Oct. 28, 2003

The Problem with Internet Malls

I just had the privilege of being invited to sign up for some kind of Internet Mall. I could tell you the name of it, but why bother. There are probably many of them out there and they’re probably pretty much all the same. I’ve read enough information to know that Internet Malls are mostly a scam, but I decided to sign up for a free store so I could gather some information for this article.

Lets Go Shopping

I went and checked out the retail and wholesale prices at my new internet mall and then I compared them to the stores at yahoo! Here is what I found out by comparing five items.

Travel Express^TM Genuine Patched Leather Backpack with Cart

At my new mall, the suggested retail price was $51.95. The wholesale price was only $15.05. Not bad, I guess. You would make over $35.00 for each sale! At Yahoo! I found the exact same item for $29.95. Now why would someone pay you $51.95 for something that they can buy for $29.95. Well, I suppose you could lower the price to $29.95 if you want to. You would still make over $15.00. However, in order to set your own prices, you would have to buy a membership for $10.00 or $50.00 a month.

There were 5375 stores selling backpacks at Yahoo! Who knows how many people sign up for an internet mall. How many people do you think you can get to your store with all that competition?

Let’s look at some more items

Embassy^TM USA Soft Sided Briefcase

Retail price at my new mall: $26.95

Wholesale price at my new mall: $7.39

Retail price at Yahoo! Anywhere from $7.66 to $18.60

Number of Yahoo! stores selling briefcases: 2,644

Mitaki^TM Miniature Alarm Clock

Retail price at my new mall: $17.95

Wholesale price at my new mall: $3.60

Retail price at Yahoo! As low as $4.99

Number of Yahoo! stores selling alarm clocks: 2,661

Alex Naravrre^TM Ladies Genuine Diamond Watch

Retail price at my new mall: $23.95

Wholesale price at my new mall: $6.35

Retail price at Yahoo! As low as $5.49

Number of Yahoo! stores selling watches: 14,838

Giovanni Navarre^TM "Italian Stone" Genuine Leather Coat

Retail price at my new mall: $94.95 for small, $104.95 for large

Wholesale price at my new mall: $27.39 to 28.45

Retail price at Yahoo! As low as $49.95

Number of Yahoo! stores selling leather coats: 1,013

In some of the above examples you can save some money by buying retail from your own store, but in some cases it’s actually cheaper to pay retail at a Yahoo! store than it is to buy wholesaler from your own mall. Is it worth joining? Maybe. You can get an internet mall for free and pay wholesale prices and maybe save some money. If you’re in it for a large residual income, do you think you’ll be able to generate enough traffic in order to sell enough product to make any decent kind of money?

A Pyramid Scheme in Disguise?

The way to make any real money at this mall is to build a large downline. You will get paid according to the number of people you have. I’d go into more details as how they pay you, but the way they explained on their site was way too confusing for me. As far as I know, a person may never get paid. The problem with this type of set up is that eventually the people at the bottom will be paying the monthly fee but never earning any money.

I think I’ve been able to prove two things here:

1. With all the competition out there, and most of it selling the same merchandise at much cheaper prices, the chances of you making any money selling products is pretty slim.

2. The way to make money in this program is to build a large downline and receive money from the fees that they pay every month.

Is this a pyramid scheme? You decide.

Pyramid schemes, as currently defined by the Federal Trade Commission (FTC) and in many state laws are plans which do the following:

1. concentrate on the commissions you could earn just for recruiting new distributors

2. generally ignore the marketing and selling of products and services

I don’t know if all Internet Malls work this way. Some of them may very well concentrate on making sales. But with so much competition out there, can a person really make any money this way?