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The Rise and Fall of the Online Mall

The Rise and Fall of the Online Mall

With Yahoo! and MSN generating a combined 100 million visitors per month, Yankee Group analyst Ritter said major retailers find it hard not to keep a portal presence.

By Lou Hirsh
01/29/02 6:49 PM PT

At one time, e-commerce retailers found it crucial to join one of the major online malls -- such as Yahoo! Shopping, Lycos or Excite -- if they wanted to have any chance of success. But times are changing as portal sites de-emphasize shopping and consumers find other ways to access their favorite stores on the Web.

According to experts, major online retailers have found plenty of avenues to draw shoppers without exposure on portals, although malls do have a role to play in helping smaller companies grow traffic and build their brands.

"The virtual mall doesn't take the place of the strip-shopping center that people drive to every week," GartnerG2 research director David Schehr told the E-Commerce Times. "There are different dynamics involved."

No Anchor Advantage

In a brick-and-mortar mall, small stores benefit from traffic generated by larger "anchor" stores that attract the bulk of shoppers. In online malls, Schehr said, smaller stores cannot count on this effect, since the big stores are finding more effective means than portal presences to sell their wares.

This has mostly to do with the way shoppers access online stores. Rather than browsing randomly on a portal, Schehr noted that many people just type store names into the browser window.

"Consumers have shown they are just as likely to use a search engine," Schehr said, adding that this is the preferred way to locate several stores selling a specific product.

Offline Familiarity Factors

Meta Group senior program director Gene Alvarez told the E-Commerce Times that most consumers hear about online stores through offline means, such as advertising and word-of-mouth. In addition, shoppers tend to frequent the Web stores of companies with which they are already familiar.

"Brick-and-mortar businesses are finding they can attract users to their Web sites using shopping bags, trucks, product packaging and their traditional advertising outlets," Alvarez said.

With Web use rising but consumers' lives getting busier, most major companies are looking for creative ways to grab buyers' attention in the course of their regular daily routines, rather than hoping shoppers will run across their online sites by chance. Alvarez noted that even M&M-Mars posts its Web address prominently on candy wrappers.

'Grand Central' Effect

This shift in strategy makes online malls less than vital to the success of major retailers, but Alvarez said the "Grand Central Station" effect of portals can help boost the profile of smaller companies.

Those companies include businesses selling collectibles, hobby items and other niche products whose sale in physical stores is not cost-effective.

Alvarez noted that portals still attract enough eyeballs to create aggregate traffic and brand recognition for some small or new companies that could not count on getting the same exposure elsewhere.

Portals Still Benefit

Experts noted that the major portals have not entirely written off shopping. In fact, according to Yankee Group analyst Paul Ritter, portals like Yahoo! and MSN still see partnerships with retailers as a good way to increase revenue and lower dependence on advertising income.

"The primary driver for the retailers is more to increase traffic than to further their brand, although brand extension can certainly result from an association with the right portal site," Ritter, the Yankee Group's program manager for Internet market strategies, told the E-Commerce Times.

Ritter added that several high-profile retailers -- such as Eddie Bauer, Victoria's Secret, Brooks Brothers, Crate and Barrel, Nordstrom and Spiegel -- maintain presence on the Yahoo! and MSN portals as part of an overall strategy to increase sales channels.

With Yahoo! and MSN generating a combined 100 million visitors per month, Ritter said major retailers find it hard not to keep a portal presence, especially during busy times like the holiday shopping season.

"Both Yahoo! Shopping and MSN eShop experienced tremendous sales results over the holiday shopping season, as did many of their retailing partners," Ritter said.


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