Aug. 3 (Bloomberg) -- The world’s largest mall owners are harnessing digital technology to stem an erosion in their tenant base by online retailing and keep shoppers coming.
London-based Hammerson Plc plans to use software that tracks visitors to its malls using the signal from their mobile phones. Australia’s Westfield Group Ltd. has set up a virtual mall and landlords Simon Property Group Inc. of Indianapolis and Paris-based Unibail-Rodamco SE, are encouraging shoppers to add new and more sophisticated smartphone applications.
“The big beasts of the jungle are showing that they are alive, ready and willing to embrace these trends,” said Joshua Bamfield, director of Newark, England-based Centre for Retail Research. For some town-center shopping streets and smaller retail centers, “it’s another nail in the coffin.”
Online shopping is helping retailers reach their customers with fewer stores, making them pickier about the amount of space they lease and where shops are located. Mall landlords, seeking to grow rental income and raise property values, are using technology to attract more visitors and track the habits and movements of shoppers to better meet the needs of their increasingly selective tenants.
Global spending online rose more than fourfold to 591 billion euros ($855 billion) in the decade through 2010, trade organization Interactive Media in Retail Group said. Forrester Research Inc., a technology and market research company, predicts internet retail sales will increase by at least 10 percent annually through 2015 in Western Europe and the U.S., with even faster growth in the Asia-Pacific region.
New mobile technology won’t necessarily give big malls an insurmountable advantage, said Patrik Karrberg, a researcher at the London School of Economics’ Information Systems Innovation Group.
“These applications are pretty simple to create” and have allowed independent artists in music and entertainment to compete successfully using social media, he said. Similarly, independent retailers can drive sales by signing up to services like Groupon Inc.’s online coupon program.
The rise of web shopping means that going to a store will become a leisure activity or a quick visit for a last-minute purchase, Gerard Groener, chief executive officer of Corio NV, said in an interview. That’s pushing landlords to make malls more compelling or closer to transportation hubs, he said.
Corio, the Netherlands-based owner of 45 malls in six countries, plans to create a club membership with smartphone applications to compile a database of consumer spending that it may go on to sell as a service, Groener said in an interview.
Retailers need about 90 stores to sell to half of Britain’s population today, compared with 200 in 1971, said Jonathan de Mello, head of European retail at CB Richard Ellis Group Inc. The growth in online retailing may polarize the U.K. retail market further, he said.
Collecting information on customers’ shopping habits helps mall landlords decide where to locate retailers to create mutually beneficial clusters of tenants. That’s prompted Hammerson to test software developed by Path Intelligence to track visitors’ movements around a mall using the signal from their mobile phones.
“There is nothing ‘Big Brother’ about this,” Lawrence Hutchings, Hammerson’s managing director in charge of retail, said in an interview. “It has nothing to do with personal data. It’s just the signal.”
Retailers are focusing on the busiest and most convenient locations as they rely on the internet more. Hollister, a brand of Abercrombie & Fitch Inc., began its expansion outside North America in the U.K. in 2008 and has since opened 19 outlets only in the largest regional malls across the country backed by a website.
Mall landlords are using technology to extend their advantage over town-center shopping streets and smaller retail centers, where rising vacancies are pushing down rents and property values.
Unibail-Rodamco, Europe’s largest mall owner, said tenants at its 88 centers saw a 4.2 percent increase in first-half sales from a year earlier. By contrast, overall retail sales increased less than 1 percent across the nine countries where it operates and the gap has been widening since 2009, even as consumer spending is under pressure.
“When the water’s rising, the high ground is where retailers want to be,” said Peter van Rossum, the company’s chief financial officer. Unibail-Rodamco reported a 5.5 percent increase in net rental income and said its properties appreciated by 304 million euros, or 2.4 percent, in the first half.
Swire Properties Ltd., the biggest commercial landlord in eastern Hong Kong Island, says it uses quizzes, photo competitions and videos on social network websites Facebook and Twitter to attract visitors to themed events and promotions at malls including Pacific Place.
“It’s far more effective than fliers through a door,” said Tony Brown, chief executive officer of Lend Lease Investment Management, which owns stakes in four British malls.
Mall of America, Triple Five Group’s 520-shop center in Bloomington, Minnesota, has more than 270,000 followers on Facebook, the highest for a shopping location in the world.
Smartphones are key to digital innovations at shopping malls. Applications can guide a visitor to a shopping center, locate a vacant parking space and plot the vehicle’s position on a plan of the center. They can steer shoppers towards their favorite stores, alert them to special promotions and provide movie listings and other entertainment schedules.
Simon Property, the biggest U.S. shopping-mall owner, last year introduced the shopkick Inc. smartphone application that alerts visitors to promotions available from retailers. The application complements Simon’s mobile shopper club.
Unibail-Rodamco said it will test a rewards-incentive smartphone application based on visits to Amstelveen shopping center in the Netherlands, which it may roll out at other centers.
Property owners are playing catch-up with tech-savvy retailers, said James Brown, head of Jones Lang LaSalle Inc.’s retail research business in Europe. He cited Starbucks Corp.’s boost to sales through rewards provided through Foursquare Labs Inc. phone applications. Successful retailers are combining store openings with websites to drive sales, a strategy dubbed “clicks and bricks.”
The speed of adopting the new technologies depends on the size of online retail and the sophistication of smartphone use in a country. In Asia, particularly in Japan and South Korea, payment by mobile phone and applications that scan bar codes are very advanced, said Brown at Jones Lang.
Westfield in November opened its online virtual mall serving Australia and New Zealand, offering shoppers a price comparison tool to search for goods and services carried by 130 retailers. The service provides a single checkout and links on social network sites for shoppers to give feedback on merchandise and service quality.
Westfield, the world’s second-largest shopping-mall owner by market value, signed up online retailers that aren’t already its tenants and provided some international retailers with their first commercial presence in Australasia.
“Just traffic is not enough,” Michelle Vanzella, Westfield’s director for business development said in an interview. “It has to end up with sales.”
In the U.K., Europe’s largest online retail market, the new technologies may accelerate the decline of city-center shopping strips as higher energy costs and taxes crimp consumer spending and cause more casualties among retail chains.
Capital Shopping Centers Group Plc said yesterday that just 3 percent of space in its 14 U.K. malls was vacant as of June 30 and visitor traffic rose 3 percent since the end of 2010. That contrasts with an average vacancy rate of about 12 percent at U.K. shopping centers. Three hundred town-center shopping strips have an average vacancy rate of 14.5 percent, according to retail research company Local Data Co.
Twenty shops closed each day during the first five months, according to a survey by Local Data for PricewaterhouseCoopers LLP, which predicts more retail failures. Prospects for some locations are so bleak that Prime Minister David Cameron ordered a review in May to devise a national revival plan.
While retail failures may accelerate as the U.K. economy falters, small-scale landlords can also employ technology to fight back against the industry’s goliaths, said Bamfield of the Centre for Retail Research.
“Everyone’s going to get into this area,” he said. “We can only see 5 percent of what’s possible.”
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