Do cybermalls mean safety in numbers for e-commerce sites? Not necessarily. Read on to find out if they're the right choice for your company.

When Michael Pietrafesa realized that his start-up company, New York City-based World Doll Shop, needed a home on the Internet, he buckled down to examine his options. After realizing that setting up a Web site and back-end operations for his e-commerce site would be cost-prohibitive, he turned to shopping portal iMALL, which provided a more affordable solution. As vice president of World Doll Shop, Pietrafesa says all of the literature he and his partners read indicated that selling through a portal such as iMALL would improve a small company's chances for online selling success. Then, when he compared the setup and hosting fees between iMALL and basic (non-mall) hosts, he found the cost differences to be negligible; therefore, he says, the decision to set up shop in iMALL was "essentially a no-brainer. iMALL was the largest and, therefore, offered the most potential with very reasonable prices," he adds.

World Doll Shop, which peddles collectibles such as Princess Diana and ventriloquist dolls and a variety of children's play dolls, made its debut on iMALL in November 1998. As a result, Pietrafesa says the site's visitor count grew from 450 a month in December, to 890 in February and 1,100 in March. And the site's orders-to-visitors conversion rate now averages around 1-1/2 to 2 percent, he adds.

According to Pietrafesa, working with iMALL gave his company a tremendous advantage: "They showed us everything necessary for doing it right," he says. "As our business grows, we are becoming more and more aware of the advantages of e-commerce and are now planning expansion in cyberspace." He says the mall gives his company "spotlight" ads within specific categories on a rotating basis, and in return, his company pays a percentage of sales in excess of $2,500 per quarter.

"This is a tremendous benefit for new businesses like ours that are being built from the ground up," he adds. "Being on iMALL has brought business to our site, at no cost to us so far. Their traffic alone provided enough business to cover the hosting charges in 1 ½ weeks."

Malling Around Online

Unlike America's neighborhood malls, where people go frequently to shop, dine, and socialize, Internet malls haven't quite become what their founders intended them to be. While they've attracted their share of supporters, they're still struggling to achieve credibility. Jim Daniels, president of JDD Publishing Company, a Smithfield, R.I., company that provides Internet marketing assistance for home-based and small business owners, says mall operators lure companies in with the promise of free promotion for their businesses. "They tell you their total number of hits last year was 5 million, and many small business owners think that many of these hits will land on their sites if they join the mall," warns Daniels. "In fact, [they rarely do]."

Further, he says, since these new mall tenants expect the promotion they pay for, they end up lacking the skills they need to promote their Web sites properly. "The fact is, any site, whether it is in a mall or stand-alone, requires promotion," he says. "There are many ways to do it, but relying on your mall landlord is not going to do the trick in most instances."

For World Doll Shop, a strong advocate of online malls, business strategies like selling unique, reasonably priced products and using very targeted advertising are proving effective online. The firm is also presently evaluating different advertising options, though Pietrafesa says the most critical issue for the company's online effort is tied into the iMALL results -- numbers that have kept his company profitable since week two of operation.

Peter Kent, author of "Poor Richard's Web Site: Geek-Free, Commonsense Advice on Building a Low-Cost Web Site" (1998), urges e-commerce companies to avoid cybermalls and opt instead for a stand-alone site. "Most Web malls charge more than the value of the services they provide, and most won't bring you a lot of traffic," he says. "You have to find ways to generate traffic yourself, but they'll charge more for their services than a normal Web-hosting company charges."

Kent explains that some Web malls are better than others are, but it's just not their "mall-ness" that makes them good. He advises e-companies to compare Web malls with hosting companies, pick the best deal, and avoid assuming that "being in the mall" will bring them a lot traffic. Kent feels that most promises of increased viewership are grossly exaggerated.

"Mall-site owners I've spoken to have expected a lot more traffic than they ever received," he explains. Dr. Ralph F. Wilson, editor of Web Marketing Today, based in Rocklin, Calif., agrees: "If [sites] are in one or more malls, then all the better, though I don't believe that most malls bring much traffic compared to what could be generated by the aggressive merchant working to increase search-engine traffic through positioning and other techniques."

