Virtual Mall Platform Finds Traction

There were more dire predictions for the mall sector this week, as some states had to revisit their lockdown mandates due to new COVID-19 spikes. But a new eCommerce platform coming out of the Alibaba Group in Southeast Asia is bringing a unique business model to malls in that region, one that could provide a blueprint for struggling U.S. shopping destinations.

The platform to bring malls online — or create a virtual mall — is being led by an Alibaba-owned company called Lazada. Its virtual mall solution is called LazMall, which was launched in August 2018. The core Lazada business is centered on eCommerce infrastructure, which has been extended to LazMall. It connects shoppers to more than 18,000 leading international and local brands. Shoppers can buy from the individual shops in the virtual mall, get next-day delivery on purchases and get liberal return policies. “For brands and sellers,” the company says, “LazMall offers an opportunity to create a customized experience for their customers.”

According to Bloomberg, Marina Square Shopping Mall in Singapore is the first shopping center in the country to partner with Lazada.

“It’s a new concept in Singapore,” James Chang, chief executive officer of Lazada Singapore, said in an interview. “From a shopping mall’s perspective, it could be seen as competition, but we worked out this partnership because it provides visibility and awareness of the tenants and offline mall.”

Marina Square’s partnership with Lazada will include about a dozen brands that weren’t previously on the eCommerce platform, according to the Bloomberg report. “The mall is also offering vouchers that can be used in physical stores, as part of efforts to draw shoppers back into its outlets,” it says. “This follows similar moves by Siam Center, a landmark shopping mall in Bangkok built in the 1970s, which teamed up with Lazada to set up its virtual mall with about 40 tenants. In Indonesia, more than 100 tenants of three malls by developer Pakuwon Group are going live on Lazada.”

Meanwhile a new Seeking Alpha report brought a sobering reality to the state of U.S. mall owners. It predicts at least one and possibly more real estate investment trusts (REITs) will need to file for bankruptcy as retailers struggle to pay rent and consumers stay away either by choice or due to new lockdown mandates. It points out that the mall sector has lost around 48 percent in market capitalization since January 2020.

“The COVID-19 crisis came during an already tough time for department stores,” said a recent research note from Bank of America Securities. “After an okay 2018 fueled by tax reform… the sector continued to grapple with secular sales challenges, including weak mall traffic and channel shifts to off-price and pure-play online retailers. Year-to-date, department stores have increased debt by 43% to bolster their liquidity during COVID-19, including new debt issuance and revolver draws. This includes leveraging real estate for Macy’s and Nordstrom.”

The Seeking Alpha report also expresses concerns about the future of one of the biggest REITs, CBL Properties. It says CBL “… entered into a forbearance agreement with its lenders over a missed interest payment. With bills piling up and many of its retail tenants opting to not pay rent during the coronavirus pandemic, CBL did not make an $11.8 million payment on June 1 on its 2023 notes, triggering a 30-day grace period that expired this week.”