The fall and rise of online shopping malls: April 05, 1999 issue of New Thinking

April 05, 1999 New Thinking:
The fall and rise of online shopping malls

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April 05, 1999

The fall and rise of online shopping malls

By Gerry McGovern

I doubt anybody in their right mind would build a mega shopping centre in the middle of the Mojave desert. And I don’t think that McDonalds is planning to open an outlet on the North Pole anytime soon.

Strangely, a lot of businesses took just those sort of illogical decisions when they built shopping centre/mall websites on the Internet in an Internet mall craze about three years ago. In Ireland alone, two banks did it, and I remember IBM and a number of other major entities doing the same.

When nobody came and nobody bought, these Internet malls were closed, and the received wisdom that was passed on was that Internet malls don’t work. Very faulty wisdom, very faulty thinking. It comes from the same dodgy logic which surmises that because Iranian men won’t buy Gillette razors, they’re not interested in consumer goods or personal hygiene. (Iranian men don’t buy razors because growing beards is part of their religion.)

Many of the early Internet malls didn’t work because they didn’t have an online marketplace to supply. Malls and shopping centers come after the city or town is built, not before. They demand a major shopping community around them before they can be successful. They are a response to the fact that a major shopping community exists and they seek to meet the shopping needs of this community.

The clever people saw that the Internet was a very dispersed environment. They realized that community feeds commerce, that commerce can’t survive and thrive without there first being a stable community that regularly frequents a particular space.

The clever people went about building ‘portals’ and other online community hubs and centers. They knew that if they had the people – the regular traffic – that then they could set up their Internet mall, or rent some space to other Internet malls or businesses.

The clever people are the ones we all know today. They are Amazon, Yahoo, America Online, eBay. They have the communities and once established they busied themselves setting up the malls, or whatever we want to call them.

You see, Amazon.com is not in the business of selling books. Yahoo is not in the directory business. America Online is not an online service provider. To one degree or another, all the above companies are in the business of creating and servicing communities.

In March 1999, Amazon.com launched an auction section to its website. In introducing the auction section, founder and CEO, Jeff Bezos, wrote about, “our community of 8 million shoppers.”

References to community can be found all over the website: “Our community rules are firm to keep your bidding and selling worry free…. The strongest communities are ones where neighbors know and help each other.” In fact, customers are even described as “Amazonians.”

Interestingly, John Riordan, president of the International Council of Shopping Centers, told Investor's Business Daily in March that, “shopping centers could form alliances with online retailers and "could help distribute goods bought online. They could, for example, offer their surplus space as 24-hour pickup points, or they could take returns of Net purchases.”

So, shopping centers do work on the Internet. It’s just that I don’t recommend building them in an online version of the Mojave desert.

Gerry McGovern

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Amazon.com is not in the business of selling books. Yahoo is not in the directory business. America Online is not an online service provider.