There is one case, Kent says, where sites may be well suited for malls: "Let's say you have a product to sell, but don't want to learn how to put up a Web page. You're willing to promote your product in newsgroups, mailing lists, search engines and so on, but you won't want to mess with a site. It might be worthwhile setting up a mall site -- not because you expect the mall to bring you lots of business, but because it will create your Web site for you. All you have to do is promote the product and send people to your site, where, if you're lucky, the mall has set things up so your prospective clients can place orders."

Helping on the Back-End

In addition to aiding in the setup of a Web-based storefront, most malls offer a built-in central-purchasing system. What this means is that companies don't have to pay for shopping-cart software up front. Instead, Wilson says, you'll pay for it in higher fees over a period of time. "The way shopping-cart software works, however, is to bring the customer into a state in which the shopping system is functional," explains Wilson, whose company provides information and research in the areas of Web marketing and e-commerce. "To do this, you bring them in through a specific 'front door.' Once in this state, consumers can purchase items from any store in the mall and pay once, because the mall often takes care of the whole system."

iMALL COO and executive vice president Joe Ruszkiewicz says his company does handle the back-end duties, yet he suggests a dual approach to online commerce - including both a standalone Web site and a mall presence. One of iMALL's sites, for example, merchantstuff.com, offers companies the ability to create a site, get a merchant account, set up a payment gateway, and create a shopping basket. "It's the only site on the Internet where you can get your business online without having to assemble all of the components yourself," says Ruszkiewicz. "For example, with the add-on wizard, the bolt-on function allows you to add the e-commerce function to an existing Web site that's already in place."

The Drawbacks

While the experts agree that most online malls provide a directory that will list a company and perhaps attract traffic, Kent says "the cost will probably be way above the value." He cites the expense involved and the shabby design services offered as the two major drawbacks to most online malls.

"There are probably some malls with good design services, but many seem to have very poor design services," he says. "One major mall, for example, recruits anybody who'll pay the training fee as Internet consultants. So the person designing your site may be a bartender or bus driver."

Another real problem with online malls lies in the restrictive qualities of the cyber-setup. For example, Wilson says some malls are set up so the merchants don't have their own URLs, so customers can't get to the store except through the mall's front door.

"This severely decreases the merchant's chance of success, since all marketing must be done by the mall owner, and few carry on serious marketing," he explains.

A Targeted Slant

A quick look around the Web reveals various specialty or regional malls -- from those that cater to a specific niche, like antiques, to those that target a particular geographic region. And while they may appear to be more tightly focused than a mall that appeals to a broad group of cybersurfers, there are some definite drawbacks.

"Regional and niche market malls stand a better chance than 'blanket' malls, but there are cons here, too," says Daniels. "For instance, why would a business owner choose to set up shop in the same building as hundreds of competitors? Have you ever seen a shopping mall with 100 stores carrying the same product? Sure, some stores will make sales, but eventually the sales will be filtered to only a few stores who offer the best prices and have the best selection. Who wins here? Again, the mall operator who can sell advertising and rent out space to unsuspecting business owners."

Wilson adds that the most effective regional mall is Yahoo!, which is free to merchants but increasingly difficult to get into. "Some niche sites, such as the Antiques Mall, are exceptions to norm and can be very advantageous for merchants," he says. "Before you join a mall, however, phone some of the merchants you find there and ask if being part of that mall brings them much additional traffic."

Timely Advice

For better or worse, Kent says, the online mall is here to stay. Because it's easy for a hosting company to set up a mall and include its customers, he says, the malls will stick around. But, he says, there will be less focus on the idea of being in a mall because it really doesn't bring a great deal of business. "Remember, Amazon.com and CDnow are not in malls," he says.

For new online storeowners, Pietrafesa says figuring out how to get customers to visit is the whole challenge. "I've spoken to people who have spent good money and time and have gotten nowhere ... and still don't know what to do," he says.

According to Kent, companies considering an online mall versus a standalone site need to first take two steps: "Create a site that provides people with a reason for visiting it. Remember that your reasons for having the site are not the same as the buyer's reasons for visiting. Second, once you have a site people would want to visit, then you have to tell people about it, as many ways and as often as possible!"

Wilson adds: "Do a very careful business plan, and make sure you build in at least as much money for site promotion the first year as you spend on developing the Web site. Once you have an attractive and workable online store, site promotion is the single most important element of online success. Being part of a mall has little to do with a merchant's success."

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