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E-commerce Week in Review

From: Ravi Kalakota <kalakota@uhura.cc.rochester.edu>
Date: Mon, 14 Oct 1996 02:06:19 -0400 (EDT)
Message-Id: <199610140606.CAA18615@uhura.cc.rochester.edu>
To: www-talk@w3.org

            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

Copyright (C) 1996 Ravi Kalakota.  
All rights reserved.   May be reproduced in any medium for noncommercial 
purposes, as long as proper attribution is given.

- Editor's Note
- FedEx enters the Internet Commerce arena -- Is this a smart move?
- AT&T and AOL’s Service Guarantees - Are they effective or useful?
 - Interesting Web Company Profile: 
                  Internet Profiles Corporation (I/PRO)
- Un-Apologetic Disclaimer
- Subscription Info

Editor's Note
This free newsletter is a summary of major announcements in the prior 
week for those interested in the e-commerce area but  don't have the time to 
track down the information.  I'll present some factual recent news every 
Monday about the e-commerce industry, where it has been, where it is now 
and where it is going. I'll also throw in an editorial opinion or two to spice 
things up.  

If you want to contact me with comments, suggestions or to be added to a 
automatic mailer, send mail to: kalakota@uhura.cc.rochester.edu.

Federal Express Corp .announced last week that it is set to provide a 
software package, BusinessLink, designed to help companies create Internet 
storefronts, that it claims will help companies sell products via the Internet.  
FedEx  is starting its "BusinessLink" software program with selected 
customers, with plans for “free” national distribution next year.  
BusinessLink has been beta tested by a  group of  FedEx  customers, most 
notably computer supplier Insight Direct.

How does it work? 
1) With BusinessLink, companies can put catalogs on a secure  FedEx  
server for potential customers to review and then order from them.  FedEx 
provides vendors with software to create and update their own on-line 

2) Buyers around the world will be able to search for products, check 
pricing information and place their orders. The FedEx server takes the credit 
card information and processes it internally (not clear what encryption 
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. 

4) After confirmation each order is linked to a FedEx  tracking number; the  
FedEx  PowerShip system generates the shipping label and barcode, and the 
item is ready for shipment.

5) Both the vendor and the buyer have real-time access to package order and
tracking information from pick-up through delivery.

With  FedEx BusinessLink, the company will become the first to provide 
businesses the capability to electronically integrate the ordering of products 
on-line with the ability to fulfill and deliver them anywhere in the world. 
According to a comment from the press release: the objective is  to enable 
companies of any size to become a global marketer and create new sales 
channels without the need to invest in additional customer service and 
warehousing. In the “ideal case”, the offer provides a low-cost, low-risk
method to meet customer demand while minimizing inventory.

From a business angle what are the challenges? 
This is a very smart move on the part of FedEx. The objective of the offer is 
clear: move upstream into the order taking process, to complement strength 
in order fulfillment. 

Why is this necessary? FedEx is facing increasing pressure in its core 
business and needs to ensure traffic on its transportation network. This is 
very similar to the challenge facing telephone companies, like AT&T, who 
are struggling to come up with creative ways of funneling more traffic onto 
their backbones. Unfortunately for them, much of the telephone traffic that 
the Internet is generating is not a per-minute charge type traffic which their 
business models are heavily wedded to.

The immediate challenge for FedEx:  get a sizable number of vendors with 
compelling content online who are of interest to Joe and Jane consumers. 
Another challenge is to get the consumer to come to the FedEx site. This can 
be accomplished by a media blitz preferably television commercials that 
inform the general public about the site and the advantages of ordering 
through that site. 

Now this begs a question: Why as a consumer should I order from the 
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 
buying, say office supplies. But, for an average consumer buying 
information products or “sexy lingerie” these benefits are irrelevant. I 
noticed that very few big companies that attempt Web-commerce actually 
think about the value to the end-customer. Most of them make generic 
statements like: It is cool, it is convenient, it is cost-effective. These 
statements don’t amount to much because they fail to capture the 
fundamental distinctions in why a consumer selects one site over the other.

What is the benefit for a businessman thinking of setting up a catalog on the 
FedEx server? The most obvious benefits are to companies serving the 
business customers (or business-to-business marketing). Many firms are 
improving their overall procurement process by moving towards integrated 
purchasing and payment systems. 

Recently it was brought to my attention that while production-related 
purchasing is quite streamlined, non-production related purchasing is quite a 
mess in most companies. Non-production related purchasing is one area 
which can benefit enormous from electronic commerce. To give you a size 
of the market opportunity, consider Xerox Corp.-- one billion production 
related purchasing and close to four billion in non-production related 

Most buying organizations are focusing their purchasing activities on 
delivering value to the enterprise by emphasizing relationship management 
with key vendors while minimizing routine transaction processing. If FedEx 
is smart it can take advantage of this trend by enabling online partnerships 
between buying organizations and their key vendors.  This can be done by 
creating a customized interaction between a vendor and a frequent customer.

In the long-run, FedEx can gain a lot of revenue from professional services 
which help clients develop strategies, systems, and services to implement 
processes that improve customer service, lower costs, and enable 
purchasing partnerships.

