[10371] in www-talk@info.cern.ch
E-commerce Week in Review
daemon@ATHENA.MIT.EDU (Ravi Kalakota)
Mon Oct 14 02:20:43 1996
From: Ravi Kalakota <kalakota@uhura.cc.rochester.edu>
To: www-talk@w3.org
Date: Mon, 14 Oct 1996 02:06:19 -0400 (EDT)
Resent-From: www-talk@w3.org
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Kalakota's E-Commerce Week in Review - Vol. 1, Issue 1
Proudly Sponsored by NoOne - A company specializing in doing nothing
Weekly Summary of Major Electronic Commerce Events
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Copyright (C) 1996 Ravi Kalakota. =20
All rights reserved. May be reproduced in any medium for noncommercial=20
purposes, as long as proper attribution is given.
IN THIS ISSUE
- Editor's Note
- FedEx enters the Internet Commerce arena -- Is this a smart move?
- AT&T and AOL=D5s Service Guarantees - Are they effective or useful?
- Interesting Web Company Profile:=20
Internet Profiles Corporation (I/PRO)
- Un-Apologetic Disclaimer
- Subscription Info
Editor's Note
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This free newsletter is a summary of major announcements in the prior=20
week for those interested in the e-commerce area but don't have the time=
to=20
track down the information. I'll present some factual recent news every=20
Monday about the e-commerce industry, where it has been, where it is now=20
and where it is going. I'll also throw in an editorial opinion or two to =
spice=20
things up. =20
If you want to contact me with comments, suggestions or to be added to a=20
automatic mailer, send mail to: kalakota@uhura.cc.rochester.edu.
FEDERAL EXPRESS attempts INTERNET COMMERCE
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Federal Express Corp .announced last week that it is set to provide a=20
software package, BusinessLink, designed to help companies create Interne=
t=20
storefronts, that it claims will help companies sell products via the Int=
ernet. =20
FedEx is starting its "BusinessLink" software program with selected=20
customers, with plans for =D2free=D3 national distribution next year. =20
BusinessLink has been beta tested by a group of FedEx customers, most=20
notably computer supplier Insight Direct.
How does it work?=20
-----------------------
1) With BusinessLink, companies can put catalogs on a secure FedEx =20
server for potential customers to review and then order from them. FedEx=
=20
provides vendors with software to create and update their own on-line=20
catalog. =20
2) Buyers around the world will be able to search for products, check=20
pricing information and place their orders. The FedEx server takes the cr=
edit=20
card information and processes it internally (not clear what encryption=20
technology is used or which browsers are supported).
3) Once the payment is confirmed, FedEx transmits the order to a second
server at the merchant's location for fulfillment.=20
4) After confirmation each order is linked to a FedEx tracking number; t=
he =20
FedEx PowerShip system generates the shipping label and barcode, and the=
=20
item is ready for shipment.
5) Both the vendor and the buyer have real-time access to package order a=
nd
tracking information from pick-up through delivery.
With FedEx BusinessLink, the company will become the first to provide=20
businesses the capability to electronically integrate the ordering of pro=
ducts=20
on-line with the ability to fulfill and deliver them anywhere in the worl=
d.=20
According to a comment from the press release: the objective is to enabl=
e=20
companies of any size to become a global marketer and create new sales=20
channels without the need to invest in additional customer service and=20
warehousing. In the =D2ideal case=D3, the offer provides a low-cost, low-=
risk
method to meet customer demand while minimizing inventory.
From a business angle what are the challenges?=20
-----------------------------------------------------
This is a very smart move on the part of FedEx. The objective of the offe=
r is=20
clear: move upstream into the order taking process, to complement strengt=
h=20
in order fulfillment.=20
Why is this necessary? FedEx is facing increasing pressure in its core=20
business and needs to ensure traffic on its transportation network. This =
is=20
very similar to the challenge facing telephone companies, like AT&T, who=20
are struggling to come up with creative ways of funneling more traffic on=
to=20
their backbones. Unfortunately for them, much of the telephone traffic th=
at=20
the Internet is generating is not a per-minute charge type traffic which =
their=20
business models are heavily wedded to.
