Retailers enjoy the benefits of supercharged bandwidth while mall owners enjoy the extra revenue gained by selling it to them.
Maybe a retail exec in the home office wants to keep a real-time eye on what's going on at mall stores. Or maybe a store manager wants to shave a few seconds off the time it takes to authorize a credit card during peak shopping seasons. Then again, a retailer's catalogue division might want shoppers to be able to order brand new, not-yet-on-the-rack merchandise from strategically deployed in-store Internet kiosks.
They're all prime candidates for broadband technology, which offers the opportunity to send and receive voice, data and video information simultaneously and at speeds far exceeding those most retailers enjoy today.
The next technology wave? Retailers stand to gain a lot from the "broadbanding" of shopping centers, according to John Bucksbaum, CEO of General Growth Properties. The Chicago-based REIT is wiring its malls to bring broadband access to retailers.
"This is all about applications that raise the efficiency and productivity of retailers," explains Bucksbaum. "We want to use this technology to help increase traffic and drive sales in our malls. Mall owners that don't do this will ultimately be at a disadvantage, because as retailers see the benefits, they'll only want to be in properties that offer broadband access."
Those benefits, according to Bucksbaum, include cutting the time it takes to process credit card transactions; enabling in-store cameras to observe consumer behavior from afar; giving retailers the ability to monitor how products are marketed; and providing a platform for in-store employee training through efficient "distance-learning" techniques.
Chicago-based MerchantWired is also in the process of bringing broadband to retail. This coalition of property owners includes The Macerich Co., The Rouse Co., Simon Property Group, Taubman Centers, Urban Shopping Centers and Westfield America. It aims to provide retailers with the infrastructure necessary to hop on the broadband bandwagon by wiring malls and selling the service directly to tenants.
"We have more than 300 malls currently wired and operational," reports Bob Covington, MerchantWired's chief technology officer and head of business development. He adds that nine chains have either signed up for those services or implemented pilot programs.
Covington predicts broadband networking in malls will lay the foundation for the next generation of retail commerce. Among other benefits, he says broadband users will be able to speed up credit card transactions from 20 seconds to 2 seconds, connect their store inventories to the Internet, develop new multimedia training systems and provide simple but important services such as e-mail for store employees.
The perfect environment Another top player in the retail broadband arena is MyShopping Center.com. The Miami-based company has partnered with several publicly traded REITs (including Regency Realty Corp., Federal Realty Investment Trust, Equity One Inc. and Kramont Realty Trust) to bring what CEO and president Gary Mansfield calls "retail-centric" broadband services to merchants and mall owners.
The MyShoppingCenter.com mix includes branded websites for both shopping centers and their individual tenants. These Internet sites provide local content and customer incentives through e-coupons, targeted e-mail blasts, banners and product lists.
At the same time, a business-to-business component provides discounted purchases of goods and services through the aggregation of tenant demand. And the third component, broadband connectivity, offers tenants a variety of services that include high-speed Internet access, video conferencing, computing applications-on-tap and local and long distance telephone service.
"The demand for broadband in retail is significantly higher than anyone ever expected," notes Mansfield. "Retail is the perfect environment for high-bandwidth, multimedia solutions."
Not a mere `R&D' project Toronto, Canada-based Cadillac Fairview Corp., which maintains a 50.9 million-sq.-ft. ownership portfolio that includes 11 U.S. retail centers, is using digital subscriber line (DSL) technology to bring the benefits of broadband to its 45 Canadian malls, according to Ron Peddicord, executive vice president of e-business.
The wiring of the company's U.S. malls is being handled by the malls' stateside managers, including General Growth Properties and Simon. "Our tenants are saying they need high-speed access on an affordable level to roll out their business strategies over the next five years," Peddicord notes.
In-store cameras appear to be high on the list of items for which tenants want broadband access, Peddicord says, adding that landlords should listen and respond to ensure that their malls remain up-to-date. "We don't view this as some kind of R&D project," he says. "We view this as mandatory."
Questions from Wall Street The wiring of malls for broadband has great potential for creating operational efficiencies and a host of other benefits over time, says Pat Hickey, REIT Analyst for the Robinson Humphrey Co. Inc., Atlanta. "The question, though, is whether this is a service that retailers are looking to the property owner to provide, or is it something that they would prefer to build and maintain themselves."
Other analysts wonder whether retailers will make the best use of a potentially expensive technology. "Clearly, it should be beneficial to retailers to have broadband access," says Ross Nussbaum, research analyst for Salomon Smith Barney, New York. "The question I have is whether they all really understand how they're going to use broadband."
According to Nussbaum, savvy national retailers with deep pockets - "the GAPs of the world" - are most likely to put Internet kiosks in their stores and to restructure their point-of-sale and inventory systems to take advantage of broadband connections to the home office.
"But will the mom-and-pop retailers of the country use this?" Nussbaum asks. "That is the wild card - can these broadband providers make any money by simply servicing the national retailers?
"My sense is - I doubt it," says Nussbaum. "I think that [broadband companies] will really need to access the regional guys and the smaller, mom-and-pop players in order for all of this to be as profitable as they think it will be."