St. Louis Mall Fights E-Commerce

November 24, 1999

St. Louis Mall Fights E-Commerce

If you can't beat 'em, join 'em, the old saying goes – but when it comes to on-line retailing, the owners of a mall in suburban St. Louis, MO, strongly disagree.

The Saint Louis Galleria sent a letter last week to its 170 retail tenants saying it prohibited in-store signs, decals or other advertising promoting e-commerce Web sites. An article in The Wall Street Journal says the move reflects fears of mall owners across the country that in-store sales will drop as more people shop on-line. About 4% to 10% of mall tenants' rent payment is calculated from a percentage of in-store sales.

Tenants, many of whom print their Web sites on shopping bags and point-of-purchase displays, are reacting with anger. Right Start, a retailer of educational toys, sent a letter from its attorney to Galleria owners Hycel Partners 1 LP threatening legal action. "Aside from the illegality of your tactics, it is unfortunate that you have chosen to fight the inevitable evolution of retailing," wrote David Lamb, Right Start's attorney. Other retailers, such as Banana Republic, Nine West, and The Athlete's Foot, continued advertising their company Web sites in windows and on bags as usual.

The Galleria is an upscale, 1.2 million-square-foot mall with tenants such as Lord & Taylor and Cartier and average sales of $500 per square foot, higher than the national average of $315, the Journal says. Retailers who lease real estate in such successful malls are often more likely to "play by the owner's rules," the article says.

- by Stacey King