E-commerce is eroding the appeal of shopping malls, so the operators of some of the largest shopping centers are starting to dish out their own share of digital disruption.
"Our competition is any other way of shopping," said Ed Vittoria, vice president of loyalty for the Simon Property Group, an Indianapolis-based real estate investment trust that owns or has an interest in shopping malls including the Houston Galleria, Dadeland Mall near Miami, Copley Place in Boston, and Fashion Centre at Pentagon City in Virginia. Simon just inked a collaboration deal with digital marketing specialist Spring to connect real-time payment data to mall loyalty programs.
Vittoria doesn't see the move as defensive as much as a way to push the mall's brand in a time in which consumers have myriad options and channels for shopping.
"We want to create a unique relationship with shoppers, and if a program such as ours leads someone to consolidate more of their shopping at our centers at the expense of online or other stores, that's good no matter where it comes from," he said.
Spring Marketplace, a Chicago-based company that provides debit and credit card rewards programs, also signed three other large mall owners in recent weeks, including Starwood Retail Partners,Taubman Centers and Pennsylvania Real Estate Investment Trust. The deals increase Spring's network to $60 billion in annual spending and more than 1 billion store visits.
The marketing company uses relationships with Visa, MasterCard and American Express to cull real time spend data to produce pitches to shoppers while they are still in the mall. The marketing structures incentives by spend amount, time frame or location. Redemption is automatically administered by the Spring platform.
"This allows individual retailers in the same mall to leverage the same platform, and not having to do it on a one-off basis," Vittoria said. "This also allows us to have a relationship with consumers. Our model has been business-to-business for years but we are looking to make a more direct connection."
Spring's goal is to boost foot traffic by marketing to shoppers when they are in the mall and looking for deals. The rewards are structured like a goal—an amount of spending results in an infusion that allows for more spending in the mall, usually in the form of a statement credit.
"It's like a virtual currency that you can spend in the mall," said Jonathan Dyke, chief operating officer of Spring.
Physical stores are challenged when it comes to analytics, but consumers cards and/or smartphones can be used to track spending and lead to a response, Dyke said
It's vital that malls find ways to increase foot traffic and boost shopping, and improving marketing campaigns by tying payments data to offers is one way to combat market headwinds, according to Jan Kniffen, a retail and mall analyst.
"Other than digital and online selling the hottest thing in retail is loyalty payments," Kniffen said.
Traditional retailers are "desperate" to get more traffic, Kniffen said, adding foot traffic at malls has been declining about 6% per year for the past several years. The trend is particularly acute for malls outside of the higher-end sector—the companies partnering with Spring are higher-end malls and are already in better shape relative to their traditional mall competitors, Kniffen said.
But there's a shakeout coming in the mall industry, Kniffen said, adding there are about 1100 malls in the U.S. in a market that can probably support only about 700.
"Everybody is looking for a magic bullet…whether [data-driven loyalty] is enough to save malls from the incursion of the Internet remains to be seen," Kniffen said.
Traditional retailers are trying other emerging technology to boost traffic and sales stores, such as deploying Bluetooth beacons to aid location-based marketing and social networking to create conversations with consumers and encourage referrals.
But using marketing and payment-related perks to create lasting foot traffic may be a challenge, according to Jerry Thomas, president and CEO of Decision Analyst, a retail research company.
"I have my doubts that the system can build sustained traffic over the long term," Thomas said, adding promotional offers are more effective in the short term because they are effectively discounts that can actually depress prices and lower margins over time. "Also, the massive scale of the system would seem to be an advantage, but trying to manage and optimize such a system is daunting," Thomas said.