Two of the nation's biggest shopping center owners announced their first major Internet initiatives just weeks before the 1999 holiday season. In colorful marketing campaigns evoking images of friendly frogs, Nepalese mountain climbers and surf-addicted beach bums, Indianapolis-based Simon Property Group and Chicago-based General Growth Properties launched extensive websites linked to their brick-and-mortar malls.

Such click-and-mortar strategies are still in the 1.0 stage. But Simon's FastFrog.com and YourSherpa.com, along with General Growth's Mallibu.com, could signal the beginning of the next evolution of the shopping center industry.

"The Internet has become an integral part of our daily lives, and the shopping experience is undergoing a significant transformation," notes Simon CEO David Simon. "What we're doing is developing ideas and products that blend the convenience of e-commerce with the overwhelming social experience and brand importance of mall shopping. This is a radically different business model."

The two companies have gained widespread recognition for their efforts to break new ground with technology. General Growth CEO John Bucksbaum says the industry must continually strive to anticipate rapidly changing consumer demands.

"From a retail perspective, we at General Growth are focusing on how e-commerce will better allow us to connect with our customers," Bucksbaum says. "People's lives are changing, and it's crucial that we give them what they want, when they want it, where they want it. That means giving them choices."

Frogs, wands and teens Clixnmortar.com, Simon's Chicago-based e-commerce subsidiary, is running the company's first click-and-mortar experiment at two regional malls in suburban Atlanta. FastFrog.com was launched exclusively at Gwinnett Place Mall and The Mall of Georgia, with the possibility of a national rollout sometime in 2000.

Under the program, teenage shoppers go to a cluster of computer terminals called The Pond and pick up hand-held scanners called ZapSticks. The bright green wands, which were developed by Holtsville, N.Y.-based Symbol Technologies, allow the teens to roam the mall scanning items they would like to receive for, say, Christmas or an upcoming birthday. Participating retailers include Abercrombie & Fitch, American Eagle, Footlocker and Sunglass Hut.

After the teens finish shopping and return the ZapSticks, information about the scanned items is uploaded to a personal web page containing a detailed wish list. Family and friends can log onto the Internet to view the list, which also can be delivered via e-mail. "Dad gets an e-mail from the teen that says, 'Click here on FastFrog.com,' " explains Melanie Alshab, president of clixnmortar.com. "Dad then goes to the wish list, where he can buy online from FastFrog.com at the retailer's website. He can also print out the list and just buy the items at the mall."

The marketing slogan for FastFrog.com is "wish louder." The idea is to create an experience that is more fun and more efficient than e-commerce or brick-and-mortar shopping alone.

"Teenagers can be difficult to buy for, and what Mom and Dad think is cool is usually way off base," Alshab says. "With FastFrog.com, the teens get what they want, the retailers sell their products, and Dad doesn't have to hand his credit card to a teenager headed to the mall."

Standing out from the crowd Two years ago, under headlines such as "Say Goodbye To Your Mall," news accounts portrayed purely e-commerce companies as the eventual victor in the battle for retail dollars. Such reports often failed to explore key strengths of the click-and-mortar approach. Simon, for example, already has a vast audience for its targeted sales and promotions. But e-commerce start-ups often struggle to distinguish themselves, competing for Internet surfers' attention amid an ocean of websites.

"Our properties aggregate more than 2 billion mall visits in one year," David Simon notes. "That's an amount unrivaled in any single space, whether physical or in cyberspace."

Simon initially took a conventional approach in promoting FastFrog.com. The company paid for dozens of billboard messages, radio commercials and print advertisements in the Atlanta area, even hiring airplanes to fly banners over high school football games.

Those efforts continue. But after analyzing research data from Christmas '99, Simon became convinced of the tremendous value of in-mall advertising.

"Traditional retailers really had a leg up on pure e-commerce players this year," says Bob Covington, vice president of clixnmortar.com. "We found that about 70% of the teens who used FastFrog.com had learned about it in our malls. Bringing those virtual and physical dimensions together is just a phenomenal attribute that malls have available to them. It's the best advertising."

Mining the data Although Covington declines to provide hard numbers, he asserts that FastFrog.com has been successful. "We were pleasantly surprised with the amount of people who signed up for and used it throughout the holidays," he says. "It worked very well."

Simon also was pleased with the system's ability to gather useful information about mall customers and their shopping preferences. Wish lists posted on FastFrog.com help Simon determine which products are most popular with teens. That information enables participating retailers to stay ahead of fashion cycles, rather than examine sales data after the fact.

In 1999, Alshab notes, the value of teenagers' influence over their parents' shopping decisions was estimated at more than $14 billion. "The information that we obtain from our teenage customers will enable us to better target and communicate with them," she says. "FastFrog.com is the first retail offering that takes advantage of that potential."

Sherpas in Atlanta? When Sir Edmund Hillary climbed Mount Everest in 1953, a team of Nepalese mountaineers carried his bags. The now-famous Sherpas inspired the namesake of Simon's second e-commerce product, Your-Sherpa.com.

The initiative is being tested in the Atlanta area at Simon's Lenox Square mall. Like FastFrog.com, it blends hand-held technology with online shopping and wish lists. YourSherpa.com is designed to make life easier for busy adult professionals, allowing them to make purchases at their favorite retailers without having to carry bags or wait in lines. Customers simply walk through the mall scanning desired items and placing them in designated bins within the stores of participating retailers. Mall employees pick up the items, which are delivered to the customers' homes or other requested locations. When finished shopping, customers return the scanners and pay for the scanned goods at the central kiosk.

