What's new, different and entertaining among specialty retailers? Industry experts say the Internet is popping up on kiosks in malls across the country.

"Specialty leasing managers are becoming more and more creative on how to generate additional income and do things in a more unique way," says Judy Batson, president of Cartworks, a North Andover, Mass.-based firm that handles tenant representation, program management and specialty leasing. As a result, Batson adds, "specialty leasing managers are trying to look outside the box to bring in unique vendors."

Mirroring themes that have become familiar in the shopping center industry as a whole, the latest specialty retail trend involves a combination of entertainment, retail sales and the Internet.

"The Internet is the hot thing," says Batson, who serves as exclusive leasing agent for cyberXpo.com, a Dallas-based company that specializes in web-enabled kiosks. "People want to be entertained and they're interested in the Internet."

A useful tool By harnessing the power of the web, cyberXpo.com and other high-tech specialty retailers are discovering new ways to attract shoppers to the mall. As a result, developers who once feared the Internet are embracing their former enemy - and they're even using the web as a marketing tool, says Bruce Thompson, CEO of cyberXpo.com.

The 2-year-old company maintains five computer kiosks at malls in the Dallas and Houston area and by mid-March plans to have another 20 installed in Pyramid properties around the country. "We want to be in 120 malls across the country by December 2000," Thompson says.

Described as an entertainment venue for malls, cyberXpo.com allows users to surf the web through a super-fast Internet connection. The company's cyberCenters are generally placed in food court and center court areas. Each is equipped with 12 to 14 computer terminals and manned by support staff who maintain the systems, answer questions, and even offer free Internet training for beginners. Four plasma video screens hang over the kiosks, running nonstop national advertising.

Shoppers don't have to pay to use the advertising-supported systems, which offer Internet service that is exponentially faster than what most people have on their home computers. Having never seen such lightning-quick web connections, many users are mesmerized by the kiosks, Thompson says. "What we try to do is showcase the latest broadband technologies: digital music, streaming video, plasma screen displays. We're averaging over 12,000 users per week per system."

Aside from surfing the Internet, shoppers can check their e-mail accounts and obtain information about mall sales and promotions. At the same time, mall owners can use the kiosks to gather demographic information from customers through online questionnaires. The information is stored in a database that can be used in efforts to increase mall traffic and sales.

"Historically, developers have had difficulty determining who their shoppers are," Thompson notes. "But because we have a substantial user base, we can give them some insight."

CyberXpo.com is now signing five-year leases, offering developers a base rate along with a percentage of profits from advertising. "We can generate a tremendous amount of revenue and draw people back into the mall via an alternative way of marketing," Thompson notes.

Building relationships In addition to boosting revenue and spurring traffic, the new kiosk technology provides other benefits. "Mall developers have a huge opportunity to enhance their relationship with the customer," says Chris Miglino, vice president of business development for CENTERLINQ, a division of Van Nuys, Calif.-based GenesisIntermedia.com.

The company has negotiated with Bloomfield Hills, Mich.-based Taubman Centers Inc.; Chicago-based Urban Shopping Centers Inc.; Johnstown, Pa.-based Crown American Realty Trust; and Cleveland-based Forest City Enterprises Inc. to launch 80 electronic kiosks this year, in addition to the 20 that are currently installed. Miglino says CENTERLINQ is now signing seven- to 10-year leases with developers.

"Our focus has been to provide the mall developer with full-scale deployment of an interactive communication system that they can use to communicate with their customers," Miglino says. "We have a proven loyalty-shopping program that we can show definitively increases sales within the mall environment while generating revenue for the mall developer through advertising and sponsorships."

CENTERLINQ's interactive kiosks, which are set up throughout a mall, feature 42-inch video display monitors. The company's loyalty-shopping initiative allows consumers to sign up for a special rewards program. They can access select websites, view a mall's directory, print coupons and learn about upcoming special events. Shoppers submit personal information and shopping preferences that are then used in various marketing campaigns. Miglino says some developers are establishing programs to give loyal customers discounts and sales information.

And there are other advantages. "Our units take up space that wasn't leasable before, so we're not taking revenue away from the mall developer," Miglino says. "The units can be placed in locations where RMUs can't be placed, and they're designed to be small enough to be put in locations where mall owners are not doing traditional specialty leasing."

Kiosks 'click' with malls Mall developers that haven't instituted a specialty leasing Internet strategy will do so within the next 12 to 18 months, predicts Miglino. "It's not just a specialty leasing deal," he says. "It's a comprehensive specialty leasing and Internet strategy working together."

Already experimenting with the technology is Forest City Enterprises, which recently launched CENTERLINQ in five of its West Coast centers. "We try to do deals with tenants that make sense for both of us," explains Dave Favorite, executive vice president of Forest City's commercial management division/retail. Through CENTERLINQ, he says, "we have found a way of entree into the Internet that has helped us enhance the shopping experience for our customers."

Developers interested in the technology can choose from among half a dozen Internet kiosk companies in the United States. Englewood, N.J.-based Omnitech Corporate Solutions is moving quickly to deploy high-tech interactive kiosks in malls across the country. Omnitech already has installed its iPort units in three Glimcher Realty Trust-owned malls in Ohio and New Jersey and plans to roll out the kiosks at another seven malls in 2000.

Overall, the company will sign 60 to 70 deals this year and plans to install the additional units by 2001, according to Michael Chadwick, Omnitech's director of real estate acquisitions.

