Personal Internet Malls: Biz Op or Biz Flop?

The trendiest new concept for new network marketing companies seems to be the Personal Internet Mall, otherwise known as the personal shopping site, and various other psuedoyms and acronyms.

Three years ago there was a bumper crop of Travel Agent Tutorial companies, this year's rotation seems to be the Mall Opportunity. In fact if you take the old "independent travel agent" moniker and sub in "independent mall owner", you're looking at a very similar model.

At its most basic level, what each of these companies offer in one form or another is a customized shopping site where the owner earns direct sales commissions (usually averaging 8%) on merchandise bought online through their site.

Comparison:

Affiliate Sites

Amazon.com - commission 15%

Online Internet "MALLS"

Pricenet member commission on Amazon.com purchases - 6%

The Math

How much product do you have to sell to cover your initial investment (excluding commissions for sales of "malls" to new independent mall owners)

The Pitch

Billions of dollars in sales each year on the internet. A booming industry. All you need to do is capture a portion of that traffic, and the company will help you do it. And for anywhere from $199 to $495 you can get your personal internet mall to capture some of those sales.

It's got a great ring to it. But is it true?

The Reality:

You, your friends, and your family are going to shop at your site, with the exception of companies that include an autobilling, in which case your downline will be forced to spend a certain amount each month (they may also be your friends and family). Companies that do include the autobilling may have the best opportunity to survive, as their mall operators will definitely receive commissions from merchandise sales. This makes regulators happy, or at the very least gives them something to look at if they are wondering if a company is a pyramid scheme.

In order to break even, you would need upwards of $6000 in sales in a year to make back your initial setup fees. Unless you spend $6000 personally online, this really isn't much of a business opportunity. Not when you can get the same custom site and higher rebate percentages at places like ocrebates for $20.00 a year or even free if you catch them during a promotion.*

PostScript: (1/1/2002)

There were many companies hitting the market when this article was written. Most of the biggest names have already hit our dead list:

WiMall

ISIValueNet

Fortune21

KM.net

PriceNetUSA - Pricenetusa.com

One World Online - oneworldonline.com

Bigsmart.com

The list goes on.

Post PostScript (8/20/2002)

*We've found one company that doesn't fit the standard mold, and we're sure there are others. Online Coupons at OCRebates.com is a super-affiliate program that offers members 100% of the merchant rebates on their purchases for a $20.00 flat fee annual membership, with a $5.00 referral commission. This is not an MLM. Simple and to the point, this site give you all the benefits of the online malls of the sites mentioned above that failed without the initial expense. There's also a list of instant flat fee rebates members can earn to offset the $20.00 membership fee - for example, Columbia House pays $16 for joining their CD club, and American Express up to $45.00 for obtaining a new card.