SYDNEY/PARIS (Reuters) – Online shopping has its limits and physical stores will never go out of fashion, says the CEO of Unibail-Rodamco which is betting $16 billion on buying Westfield to create a global mall giant.
The deal comes at a time when the traditional retail sector and shopping centers are under pressure to reinvent themselves in the face of fierce online competition led by Amazon.
However, Unibail-Rodamco Chief Executive Christophe Cuvillier predicted online shopping would peak at 20 percent of global retail spending, up from 8-10 percent now, although he did not give a timeframe.
“Internet will grow but internet cannot do everything. It’s very difficult to be profitable on the internet, particularly pure-play online retailers,” he told journalists on a call on Thursday.
“Retailers need physical presence,” he added, noting that largely online companies like Apple, Nespresso, Tesla and even Amazon had opened bricks-and-mortar stores.
Franco-Dutch group Unibail’s planned acquisition of Westfield will create a stronger competitor for the world’s biggest commercial property owner Simon Property Group, one with 104 centers and more than 1.2 billion visitors a year.
The deal gives Europe-focused Unibail, which owns Les 4 Temps and Forum des Halles in Paris and has centers spreading from Helsinki to Valencia, exposure to Britain, the United States and Italy, countries where Westfield operates 35 malls.
The acquisition is part of Unibail’s strategy of increasingly focusing on high-end “destination” malls in landmark locations and Westfield would bring shopping centers in big cities like London, New York and San Francisco, which offer customers a wide range of restaurants, bars and entertainment.
Unibail could replicate some of Westfield’s services at its other centers around Europe, including staging events like concerts and hosting pop-up shops, according to a source familiar with the matter.
“The big (Westfield) malls are only getting stronger,” said Grant Berry, portfolio manager at Australian broker S.G. Hiscock, which holds real-estate investment trust shares, including Westfield.
“Nothing’s changed in terms of these big malls as gathering places for entertainment and experiences.”
As part of its “destination” mall push, Unibail has said it plans to sell some regional Westfield shopping centers in the United States to concentrate on malls in central locations of big cities, but has not provided more specific details.
Cuvillier said one of the reasons why many American malls and department stores were struggling was a failure to diversify into offering customers food.
”I think it (food retailing) is a way of recovery for United States shopping centers. Some department stores … have nothing more to offer.
Additional reporting by Herbert Lash in New York; Editing by Luke Baker and Pravin Char