The scanning device also allows consumers to store product descriptions in "under consideration" files or to add items to an online wish list. "YourSherpa.com will allow time-starved professionals to get in and out quickly," Alshab says. "It's one-click ordering at the mall."

Surfing in Mallibu Logging on to Mallibu.com, Internet surfers find plenty of options, including music, movie, fashion and video game pages, gift certificates to General Growth malls, and an interactive gift guide that displays the most popular gifts, along with retailers that sell them at General Growth malls.

The site was inspired by Malibu, Calif., the original surfers' paradise. Bucksbaum says it eventually will provide links to all of General Growth's 131 malls. Consumers will be able to find the one nearest them by clicking onto a mall finder indexed with zip codes.

Bucksbaum sees Mallibu.com as a portal site designed to drive traffic to specific General Growth malls and tenants. The company aims to make it easier for stores to set up their own individual web pages, thereby boosting local sales and creating new opportunities for sponsorships, promotions and advertising.

"You will go to the mall directory on Mallibu.com and click onto a given retailer," Bucksbaum explains. "But rather than taking you to the national clearinghouse site for the retailer, our goal is to take you to a site operated by the individual store for that particular mall. The infrastructure for this e-commerce activity will be created by General Growth, so the retailers won't have to worry about that piece of the puzzle."

The infrastructure will support transaction-enabled "virtual storefronts" for as many retailers as possible, Bucksbaum says. "The pages will include inventory information, specials, in-store events, job openings - any information they would like to add," he explains. "But the largest and most important item would be whatever products they want to offer on the site."

In discussions with General Growth, retailers have expressed widespread support for the idea. "It's e-business, but it's in exactly the same vein as their current operations. The only difference is that customers aren't physically in the stores when they place their orders.

"The Internet companies are building these large distribution centers to fulfill their orders," Bucksbaum says.

"But the existing retailers already have hundreds of distribution centers around the country - their stores," he says. "It's far cheaper to fulfill and ship to someone within a 10-mile radius than it is to send something to a customer 1,500 miles away."

As the largest shopping center owner in the country, Simon Property Group provides its tenants with access to more than 180 million sq. ft. of retail space. Now, the Indianapolis-based REIT is selling access to another money-making dimension: cyberspace.

Simon recently began hard-wiring a select few tenants with high-speed Internet and telecommunications connections. TenantConnect.net is designed to make it easier for retailers to compete by adopting click-and-mortar strategies. Many have had trouble launching such initiatives by themselves, says Bob Covington, vice president of clixnmortar.com, Simon's Chicago-based e-commerce subsidiary.

"It's like when Henry Ford built all those new cars and there were no roads," Covington explains. "You have to build roads in order for people to drive. TenantConnect.net is trying to help build those infrastructures."

The program is a collaboration with three leading high-tech communications firms: Denver-based Qwest Communications International Inc., Palo Alto, Calif.-based Copper Mountain Networks Inc., and Tampa, Fla.-based Intermedia Communications. TenantConnect.net is being tested at seven Simon properties in Georgia, Indiana, Ohio and California. It could eventually be offered at all Simon malls. "We're bringing in new retailers all the time," Covington says. "It's going very well."

The high-speed broadband connections allow retailers to set up Internet kiosks in their stores, thereby making sales that might otherwise be lost. If a certain sweater is out of stock at The Gap, for example, a customer could order it on online. Retailers also will have the opportunity to participate in Simon's extranet, a database loaded with customer profiles and other marketing information that could be used to design promotions and sales campaigns.

"Each retailer has a different way in which it wants to try to sell to consumers," says Melanie Alshab, president of clixnmortar.com. "Tenant-Connect will enable retailers to do everything from online cybercasts to putting their point of sale online. Eventually, a lot of retailers will explore whole new business models."

In addition to opening the door to Internet sales, Covington adds, the system will help tenants do business more efficiently. He says retailers will jump at the chance to move inventory and other systems into cyberspace.

"The ability to have centralized inventory control is very important," Covington explains. "A lot of retailers really don't have accurate counts of what's in their store. Inventory is done nightly or in some cases weekly, and because of that there are huge discrepancies. But with online networks, retailers have the ability to have very accurate online inventories that are updated moment to moment."

Simon will charge for the connections, but Alshab says the price will be affordable for the majority of Simon's tenants. "TenantConnect has actually been a pretty easy sell," she explains. "It really provides an unparalleled opportunity in terms of broadband access in a mall setting, so we're getting a lot of interest."

CEO David Simon says the company's retailers will be responsible for setting up their own individual sites, which will be linked to portal sites for Simon malls. Experiments such as TenantConnect are evidence of a movement toward bringing technology into malls, he notes.

"The mall historically has been a dumb box, and at Simon we're going to make it a smart box," Simon says. "Doing that will add to the retailers' productivity, as well as make the shopping experience more fruitful for consumers."

Q: What is Mallibu.com?

* Mallibu.com is General Growth Properties' shopping center destination website. It will provide a wide range of shopping information and resources, with links to malls around the country.

Q: How will the site function on national and local levels?

* Mallibu.com will serve as the central hub or portal site for consumers to access GGP shopping information and directories. It will include links to individual mall websites.