June 1996

Root Page of Article: Building "Webcentricity", by Christopher Kresser

Sell Products/Offer Services

The Web provides companies with a marketspace in which products can be sold and services offered at a distribution cost approaching zero. Combining elements of direct marketing with in-store shopping gives the Web the potential to be vastly more efficient than either of these methods by themselves. One-to-one relationship marketing, customization, and the ability to offer much broader definitions of products and services increases the probability of a sale. Currently, due to the demographic characteristics of the majority of Web users, technological limitations, and concern about security it is not profitable to sell most products on the Web. Books, music, consumer electronics, computers and accessories, software, travel, financial services, and real estate appear at this time to be the most marketable products on the Web. It seems that the advantageous communications characteristics of the Web are best suited for the sale of these products. This is expected to change to some degree as bandwidth improves and consumer fears about security are allayed.

Using the Web as an online storefront, companies such as Tower Records and 1-800-FLOWERS sell their product via an online-order form, an 800 number, fax, or least popularly, through snail mail. The number of products being sold on a site ranges from one to thousands. Taking the online storefront concept a step further, some firms have decided to market their products in virtual malls that bring many companies together in a single virtual marketplace, much like a traditional physical mall.

There are a number of virtual malls on the Web, but eShop Plaza seems to be approaching the online storefront business model most effectively. eShop has five anchor stores: Spiegel, The Good Guys, 1-800-FLOWERS, Tower Records, and Insight. It is attempting to allay consumers' fear of purchasing online by guaranteeing that it will pay any charges levied on its customers by their credit card companies for fraudulent purchases made with stolen card numbers. Consumers can also avoid incurring the charges of their Internet Service Provider while using the Web by using direct dial-up software to access eShop Plaza at no cost. They have correctly assumed that no one will be willing to pay to go shopping. eShop Plaza offers coupons, discounts, and other incentives to build and retain shopper loyalty. The first time one ventures into eShop Plaza, he/she is likely to be presented with a coupon from Tower records for $3 off all CD's priced $12.99 and above (better than a 20% discount). Similarly, 1-800-FLOWERS offers consumers two $5-off coupons on their first visit. Most important, the shopping experience is consumer driven. A virtual interface designed by an award- winning architectural illustrator shows a simulated 3-D view of a plaza that is intuitively navigable and visually pleasing. Simply point your mouse to the store you want to visit and you're in.

Companies which have no products of their own are also using the Internet to sell to consumers. The explosion of digital information technologies has made it possible for individuals to access an almost unlimited source of content at any hour of the day, any day of the year. Access to and control of information has become an increasingly important factor in the success of a firm in a highly competitive, globalized economy. Executives, marketers, and consumers alike have neither the time nor the desire to browse through endless headlines to find what they are looking for; they want information and news that is timely and customized to their professional or personal needs. Companies like Individual, Inc. have created services that address these demands. The customer selects certain areas which he/she would like to receive information about from a huge list of categories and decides which format the information will be delivered in (email, fax, WWW). After the choice is made, Individual sends a brief summary all of the top news releases for the selected categories every day at an appointed time (usually by 8:00 AM). The full text of a story can then be ordered, if the consumer is interested, for a charge. This has become a highly popular service.

The commercial scenarios snd suggestions for successful Web-based business models I have provided throughout this paper are certainly contingent upon the viability of the World Wide Web as a commercial medium. Currently there are significant barriers to the commercialization of the Web. Convenience of access is at the core of the adoption of any technological application and determines its ultimate success. (Gupta, 1995) The primary issues in convenience of access, according to professor Hoffman at Vanderbilt, are bandwidth (high speed communications), ease of finding an Internet service provider, and the diffusion of the software/hardware/modem bundle into the home. (Hoffman, 1995) Just six months after professor Hoffman made these observations, solutions to these potential problems are already in view. This is largely due to the dramatically increasing commitment and attention of major corporate powers to the development of the Web. Cable modems and further deployment of ISDN lines will dramatically enhance high speed communications and reduce/eliminate the bandwidth problem. The entrance of telecommunications powerhouse AT&T into the Internet service market, with MCI and Sprint following suit, has made it much easier for consumers to gain Internet access. To address the high cost and sometimes complicated process of setting up the hardware and software needed to get online, Oracle has already developed a device called a "network computer" which will make browsing the Web as easy as watching television.

