An e-commerce casualty, IBM shuts mall on Net

After nearly a year of attracting few shoppers, IBM will close World Avenue, its shopping mall on the Internet. But even as World Avenue is closing its shopping mall doors, America Online considers its mall a success, with twice as many people making purchases on AOL this year as last year.

After nearly a year of attracting few shoppers, IBM will close World Avenue, its shopping mall on the Internet.

IBM declined to reveal how many shoppers had bought from stores hosted by World Avenue, but did acknowledge that the numbers were disappointing.

"Obviously it wasn't where we wanted it to be," said Tim Breuer, a spokesman for the New York-based company.

With World Avenue, IBM was responsible for marketing and driving traffic to a Web site, in addition to providing the underlying technologies which powered the electronic commerce taking place there, according to Breuer. World Avenue's demise will let IBM re-focus on its true business - creating the underlying technology, he said.

"IBM's strategy as a company is to be an IT partner and enabler," Breuer said. "We're a behind-the-scenes partner."

In keeping with that strategy, IBM has built around 150 Web sites for individual customers, and has a hosting business which currently serves 300 Web sites. However, IBM is not involved in marketing or other non-technical aspects of those sites, he said.

World Avenue, which will close its electronic doors on July 9, currently hosts 17 stores, ranging from upscale Canadian dry-goods seller Hudson's Bay to meat merchant Omaha Steaks. IBM hosts the sites using its Merchant Server software and provides operational services and maintenance, Breuer said. The companies designed their own sites using Merchant toolkit, he said.

IBM collected an up-front fee from each company, in addition to monthly fees and 5% of any sales, Breuer said. He declined to provide other details of any monetary transactions.

Logging on to the site, at, visitors are greeted by a list of stores broken out by category, including "fashion", "electronics and photography" and "cooking and gourmet foods". That broad selection may have been part of the problem, according to Trink Guarino, an IBM spokeswoman.

"It's mixing apples and oranges," Guarino said. "The only thing they had in common was retail."

One analyst said that IBM may have fallen victim to being in the right place at the wrong time. In spite of all the hype, e-commerce is still very new, according to Geri Spieler, a Gartner Group analyst.

Companies think, " 'If we build it, they will come,' and it's just not happening yet," Spieler said. "It's a 'yet' issue."

Another observer questioned the strength of the "mall" approach in e-commerce.

"I don't think the mall model has been successful online in most places," said Nicole Vanderbilt, an analyst with Jupiter Communications in New York. "The mall metaphor [doesn't] translate into the online world."

But there are notable exceptions.

Even as World Avenue is closing its shopping mall doors, America Online considers its mall a success, with twice as many people making purchases on AOL this year as last year, according to Wendy Goldberg, an AOL spokeswoman.

AOL has embarked on a major refurbishing of its mall, known as Marketplace. In July or August, AOL will re-introduce its electronic mall, rechristened "The Shopping Channel", Goldberg said.

In addition, AOL has announced a partnership with CUC International, a membership-based consumer services company with 68 million members worldwide, according to Goldberg.

CUC International offers its members discounted goods and services through membership in various groups devoted to activities such as travel, automotive, shopping, and vacation-home time-sharing, she said.

Next month, CUC will offer the public membership in NetMarket, an umbrella group covering many of its existing groups, she said. Through NetMarket, "one membership fee gets you access to a lot of different products and services", Goldberg said.

Starting in mid-1998, NetMarket will have a mirror site on AOL's The Shopping Channel, and each company will promote the other's membership through its own channels, she said.

According to both AOL and analysts, AOL's e-commerce success can be summed up succinctly: eight million users.

"We have the member base, the platform, the eyeballs to direct people," Goldberg said. "CUC comes to us because we do have those eyeballs."

Jupiter's Vanderbilt agreed, saying AOL has "a fairly captive audience".

Moreover, public perception has played a role in AOL's e-commerce success.

"It is recognised as an aggregator of content and commerce ... whereas IBM has a strong brand but not necessarily as an interface to consumer and retail," Vanderbilt said.

Notwithstanding AOL's achievement, most successful sellers on the Internet to date have been standalone sites, such as CDNow, Virtual Vineyard and, Vanderbilt said.

In fact, many of the companies with a spot on IBM's World Avenue already had their own sites, and went on World Avenue as an adjunct.

But having an IBM presence between the stores and their customers was distracting, IBM's Guarino said. For example, Omaha Steaks' customers logging on to World Avenue don't necessarily want to be greeted by IBM and other companies, she said.

"We really were getting between [stores] and their customers," Guarino said. "They want their brands front and centre."

But IBM would not characterise World Avenue's demise as a failure, saying that it was a pilot project which had yielded important results. "One of the things we've learned is that all of the technology used for World Avenue has been validated - it works," Breuer said.

Moreover, IBM is not completely abandoning the mall model.

The company hosts what it says is a successful mall, called "Aeon", in Hong Kong. The difference is that Aeon is marketed by Mitsubishi, with IBM taking care of the back-end technological issues, Breuer said.

IBM is also slated to launch an experimental electronic shopping mall in Europe in September. Called "Planet Market", the site will be organised by country and is designed to test out the legal issues faced by small and medium-sized enterprises doing business on the Web, according to Sanjaya Addanki, general manager of IBM's Network Computing Solutions, Europe, Middle East and Africa.

Vendors will pay $US3550 for the right to display up to five products on three HTML pages, and the Planet Market pilot will be evaluated after two months to see if it should continue, Addanki said.

"I think we're seeing some shakedown," Gartner Group's Spieler said. "It's early in the game - it's just early."

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