The True "Mall of America"
Simon Property Group controls somewhere in the neighborhood of 40% of the mall space in America. They have the foot traffic. Now they want the click traffic. SPG and their partner(s) will become a major player because they are the physical portal to shopping and can provide this physical support and existing marketing to create a controlling virtual shopping portal.
I have started the following thread to track SPGs and their partners advance into this area:
techstocks.com
Here is an article discussing SPGs high level plan.
snap.com
Simon Property Looking to Form Venture With 'E-Commerce' Group
Bloomberg News
Feb 26 1999 11:08AM ET
Simon Property Looking to Form Venture With 'E-Commerce' Group
Indianapolis, Feb. 26 (Bloomberg) -- Simon Property Group Inc., the largest U.S. owner of shopping malls, said it's in talks to form a venture with an ''established e-commerce player,'' an acknowledgment that Internet sales are having on impact on the mall and retailing industries.
Some fear the Internet could eventually make the shopping mall obsolete. Online sales tripled in 1998, and could triple again over the next three years, according to recent studies. So far this year, the Bloomberg Mall REIT Index is down 8.53 percent, almost double the average decline of all real estate investment trusts.
Indianapolis-based Simon, for its part, has been rapidly expanding its mall holdings, spending more than $7 billion on acquisitions in the last two years in a bid to gain more leverage over retailers. Company officials say they want to use the Internet as a marketing tool to keep people coming to their malls, or to have consumers buy goods directly from their tenants without leaving home.
''We are going to be at the forefront of creating the link between cyberspace and physical space,'' David Simon, chief executive, recently told investors and analysts on a conference call.
He even joked of changing the name of the company to ''Simon Portal Group Inc.,'' a reference to Web portals. Company officials said they are in the early stages of looking for a partner and that any announcement is ''a few months away.''
Simon owns or manages 243 malls and community shopping centers with about 180 million square feet of space, bigger than its four nearest competitors combined. Its properties include the Forum Shops at Caesars in Las Vegas, Dadeland Mall in Miami and The Source in Westbury, Long Island.
The company yesterday agreed to buy 14 malls from New England Development Co. for $1.73 billion, making it the dominant mall owner in New England.
Marketing Malls
Simon in 1997 formed a unit called Simon Brand Ventures to market goods and services to shopping mall customers. The company estimates shoppers pay an estimated 2.3 billion visits to its properties each year.
One of its programs is called MallPerks, where shoppers can obtain gift certificates from retailers after spending a certain amount of money at a Simon mall. It also formed an alliance with Visa USA Inc. to market a credit card that shoppers can use to get gift certificates. And it has an alliance with Microsoft Corp. that allows consumers to use their home computers to buy goods from Simon malls. Simon officials said the planned Internet project would be different from and in addition to the Microsoft alliance.
In another initiative, earlier this week Simon said it plans to launch a national advertising ''branding'' campaign in an attempt to make its name and malls as recognizable to consumers as Marriott is in hotels or as Nike is in footwear.
Internet Threat
While sales over the Internet account for just an estimated 0.5 percent of total U.S. retail sales, more and more consumers are using this medium to buy goods and services.
The percentage of households shopping online rose to 10 percent last year from 7 percent in 1997, according to a survey by Ernst & Young LLP. Meanwhile, the percentage of retailers selling goods on the Web more than tripled to 39 percent from 12 percent in 1997.
That translated into online sales of about $8 billion in 1998, more than three times $2.4 billion in the previous year, according to Forrester Research Inc., a technology research firm in Cambridge, Massachusetts.
According to a study by Boston Consulting Group and shop.org, a non-profit organization that promotes online shopping, the market for goods and services offered on the Internet could triple over the next few years.
Moody's Investors Service Inc., in a recent report, said that a decline of just 7 percent in retail sales, about the same as in a moderate recession, can cut into retailer's profits by as much as 50 percent. That could make it harder for mall owners to raise rents.
''Just as some retailers might be ill-advised to ignore the Internet, so might some real-state owners,'' Moody's analyst Sally Gordon said in the report. ''Changes in lease structures and tenant profiles may be called for in the future to keep properties viable.''
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