AT&T and AOL’s Service Guarantees

On Tuesday, AT&T announced a suite of offers and guarantees. AT&T's 
new  electronic commerce  services include a turnkey solution for 
businesses to design, build and maintain Web sites; new ways of attracting 
Web-surfing consumers to them;  transaction capabilities via  AT&T  
SecureBuy Service (partnership with OpenMarket); and guaranteed credit 
card transaction security for Web shoppers.

The three service guarantees are:

1) AT&T  will guarantee secure transactions for Web shoppers who join the 
free  AT&T  SecureBuyer's Program and charge their Internet purchases to 
their  AT&T  Universal Card, regardless of which Internet access provider 
they use. Web shoppers will not be required to pay anything if an online 
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 
amount of the sale, up to their monthly SecureBuy Service fee (ranging 
from $ 395-$ 595 per month), in the unlikely event an order does not reach 

3) AT&T  is offering customers who use their Web hosting services an 
"Internet Server Availability" guarantee that assures their sites will be open 
for business 24 hours a day, seven days a week -- increasing the potential 
for business profitability and eliminating the "server not available" response 
Web surfers too often receive when trying to access popular sites. In the 
unlikely event that the  AT&T  server is unavailable the customer can receive 
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 
new program designed to protect its members when making purchases with 
a credit card from AOL approved merchants. AOL said that if the credit card 
company does not waive the usual liability of up to $ 50, it will reimburse 
the customer. AOL Guarantee promises protection from credit card fraud 
and 100 percent customer satisfaction or a money-back guarantee. In the 
press release it was stated that there are about 500 businesses that sell 
products online that are accessible through AOL. However, of those, only 
about 50 are considered certified merchants since their transactions are 
conducted solely online. 

The main difference between AOL’s guarantee and that offered by  AT&T is 
that  AT&T  guarantees only purchases made with the Universal card. In 
contrast, the America Online guarantee covers purchases made with its 
certified merchants over its network.

It is not clear how these new programs are going to stimulate the Web 
economy, and attract customers.  In my opinion, customers are not buying 
online because there is nothing compelling to buy. Even if there is 
something compelling they can get it easier and faster through other delivery 
channels. The fundamental problem with Web commerce is “content” not 
secure delivery!!

The incentive for merchants and consumers cannot be dumber. Merchants 
that sign up for the AT&T SecureBuy Service by January 31, 1997, will 
receive the first 500 online transactions processed every month free for one 
year. If you really want to encourage adoption, how about giving the entire 
year free for the first 500 merchants? 

As a consumer incentive, surfers who join the  AT&T  SecureBuyer's 
Program will receive an  AT&T  SecureBuy Promotional Card valid for 100 
free minutes of  AT&T  long-distance calls after spending $ 25 online at one 
or more of the  AT&T  hosted SecureBuy Web sites. 

Interesting Web Company Profile: 
    	Internet Profiles Corporation (I/PRO)
I/PRO (http://www.ipro.com/) is aiming to be the Nielsen of the Web.  As 
ad-generated revenues become increasingly more important, particularly for 
search services companies (such as Yahoo, Infoseek, etc.), content 
aggregators, and providers (such as Pathfinder), a third party service to 
track the number of visits a Web site receives has become increasingly more 

Using agent software, namely I/COUNT, I/PRO receives information from 
a site's host server, processes the information, and reports the information 
to advertisers.  I/PRO recently released a universal registration system, or 
passport, named I/CODE that tracks surfers across sites. Users provide 
relatively in-depth demographic information after which they are assigned 
an I/CODE enabling them to access and register for different information 
without having to fill out any other demographic surveys for participating 
sites. Sites that have adopted the I/CODE system include USA TODAY and 
Visa. I/PRO recently launched Java Count, an auditing system for tracking 
the number of Java applets that are being used and deployed on the World 
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 sell 
advertising to advertisers and media buyers. 

Non-Apologetic Disclaimer

The views and analysis expressed in Kalakota's E-Commerce Week in 
Review are the author's own, and may not necessarily reflect the views of 
any other person or organization.  Kalakota's Ecommerce Week in Review 
is not sponsored by any person, magazine or institution. 

Author’s Background
I became interested in E-Commerce in 1992 during my Ph.D at the 
University of Texas at Austin. During this period, I wrote what I consider 
to be one of the first books on Electronic Commerce: Frontiers of Electronic 
Commerce (Addison-Wesley). 

I have recently completed another book which looks at the business and 
management challenges facing organizations attempting to do electronic 
commerce. This new book: Electronic Commerce: A Manager’s Guide is set 
to hit the book stores late November. 

While writing these books, teaching and consulting on the subject, I have 
learned a lot about the area that I would like to disseminate to the Internet 
community free of charge. This newsletter is one such outlet.

Subscription Information

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 
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
Xerox Asst. Professor of Information Systems
Simon School of Business, University of Rochester
e-mail: kalakota@uhura.cc.rochester.edu
telephone: (716) 275 3102
Received on Monday, 14 October 1996 02:06:27 UTC

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