will spend $632 billion this year through offline channels as a result of research they've done online.

And in another merging of the Internet and the mall, QVC, which moved from cable sales to a strong Internet player with its iQVC division, this month opened a test store at the Mall of America outside Minneapolis. The [email protected] Mall shop will allow customers to see, touch and purchase QVC home, beauty and jewelry merchandise usually sold only over the Web or TV. Prospective customers are reluctant to purchase merchandise without touching it, executives said, and they are hopeful the store will assure people of product quality and eliminate that barrier. The store also will have kiosks connected to iQVC.


General Growth next month will announce a program to bring online pure plays into the physical malls. The move follows the launch this summer of, a General Growth Web site providing not just information about activities at local malls, but allowing customers to shop online for goods available at stores in the malls. Products ordered online can be picked up at the individual store, a drive-up or central pickup location inside.

This is not an new idea. Catalog shoppers at Sears, Roebuck & Co. used to be able to go to the local store's catalog counter to pick up orders. Today, however, catalog orders are shipped directly to purchasers. A Sears spokeswoman said online purchases also cannot be picked up at stores, but store pickup "is definitely in the plans." She said they are trying to iron out the kinks in the process. No date has been set for the launch.

General Growth's Mr. Graves said the new program will boost store sales by allowing shoppers to use their time at the mall to enjoy entertainment or browse for items they might want vs. chewing up time gathering the basics they need. About 50 retailers have signed up for the program, he said, including Abercrombie & Fitch, the Children's Place, Walt Disney Co.'s Disney Store and J.C. Penney Co.


The Web site and its e-commerce model allow General Growth to count e-commerce sales as part of its rental income, just as it would a sale made in the store. A customer using a computer in a Gap store to buy a product from would not have that sale tallied on the mall store's account, thus depriving the mall operator of rental fees based on store sales. Individual stores could benefit from the Mallibu model by quickly getting products into customers' hands and through reduced shipping costs.

The site, to be touted by signage at local malls, went live in late June with RiverTown Crossings in Grand Rapids, Mich., and will roll out to most General Growth malls by the 2001 back-to-school season.

General Growth also will provide stores with high-speed data lines for faster credit-card checks, employee training and even broadband service that would allow offsite merchandise mangers to watch customer behavior in stores. That would help them determine, for example, whether a sale rack distracts people from looking at more expensive featured items, he said.


Simon, with 255 properties in 36 states, meanwhile, is trying to take advantage of popular Web gift registries with its teen site FastFrog ( Teens, who are testing the program in Atlanta and Buford, Ga., roam the mall and scan in bar codes of products they want. Parents or friends can buy the gifts online.

Another service, in test at the Lennox Square mall in Atlanta,, allows shoppers to use a handheld device to place their purchases electronically, and then pay for and pick them up at a central location. It was not known if the handheld devices at some point will carry advertising.

But Simon takes its biggest online plunge later this year with a service allowing mall store orders to be placed via cell phones or wireless devices.

The Web's convenience is also making mall owners rethink their physical layouts. General Growth, in a move away from typical mall layout, has clustered some rival stores to make it easier for, say, moms to shop for kids clothing and toys. Others are improving mall maps and removing obstacles that prevent customers from easily spotting stores.

Another mall owner, Chelsea GCA Realty, has opened a separate unit to offer e-commerce back-office services to several brands including Liz Claiborne Inc.'s Elisabeth site.

Mall operators needn't fear the Web, said John Konarski, senior VP-International Association of Shopping Centers. "Brick-and-mortar retailers really are in the best position to capitalize on Web technology. After all, they already have successful businesses going.'

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