Like its competitors, Omnitech's iPort offers shoppers a multitude of services, including sales information, directions, coupons and Internet access. The kiosks are placed in high-traffic areas, flashing advertisements on plasma screens, light boxes and touch screens. The iPorts also track demographic information to help developers better understand their shoppers. "A huge draw is the iPort postcard," says Chadwick. "You can take a photo of yourself and send it to friends like an e-mail, and it's free."

Pleasing all sides "The whole mission of iPort is to build a product that equally benefits everyone involved: the shopper, the venue owner, and the advertiser. They all have specific needs," explains David Meyers, director of advertising for Omnitech. "The shopper wants value and information, the mall developer needs traffic driven back to the mall on a regular basis, and the advertiser wants point-of-purchase opportunity, branding opportunity and a unique way to get its messageacross to the consumer."

The iPort kiosks generate revenue from direct advertising that appears on the unit as well as from sponsorships and events coordinated for the mall owners. Meyers explains that advertisers interested in having a physical presence in the mall can work out special deals with Omnitech.

"Because we have a relationship with the developer, we're able to facilitate special events," he says. "The New Jersey Nets basketball team, for example, is an advertiser with us. We're helping them fill their sponsorship needs and gain a presence in the mall by bringing a player into the mall one weekend a month."

In addition to its agreement with Columbus, Ohio-based Glimcher Realty Trust, Omnitech recently formed a partnership with Toronto-based Cambridge Shopping Centres Ltd. "We're hoping to start launching Omnitech in March in one of our Toronto- or Vancouver-area malls," says Shelly Drapkin, director of Cambridge's national partnership program. "The technology is there now. As a result, developers are looking at wiring their malls so they can have Internet access and retailers can get online."

Glimcher categorizes Omnitech as a specialty retailer, and is signing one-year deals with Omnitech for a guaranteed minimal rent along with a percentage based on advertising revenue. Heidi Maybruck, director of specialty leasing for Glimcher, says she is negotiating with Omnitech to install cyber kiosks in all Glimcher malls by the second quarter of 2000.

What's Glimcher's motivation for deploying the iPorts? "Extra income is the foremost reason for the developer," Maybruck says. "And from the standpoint of consumers, it gives them the ability to utilize the Internet."

At some malls this holiday season, Internet kiosks made a different kind of appearance, related more to advertising than providing new services.

Stamps.com, an Internet-based stamp retailer, tested a new advertising concept in 50 malls across the country, including a Glimcher mall in Seattle. The company set up staffed, interactive kiosks to promote its website. The kiosks served purely as advertising units, explaining to shoppers how to buy stamps on the Internet.

Similarly, ihomedecor.com promoted its website and offered Internet capability on staffed merchandising units. "The reason is to advertise the website like on a big poster or mobile billboard," says Maybruck. "You can't get a cheaper advertising price than in a mall, and the traffic is phenomenal."

Other specialty leasing trends Favorite of Forest City says he's excited about changes the new technology could bring to specialty leasing. "There is tremendous potential for us to grow and add fun and exciting merchandise," he explains.

But the Internet certainly isn't the only development in specialty leasing. Hot products sweeping through Forest City's 15 malls across the country include the nutritional supplement Metabolife; local college and sports apparel; dolls; and AquaBabies, little aquariums produced by Aquatic Resources of Sebastopol, Calif.

Laurie Scheffler, manager of specialty leasing for Phoenix-based Westcor Partners, which operates specialty leasing programs at eight superregional malls and nine power centers, says the company has seen a surge of interest from computer firms wanting to offer Internet services to shoppers.

But Scheffler predicts that traditional retailers will remain the core of the company's specialty leasing program. "To fill the common area with a lot of service-oriented uses, there has to be careful attention paid to the balance," she notes.

In the past two years, Westcor tested Internet sites at several of its malls but found that the providers weren't getting the "hits" they had anticipated. "We want to continue to explore technology and we're doing that, but not through the specialty leasing program," Scheffler explains.

Instead, Westcor's marketing and sponsorship now handles inquiries from computer-oriented service retailers. "Every company has its own delineation about what falls under specialty retail revenue, marketing revenue, and sponsorshiprevenue," Scheffler says. "It's kind of a ball that has been tossed up in the air quite a bit."

Westcor has been keeping a close eye on other trends. "The short-term nature of leasing that we do for carts, kiosks and temporary in-line space gives us the flexibility to react quickly," Scheffler says. In 1999, for example, "Metabolife was a huge and consistent producer, AquaBabies had a stellar holiday, and Pokemon carts and kiosks did wonderful strong numbers."

Growing with the changes Ken Roberts, president of Portland-based Cab-tech Manufacturing, a cart and kiosk manufacturer, says he's experienced a marked increase in business in recent years - evidence that conventional specialty leasing continues to grow. Technology might change store fixtures, he predicts, but it won't eliminate the need for them.

"Regardless of how much money is spent on the Internet buying goods and services, people will still go to shopping centers because it's entertainment," Roberts says. "I don't have any fear that our sales are going to be reduced by more people buying on the Internet. People will continue to need store fixtures."

Overall, specialty leasing income has become a viable and integral part of a developer's bottom line, concludes Glimcher Realty's Maybruck.

The remarkable growth of recent years will only be strengthened by technological tools that make carts and kiosks more appealing to consumers. Developers and mall owners like the products because, in addition to providing a new source of revenue, they help bring the Internet into the mall, supplementing click-and-mortar strategies.

"We have arrived," Maybruck says. "We haven't peaked yet, but we're two-thirds of the way up."