The biggest mall owner in the U.S., Simon Property Group, is teaming with online shopping site Rue La La's parent company to launch a new kind of website for people looking for deals.
The real estate company announced Wednesday it's partnering with Rue Gilt Groupe, which is backed by Michael Rubin, CEO of Fanatics' parent company Kynetic, to create a new e-commerce business for discount shopping.
Simon has been testing the website "ShopPremiumOutlets.com" since March, building on its premium outlet centers business. The mall owner operates dozens of premium outlet centers nationwide and a handful overseas. It's been working with certain retailers at those centers — which include Woodbury Common Premium Outlets in New York — to test selling merchandise together on this site. It says it has signed on more than 2,000 designers, and has about 300,000 products.
Simon said shoppers will want to visit the website to find discounted merchandise online from numerous brands in one trip. It says its outlet centers are often further away for customers to reach in a pinch. However, Simon also has said it doesn't expect this new website will cannibalize its bricks-and-mortar business.
Some of the brands that have signed include Saks Off Fifth, Aeropostale, G.H. Bass & Co. Factory Outlet, Cole Haan, Nautica and Under Armour.
With the launch, ShopPremiumOutlets.com will be run by Rue Gilt Groupe, which also owns Gilt and calls itself "the premier off-price e-commerce portfolio company." Rue Gilt Groupe acquired Gilt from department store chain Hudson's Bay Company in 2018.
Simon said it plans to contribute about $280 million toward this endeavor and expects to promote the new business in the coming year using a portion of its more than $100 million annual marketing budget.
"Simon has definitely been upfront that they aren't just going to sit on the sidelines and let the world move online and them not be a part of it," Sandler O'Neill + Partners real estate investment trust analyst Alexander Goldfarb said. "The number of people who go through their malls is tremendous."
As part of the deal, Simon and Rubin will also now become "equal partners" in both Rue Gilt Groupe and ShopPremiumOutlets.com. The closing of this deal is still subject to regulatory approvals.
"We believe online value shopping presents a tremendous business opportunity for Simon, given our credibility, trust and relationships with brands, retailers and shoppers," Simon CEO David Simon said in a statement.
In a separate interview with CNBC, Simon said he expects the site over time will include capabilities like being able to tell shoppers what items are in stock at Simon's outlet centers. He also said Simon Property Group would consider doing something similar, online, with its traditional malls. "We are creating a flywheel so to speak ... of unique attributes and partners that very few companies have. ... We're getting the best in breed entrepreneurs and business people, like Michael, to keep us moving in the right direction."
"The online value shopping market is a massive opportunity ready for the next disruptor," said Rubin. He said he expects the business will "quickly surpass" $1 billion in sales and be profitable.
Simon, like other mall owners, has been hit by a wave of store closures in the U.S., at its shopping malls and premium outlet centers. But the Indianapolis-based real estate owner is often considered the strongest in its peer group, with higher-rated properties in more sought-after locations that bring in more sales per square foot. It owns King of Prussia in Pennsylvania and Lenox Square in Atlanta, for example.
Simon also has a venture arm, Simon Ventures, that has invested in retail start-ups like beverage brand Dirty Lemon, Imran Khan's Verishop, underwear maker Me Undies and subscription box company FabFitFun.
"If you look at the investments we're making ... we're grounded in real estate, but we're much more than a mall company," Simon told CNBC.
Simon shares were down about 1.5% Wednesday morning, having fallen a little more than 9% this year. The company has a market cap of about $46.9 billion.