The immediate challenge for FedEx: get a sizable number of vendors with=20
compelling content online who are of interest to Joe and Jane consumers.=20
Another challenge is to get the consumer to come to the FedEx site. This =
can=20
be accomplished by a media blitz preferably television commercials that=20
inform the general public about the site and the advantages of ordering=20
through that site.=20
Now this begs a question: Why as a consumer should I order from the=20
FedEx site? What is the value proposition? According to the press release=
:
benefits to end-customers include:
-- Order and Tracking Numbers Linked: FedEx links business's
order confirmation number with FedEx shipping label and
barcode to ease package tracking.
-- Time-Definite Delivery: Shipping via FedEx eliminates
delivery time guesswork.
These benefits are kind of lame. They make sense for a business customer=20
buying, say office supplies. But, for an average consumer buying=20
information products or =D2sexy lingerie=D3 these benefits are irrelevant=
. I=20
noticed that very few big companies that attempt Web-commerce actually=20
think about the value to the end-customer. Most of them make generic=20
statements like: It is cool, it is convenient, it is cost-effective. Thes=
e=20
statements don=D5t amount to much because they fail to capture the=20
fundamental distinctions in why a consumer selects one site over the othe=
r.
What is the benefit for a businessman thinking of setting up a catalog on=
the=20
FedEx server? The most obvious benefits are to companies serving the=20
business customers (or business-to-business marketing). Many firms are=20
improving their overall procurement process by moving towards integrated=20
purchasing and payment systems.=20
Recently it was brought to my attention that while production-related=20
purchasing is quite streamlined, non-production related purchasing is qui=
te a=20
mess in most companies. Non-production related purchasing is one area=20
which can benefit enormous from electronic commerce. To give you a size=20
of the market opportunity, consider Xerox Corp.-- one billion production=20
related purchasing and close to four billion in non-production related=20
purchasing.=20
Most buying organizations are focusing their purchasing activities on=20
delivering value to the enterprise by emphasizing relationship management=
=20
with key vendors while minimizing routine transaction processing. If FedE=
x=20
is smart it can take advantage of this trend by enabling online partnersh=
ips=20
between buying organizations and their key vendors. This can be done by=20
creating a customized interaction between a vendor and a frequent custome=
r.
In the long-run, FedEx can gain a lot of revenue from professional servic=
es=20
which help clients develop strategies, systems, and services to implement=
=20
processes that improve customer service, lower costs, and enable=20
purchasing partnerships.
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AT&T and AOL=D5s Service Guarantees
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On Tuesday, AT&T announced a suite of offers and guarantees. AT&T's=20
new electronic commerce services include a turnkey solution for=20
businesses to design, build and maintain Web sites; new ways of attractin=
g=20
Web-surfing consumers to them; transaction capabilities via AT&T =20
SecureBuy Service (partnership with OpenMarket); and guaranteed credit=20
card transaction security for Web shoppers.
The three service guarantees are:
1) AT&T will guarantee secure transactions for Web shoppers who join the=
=20
free AT&T SecureBuyer's Program and charge their Internet purchases to=20
their AT&T Universal Card, regardless of which Internet access provider=
=20
they use. Web shoppers will not be required to pay anything if an online=20
purchase is made by an unauthorized user.
2) Merchants who subscribe to AT&T's new SecureBuy Service receive a
"Never Miss an Order" guarantee. AT&T will credit merchants for the=20
amount of the sale, up to their monthly SecureBuy Service fee (ranging=20
from $ 395-$ 595 per month), in the unlikely event an order does not reac=
h=20
them.
3) AT&T is offering customers who use their Web hosting services an=20
"Internet Server Availability" guarantee that assures their sites will be=
open=20
for business 24 hours a day, seven days a week -- increasing the potentia=
l=20
for business profitability and eliminating the "server not available" res=
ponse=20
Web surfers too often receive when trying to access popular sites. In the=
=20
unlikely event that the AT&T server is unavailable the customer can rec=
eive=20
a credit equal to one month's service fee per quarter.
