Like most Internet entrepreneurs, Richard Rosenblatt thought that his start-up company had a great idea.
Rosenblatt founded iMall Inc. four years ago, when online commerce first captured the interest of both the technology and retailing industries. To him, the idea of a "cyber mall," a collection of thousands of Web pages from retailers hawking their wares online, seemed like a sure-fire hit. To raise awareness of e-commerce opportunities and iMall's services educational seminars complemented the company's endeavors.
Rosenblatt's vision worked for a while, with the company seeing its revenue leap from $1 million to almost $17 million in two years. But then it stopped attracting new customers.
The Internet highway had left iMall behind.
iMall's problem is characteristic of the lightning-fast Internet industry, which can leave even the hottest start-ups stranded along the shoulder. To regain footing, company executives decided it was time for an overhaul. Its move from Studio City to Santa Monica last week marked the latest step in a makeover that has seen a near-complete change in management and strategy.
"Our company may have gotten off track, but I feel good about the direction that we're moving toward," said iMall Chairman and CEO Rosenblatt. "I've learned a lot over the last four years, and they have been a long four years."
The first step was to close the seminar division a somewhat risky move since it had brought in between 80 percent and 90 percent of the company's $16.8 million in 1997 revenues.
Chief Financial Officer Anthony Mazzarella said the division had such a high overhead that it was not profitable. Moreover, the business community finally had caught up on the learning curve, meaning that interest in the seminars was flagging.
"We now have the tools and relationships to build a pure e-commerce business with high revenues," said Mazzarella. "We don't want to cloud it with the less strategic fit of conferences."
There were other factors, too, including an increasingly tarnished reputation. Last year, iMall attracted the eye of the Federal Trade Commission, which has an ongoing investigation of the seminar industry. The Maryland Division of Securities also charged iMall with violating a state sales act.
Company executives deny there was any wrongdoing on their part.
"No matter how you do it, the (seminar industry) is not a classy business," Rosenblatt said. "We got dragged down with other people in the industry that didn't stage their business in a good way. For months, we've known that the seminar business was no longer consistent with our goal of having a strictly e-commerce focus."
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