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."
Since the division's close, iMall's stock has bounced to around $7 per share, up from a low of $5.50 per share.
Another change involves the way the virtual mall, where clients pay for Web pages on a giant site maintained by iMall, actually runs. About half of iMall's 1,600 tenants offer "brochure" pages, in which a consumer can view products but not actually buy them online. The other half are fully e-commerce-enabled, meaning that a consumer can order goods and pay online.
In order to help more clients develop full e-commerce sites, iMall spent the last year developing an e-commerce software program called Bolt-on.
The software allows businesses with existing Web sites, be they brochure sites in iMall or autonomous ones, to add e-commerce capabilities. Bolt-on users do not have to become tenants in the cyber mall, but their e-commerce ordering and processing is done on iMall's computers.
"The transition to fully enabled e-commerce sites is critical for businesses to make money from online sales, so consequently critical to (the mall's) success," said Peter S. Kirby, a member of the e-commerce team at Boston-based Gemini Consulting. "We call brochure sites 'commerce interruptus,' since people are ready to buy but can't follow through. That's how you lose business."
"This move allows us to grow our customer base tremendously without having to increase our overhead proportionally," Rosenblatt said. "Under our old system, we would have had to gain hundreds of new staff members to keep up with the growth."
To further advance iMall's role as an e-commerce software developer, the company brought in two new executives at the end of August. Ray Whitmer, the senior system developer, came from software powerhouse Corel Corp., and Vice President of Marketing Dan Odette came from AT & T;, where he helped launch its Internet access service WorldNet.
Analysts warn that iMall is tackling a challenging market with its e-commerce software.
"It is not a huge market in and of itself," said James McQuivey, online retail analyst for Cambridge-based Forrester Research. "And anyone entering the market will have to take on Yahoo!, which just got into the field to help grow its own group of retailers."
Moreover, McQuivey warned that a cyber mall itself might not be viable in the long run.
"In the real world, developers build malls by freeways or whatever, where there already is heavy traffic," he said. "Then customers can stroll around and visually identify what store they're interested in. An online mall does neither of these things. They hope traffic will come to them, and that customers will have patience to click through countless screens until they find what they want."
Still, iMall announced this month that it will exclusively handle the e-commerce on Universal Studios Online's AnimalHouse.com site, which attracted 3.2 million page views in its first four days. iMall will create, organize and run a section of the site at which universities and businesses surrounding them can sell products online.
"We were impressed by the direction iMall is heading," said Jay Samit, vice president of Universal's new-media group. "I've been in the tech business for 20 years, and I have a great respect for Richard (Rosenblatt). I have high expectations for how the AnimalHouse mall will do."
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