Not to be outdone by AT&T, AOL on Thursday said that it is introducing a=
=20
new program designed to protect its members when making purchases with=20
a credit card from AOL approved merchants. AOL said that if the credit ca=
rd=20
company does not waive the usual liability of up to $ 50, it will reimbur=
se=20
the customer. AOL Guarantee promises protection from credit card fraud=20
and 100 percent customer satisfaction or a money-back guarantee. In the=20
press release it was stated that there are about 500 businesses that sell=
=20
products online that are accessible through AOL. However, of those, only=20
about 50 are considered certified merchants since their transactions are=20
conducted solely online.=20
The main difference between AOL=D5s guarantee and that offered by AT&T i=
s=20
that AT&T guarantees only purchases made with the Universal card. In=20
contrast, the America Online guarantee covers purchases made with its=20
certified merchants over its network.
It is not clear how these new programs are going to stimulate the Web=20
economy, and attract customers. In my opinion, customers are not buying=20
online because there is nothing compelling to buy. Even if there is=20
something compelling they can get it easier and faster through other deli=
very=20
channels. The fundamental problem with Web commerce is =D2content=D3 not=20
secure delivery!!
The incentive for merchants and consumers cannot be dumber. Merchants=20
that sign up for the AT&T SecureBuy Service by January 31, 1997, will=20
receive the first 500 online transactions processed every month free for =
one=20
year. If you really want to encourage adoption, how about giving the enti=
re=20
year free for the first 500 merchants?=20
As a consumer incentive, surfers who join the AT&T SecureBuyer's=20
Program will receive an AT&T SecureBuy Promotional Card valid for 100=20
free minutes of AT&T long-distance calls after spending $ 25 online at =
one=20
or more of the AT&T hosted SecureBuy Web sites.=20
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Interesting Web Company Profile:=20
Internet Profiles Corporation (I/PRO)
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I/PRO (http://www.ipro.com/) is aiming to be the Nielsen of the Web. As=20
ad-generated revenues become increasingly more important, particularly fo=
r=20
search services companies (such as Yahoo, Infoseek, etc.), content=20
aggregators, and providers (such as Pathfinder), a third party service to=
=20
track the number of visits a Web site receives has become increasingly mo=
re=20
important.=20
Using agent software, namely I/COUNT, I/PRO receives information from=20
a site's host server, processes the information, and reports the informat=
ion=20
to advertisers. I/PRO recently released a universal registration system,=
or=20
passport, named I/CODE that tracks surfers across sites. Users provide=20
relatively in-depth demographic information after which they are assigned=
=20
an I/CODE enabling them to access and register for different information=20
without having to fill out any other demographic surveys for participatin=
g=20
sites. Sites that have adopted the I/CODE system include USA TODAY and=20
Visa. I/PRO recently launched Java Count, an auditing system for tracking=
=20
the number of Java applets that are being used and deployed on the World=20
Wide Web.
I/PRO recently launched I/AUDIT a monthly report that provides the third=
-
party verification and summary of site activity needed to effectively sel=
l=20
advertising to advertisers and media buyers.=20
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Non-Apologetic Disclaimer
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The views and analysis expressed in Kalakota's E-Commerce Week in=20
Review are the author's own, and may not necessarily reflect the views of=
=20
any other person or organization. Kalakota's Ecommerce Week in Review=20
is not sponsored by any person, magazine or institution.=20
Author=D5s Background
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I became interested in E-Commerce in 1992 during my Ph.D at the=20
University of Texas at Austin. During this period, I wrote what I conside=
r=20
to be one of the first books on Electronic Commerce: Frontiers of Electro=
nic=20
Commerce (Addison-Wesley).=20
I have recently completed another book which looks at the business and=20
management challenges facing organizations attempting to do electronic=20
commerce. This new book: Electronic Commerce: A Manager=D5s Guide is set=20
to hit the book stores late November.=20
While writing these books, teaching and consulting on the subject, I have=
=20
learned a lot about the area that I would like to disseminate to the Inte=
rnet=20
community free of charge. This newsletter is one such outlet.
Subscription Information
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A Web-based version of this and other newsletters are available at:
< http://commerce.ssb.rochester.edu>.
If you would like this to be e-mailed to you, send e-mail to=20
kalakota@uhura.cc.rochester.edu, with your e-mail address.
I am working on setting up a LISTSERV so that subscribing becomes
easier. If anyone wants to host the newsletter or setup a LISTSERV,
drop me a line.
-- Ravi Kalakota
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Xerox Asst. Professor of Information Systems
Simon School of Business, University of Rochester
e-mail: kalakota@uhura.cc.rochester.edu
telephone: (716) 275 3102
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