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Developers learn to love the Internet

By Lucy Amaral

Who's afraid of the Internet? Not shopping center developers, many of whom are experimenting with on-line shopping.

Almost every developer has a Website, and many have sites for their individual shopping centers. Now they are taking a leap of faith and experimenting with various forms of on-line shopping services.

Simon DeBartolo Group, Indianapolis, and The Rouse Co., Columbia, Md., are partnering -- independently of each other -- with Smart AIM Corp., based in Goodrich, Mich., to offer customers a host of shopping services, as well as free Internet access.

Toronto-based Cambridge Shopping Centres is testing an on-line shopping program, and hopes to begin selling its tenants' merchandise over the Internet this summer. General Growth Properties, Chicago, also plans to have some of its mall stores trading electronically this year.

Simon has been testing its program at the 750,000-square-foot Laguna Hills Mall, Laguna Hills, Calif., where at presstime 3,000 people had signed up. Consumers who visit Smart AIM's interactive in-mall kiosk obtain a free CD-ROM, called the Smart Shopper Explorer, that gives them free Internet access via Simon's own server on their home or office computer.

Working through Microsoft's Internet Explorer 4.0 and with other Microsoft software, the computer's modem dials a local number and first connects the user to the mall's Website. Customers can order merchandise or obtain information about products, stores and retail promotions. They then can move elsewhere on the Internet at no cost. The idea is that every time a user goes on the Web, she first is taken to the shopping center site, which is updated daily, according to officials.

On-line shopping sites also give developers and retailers valuable information about Internet surfers' interests and buying habits, officials say.

"[This project] is about creating a marketing vehicle for our tenants and making connections between consumers and tenants," said Andrew R. Halliday, co-president of Simon Brand Ventures (SBV), a Simon subsidiary launched last year to maximize marketing opportunities for the firm's projects.

An Internet order is transferred either to a retail store's fax machine or, if available, to its computerized point-of-sale system. A delivery service also gets a copy of the order, and delivers the merchandise to the customer.

Simon, which owns or has an interest in more than 200 properties in 33 states, launched the Laguna Hills Mall program in 1997. Besides signing up on-line customers, the kiosk has been selling 10,000 store coupons a month, according to Gary Eberhard, vice president of operations at Smart Aim.

Simon DeBartolo planned to add Smart AIM kiosks in five malls during the first quarter of 1998, and is opening approximately 100 more over the next 18 months, Mr. Halliday said.

The Rouse Co. has Smart AIM kiosks at the 876,000-square-foot Mall at Columbia (Md.), and the 570,000-square-foot Santa Monica (Calif.) Place. The company plans to have an additional 50 shopping centers hooked up to the Smart AIM program by the end of this year, said David L. Tripp, Rouse vice president and director, investor relations.

General Growth, which has ownership interests in 68 retail shopping centers, and manages an additional 52 malls for other owners, is in "serious negotiations with a company to develop an on-line service for our shopping centers," said Marc A. Moffit, director of business development. "Our goal is to have Internet shopping available by the second quarter of 1998."

Cambridge Shopping Centres, which owns and manages 35 regional shopping centers and 10 downtown or community shopping centers across Canada, says it will be one of the first developers in Canada to offer on-line commerce, starting with its Oakville Place regional center Website
(www.oakvilleplace.com) as a test market.

"We first offered gift certificates as of February 1998," said Simon Pym, vice president of information systems. "By the end of June, we will be in position to offer the tenant the ability to sell goods on line."

Almost since the Internet's inception, myriad versions of "cybermalls" have been created to tempt the on-line surfer. For a variety of reasons, many have failed. Nevertheless, there is potential for huge success in on-line shopping, according to International Data Corporation (IDC), a Framingham, Mass.-based provider of information technology analysis and consultation services. IDC claims that electronic commerce is projected to grow from $2.6 billion in 1996 to more than $220 billion in 2001.

But what form will most of this commerce take?

Some merchandise lines, such as books, music and computers, appear to be a comfortable match for on-line commerce. But for other items, Internet commerce is a tricky venture at best. For fashion shopping, many are reluctant to pass up the entertainment value of browsing around a real store, observers say.

Nevertheless, some experts are enthusiastic about shopping centers expanding onto the Internet.

"The concept of shopping centers being on line is fantastic. It lets the consumer know they are there. Right now, however, no one has a firm grasp of the degree to which consumers will embrace the Internet," said Michael Nicklin, an independent retail trend analyst specializing in new media.

"Everyone realizes that the Internet is a very viable communication channel with the consumer, but the experimentation lies in how to use it," Mr. Nicklin said.

Why would a brick-and-mortar shopping center do any better on the Web than any of the short-lived cybermalls, such as IBM's much-hyped and now-defunct World Avenue?

"Name recognition," said Mr. Moffit of General Growth. "People also have more confidence if it is linked to a shopping center. It eliminates the reluctance of a purchase. If people want to return a purchase, they can go to the mall."

Most major retailers have individual Websites that can be easily accessed. Simon Brand Venture's Mr. Halliday sees a shopping center site as an opportunity for the small chain or individual shop owner to gain additional marketing exposure.

But Mr. Nicklin is cautious of shopping center owners trying to make money directly from the Web.

"Websites give them a global presence. It's a communication channel with customers," he said, but not a "money generator."

Cambridge is not trying to make money directly, Mr. Pym responded, explaining that owners will benefit indirectly from any additional sales generated by an Internet presence .

"We don't see ourselves as retailers," he said. "We see the Website as a benefit to our retailers because it expands their trade market. How the retailer markets his goods and designs his (Website) store front, we leave that to the retailer. We are viewing this as a service to the tenant."

Mr. Pym explained the Internet site's database would contain information on Website users' purchases that could be made available to retailers.

Simon Brand's Mr. Halliday concurred that, by helping retailers, the Internet sites automatically will benefit landlords.

"The landlord does have, in almost every instance, a percentage-rent provision," he added. "And retailer's incremental additional sales (over the Internet) means additional rent for us."

Putting malls on the Web also should enhance the reputation of their marketing departments.

"Mall retailers had less than the greatest respect for marketing efforts done by the mall," Mr. Halliday said. "Our mission is to improve our performance on behalf of the mall retailer, including the development of new technologies and new ways of bringing consumers to our tenants."