Mall Landlords Roll the Dice With Tech Investments

Mall Landlords Roll the Dice With Tech Investments Wall Street Journal (06/20/17) Fung, Esther

Shopping mall owners are investing millions of dollars in technology to help protect them from the changes buffeting the retail sector as online shopping continues to cut into their sales. Unfortunately, some of these investments are not faring so well. Macerich Co., one of the largest U.S. mall owners, wrote off $10 million last quarter that it invested in a start-up that aimed to help Web-based and European retailers expand their physical store presence in the United States. Its investment in WithMe, a firm that designs pop-up stores with such interactive features as responsive display tables, led to store openings in a half-dozen Macerich shopping centers in 2016. However, the two companies parted ways soon after as the costs of the build-outs were higher than projected. WithMe ultimately told Macerich that it would be better for it to run the program by itself. "They really billed themselves as being the bridge between clicks and bricks, which, had it turned out to be that, it would have been a wonderful business,” said Macerich CEO Art Coppola lamented.

As changing consumer habits and e-commerce squeeze more and more mall tenants, mall owners face growing pressure to remain relevant. Bigger landlords with strong balance sheets, like Simon Property Group and Westfield Corp., have been allocating millions of dollars for incubators to take on risks similar to venture capitalists. The big challenge has been getting the technology right. The article's author points to beacons, which are wireless devices that can be placed anywhere and emit a signal that is picked up by smartphones. For example, beacons placed in stores can activate apps on smartphones that offer shoppers personalized coupons or promotions. Mall landlord CBL & Associates Properties ran a pilot program with beacons at three of its shopping centers in late 2015 and found challenges in asking consumers to download the app. The Chattanooga-based REIT is now focusing on creating a mobile Internet experience instead of developing apps that provide the same information and utility.