From the firm's perspective, the barriers to the adoption of the Web as a commercial medium are primarily focused around the lack of a proven method of measurement. Firms are having a difficult time quantifying the number of people on the Net and the resulting uncertainty makes investment decisions difficult (Hoffman, 1995). The lack of established criteria for determining whether a Web site is successful or not is also a problem. However, these are problems that are not difficult to overcome, and they are certainly being addressed by everyone with a financial stake in their solutions. Significant strides in the development of standards have been made recently and will continue to be made until a satisfactory solution has been reached.

It is my opinion that the question that we should be asking is not whether or not the Web will be a commercial medium. (I hope that I have answered that adequately in this paper.) Rather, we should be concerned with how we utilize the unique communications characteristics of the Web to usher in a new paradigm of commerce and communications. The Web's unparalleled capacity to represent many different types of businesses, organizations, and individuals from all over the world in a seamless, interactive environment creates almost unlimited opportunities. Similarly, we have come to a point in the evolving economic "ecosystem" where we realize that if commercial entities do not contribute to and nourish the economic community which supports them and makes them strong, their "species" will ultimately become extinct.

The quintessential example of this concept is the steady, continuous decline of Apple Computer. For years Apple's executives have focused on conventional competition - arguing that their operating system is better than Microsoft. "People don't buy operating systems or boxes. They understand that the preponderance of innovation, venture capital, and management talent in the information industry is focused on "Wintel" PCs - those using Microsoft Windows and Intel chips" (Moore, 1996) No matter how strong Apple's product becomes, it can't possibly compete against the Wintel "species" without forming strategic partnerships in chips and motherboards, software and services, wholesale and retail. This "requires shared visions, forming alliances, negotiating deals, and managing complex relationships" (Moore, 1996). Microsoft and Intel are supported by a robust and resilient business ecosystem. Apple, however, is "like a species whose habitat is declining. No matter how 'competitive' the species is, it can't survive if it has no food or shelter" (Moore, 1996)

[] Lapham points out that the Web provides a way to look at information in new ways.

The nature of the Web as a communications medium which can support a variety of economic "species" in a single "habitat" makes it an ideal channel for the development of partnerships and alliances which will enhance the strength of the partners and contribute to the growth of the business ecosystem as a whole. It must be understood that the Web is not simply a new medium which will improve upon traditional marketing and communications strategies and techniques. It is an entirely new marketspace with the capacity to build relationships between individuals and organizations that were previously impossible. These new relationships will have a fundamental effect upon the basic economic fabric of our society. While it is early still to accurately predict the full scope of effects this new media marketspace will have, we must be aware that we control and direct the course of its development through our involvement and participation. New technologies do not develop and proliferate in a vacuum. We have a responsibility to take full advantage of what this new medium has to offer and to ensure that it's potential is understood and fully utilized.

That is why I would like to end this discussion on the Internet as a Commercial medium with a social call to action. I wish to challenge the notion that commercial development and social responsibility cannot occur simultaneously. In fact, I believe that in today's business ecosystems both of these concerns are integral parts of a unified purpose. I hope that this article has demonstrated the potential of the Web to address these changes. I urge companies to consider how they can use the Web to bring the public and private sector together in relationships which will enhance the prosperity of the company and create a positive social change as well. The time has passed when financial gain and social responsibility are treated as mutually exclusive pursuits. Companies can no longer afford to view giving something back to the system as a public relations activity. They must see it as an integral part of their success and their survival, and the Web is the most effective channel through which companies can realize this goal. --

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