PS. MCI pioneered the mall market, but also led the industry in being
the first to walk away...
On-Line: IBM's Electronic Mall to Close Up Shop
By Thomas E. Weber Staff Reporter of The Wall Street Journal
A shopping mall in cyberspace is about to face the wrecking ball.
World Avenue, the grandly titled shopping mall on the World Wide Web
that International Business Machines Corp. announced with much fanfare
a year ago, is quietly preparing to close its doors. Only last fall,
IBM Chairman Louis V. Gerstner Jr. hailed World Avenue as a highlight
of the company's third quarter, a showplace that demonstrated "secure,
So what happened? When it came to shoppers, World Avenue was more like
a deserted street, producing minimal revenue not only for mall tenants
like department-store chain Gottschalks Inc., but also for IBM, which
had planned to make money by taking a cut of every World Avenue
The mall's untimely demise raises vexing questions about what is the
right approach for on-line retailing. Should stores join on-line malls
as gathering places where Internet shoppers will converge, or should
they stay independent with stand-alone Web sites of their own?
For IBM, the flop of World Avenue underscores the challenges IBM faces
as it attempts to carve out a profitable niche on the Internet. Big
Blue has fancied itself as a behind-the-scenes enabler of commerce
conducted by others. By contrast, Microsoft Corp. has aggressively
built sites featuring its own content, such as information about cars
or travel, and has then invited merchants to come along for the ride.
Now IBM says it will limit itself to supplying technology for shopping
ventures operated by others. "We do not want to get in between our
customers and their customers," says a spokesman for the Armonk, N.Y.,
computer maker. Even so, he adds, "we feel the concept of a mall is a
Merchants are less sanguine. "Malls on the Internet are just not doing
that well," says Eli Katz, vice president of sales and marketing at
Fragrance Counter Inc., a Brentwood, N.Y., concern selling perfume on
World Avenue. Mr. Katz now favors going it alone -- that is, marketing
to Internet consumers with a Web site devoted solely to his company.
The World Avenue outing began last June, when IBM announced its plan to
build the mall, trumpeted as "an environment that melds the needs of
both merchants and consumers." Programmers and designers labored over
the summer, and the site was officially launched on Aug. 13.
Visitors to the site, located at www.worldavenue.com, see a screen
devoid of blinking logos, animated advertisements or other Web-page
staples. Instead, World Avenue welcomes shoppers with a simple list of
stores organized by categories -- not all that different from the
guides found on most shopping-mall kiosks. Clicking into a "store"
calls up photos and descriptions of merchandise. Shoppers add
selections to an electronic "shopping basket," then pay for them in a
single on-line transaction.
Merchants found the initial pitch attractive. Rather than confronting
decisions about how to hire their own Web designers, safely process
credit-card numbers and tally up orders on their own, retailers could
leave such decisions to IBM. Even better, they figured, cross-traffic
from neighboring stores would add to their own business.
But in the vastness of cyberspace, it can be tough for a single Web
site to get noticed. Merchants lay much of the blame on IBM's failure
to promote the mall. Though the computer maker advertised World Avenue
sporadically at other Web sites, there was nothing approaching the
print and television campaigns that have been conducted by some major
At Basse's Choice Plantation Ltd., a Smithfield, Va., company that
markets Smithfield hams and other food gifts, operations director Alexa
Ricketts eagerly awaited an IBM-sized promotional effort. Sure enough,
Big Blue began running ads touting Internet technology for catalog
retailers -- but without plugging its very own mall.
"They had a lot of resources they could have used to promote that site,
but there was not a mention of World Avenue," Ms. Ricketts says. On its
busiest days, the Basse's Choice shop on World Avenue had only four
customers. Often, there were none.
Virtual malls may simply fail to offer the advantages of their
brick-and-mortar counterparts, which let shoppers visit scores or even
hundreds of stores by traveling to a single location. On the World Wide
Web, everything is next door. Users can travel anywhere with just a few
mouse clicks. And in the virtual world, the role of anchor stores --
department stores and others likely to draw consumers in, thereby
attracting potential customers for all merchants -- seems vastly
reduced. Popular shopping sites like CDNow, which sells compact disks,
are more akin to independent superstores that extensively advertise
their selection and prices. But such sites have little incentive to let
smaller merchants ride on their coattails.
With millions of sites on the World Wide Web, the problem for any one
of them is standing out. That may be why one on-line mall --
Marketplace -- has had some success. Instead of hanging out its own
shingle, it is accessible via America Online Inc. That gives it a shot
at attracting "foot traffic" from some eight million AOL subscribers.
"The mall concept on AOL works great for us," says Stephanie Healy,
interactive sales manager at Omaha Steaks, a mail-order meat retailer
in Omaha, Neb. Closely held Omaha Steaks says its on-line business gets
more than $1 million a year in sales, with about 75% coming from its
AOL shop and nearly all of the rest from the company's independent Web
site. The meat merchant's World Avenue storefront produced only a tiny
fraction of sales.
Merchants on AOL enjoy a tremendous advantage. Each AOL subscriber is
funneled through a "welcome" screen peppered with promotions every time
someone signs on. In a sense, AOL is its mall's own anchor site. But
merchants say AOL accordingly demands favorable terms. While IBM sought
5% of each sale, AOL expects substantially more from all but the
largest retailers -- on top of a hefty up-front fee.
World Avenue's screens will go dark for good on July 9. IBM says it
expects to get plenty of business from on-line commerce but sees most
retailers clamoring for independent sites instead of malls. As these
new cyberstores are built, IBM will content itself with the role of
construction company instead of mall manager. "We don't want to be in
the position of generating traffic," IBM's spokesman says. "That's not