Using the Internet for Business Success - Cengage Learning

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Learning Goals
After reading this chapter, you
should be able to answer these
questions:
1 What
is the Internet, who uses
i d f h ?
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Using the Internet
for Business
Success
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1

1
What is the Internet, who
uses it, and for what?
Internet
A worldwide computer network
that includes both commercial
and public networks and off ers
various capabilities including
e-mail, fi le transfer, online chat
sessions, and newsgroups.
transmission control protocol/
Internet protocol (TCP/IP)
A communications technology
that allows diff erent computer
platforms to communicate with
each other to transfer data.
World Wide Web (WWW)
A subsystem of the Internet
that consists of an information
retrieval system composed of
Web sites.
Web sites
Locations on the World Wide
Web consisting of a home page
and, possibly, other pages with
documents and fi les.
hypertext
A fi le or series of fi les within a
Web page that links users to
documents at the same or other
Web sites.
Internet service providers
(ISPs)
Commercial services that connect
companies and individuals to the
Internet.
The Internet is a driving force in worldwide business today. In just a short time, it has moved us
beyond the individual enterprise to an interconnected economy. In the virtual world of cyberspace,
companies transact business without regard to traditional boundaries and constraints. The Internet
creates new opportunities for growth through new products, greater speed to market, and enhanced
cost competitiveness. As a result, businesses have implemented new ways of operating that take
advantage of electronic commerce (e-commerce). The Internet has forced companies and even
whole industries to change their business models.
To succeed in business today, you must understand how this communication and transaction
medium is shaping business and society, as well as how to use the Internet to your benefit. We’ll start
our exploration of e-commerce with some background on the size of the Internet and how people
use it. Next we’ll look at the impact of the Internet on business operations and industry dynamics,
examine the growth of electronic commerce in both the business-to-business and business-toconsumer
markets, and describe the steps required to launch an e-business. The chapter ends with
a look at what lies ahead for e-commerce.
The What, Who, and Why of the Internet
It is hard to believe, but until 1993, hardly anyone knew what the Internet was. With unprecedented
speed, the Internet has become a mainstay for businesses and individuals. Whereas radio took
38 years to gain 50 million users, television took 13 years, and PCs needed 16 years, the Internet
took just 4 years. Now the Internet is a fixture in our lives at home and work. Consider the following
statistics about Internet users from several recent studies: 1
•
•
•
About 1.4 billion people worldwide use the Internet.
Over 218 million people in the United States are active users of the Internet (72 percent of the
population) and spend an average of 67.8 hours a month (or about 15 hours per week) online.
Consumers spent about $175 billion in 2007, a 21 percent increase over 2006. Forrester
Research predicts that total to reach $334.7 billion by 2012; JupiterResearch, however,
estimates e-commerce spending will be only $215 billion by 2012.
• According to Forrester, 88 percent of U.S. online consumers say that they have bought
something online in the past, and online shopping is growing faster than shopping in physical
stores.
What Is the Internet?
The phenomenon that is the Internet represents the convergence of the computer’s high-speed
processing power with telecommunications networks’ capability to transmit information around
the world almost instantaneously. It is the world’s largest computer network, essentially a worldwide
“network of networks.” All of the commercial and public networks that make up the Internet use
transmission control protocol/Internet protocol (TCP/IP), a communications technology that
allows different computer platforms to communicate with each other to transfer data. The Internet
is a truly unique entity—a decentralized, open network that almost anyone can access. It has no
beginning or end. Networks can be added or removed at any time.
The Internet began life in 1969 as ARPAnet, a Defense Department network connecting various
types of computers at universities doing military research. It subsequently developed into a larger
system of academic and research networks managed by the National Science Foundation (NSF). A
major growth spurt began around 1993, when the introduction of browser technology made it easy
to access graphics, sound, and text over the World Wide Web. The World Wide Web (WWW), a
subsystem of the Internet, is an information retrieval system composed of Web sites. Each Web site
contains a home page, the first document users see when they enter the site. The site might also
contain other pages with documents and files. Hypertext, a file or series of files within a Web page,
links users to documents at the same or other Web sites.
By April 1995, the Internet was so large that the NSF turned over its backbone—the major longdistance,
high-speed, high-capacity transmission networks—to a group of commercial carriers.
However, no one “owns” the Internet. Each private company operates its own networks. In addition
to network administrators and users, the Internet also includes several thousand Internet service
providers (ISPs), commercial services that connect companies and individuals to the Internet.
All these players create a shared resource that becomes more useful as the number of networks
expands.
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To users around the world, the Internet operates as a single seamless network enabling them to
send and receive text, graphics, movies, and sound files. With TCP/IP, the Internet’s interconnected
local and long-distance networks work together, regardless of the underlying hardware or software,
to send and receive information.
Today, most people use the terms World Wide Web and Internet interchangeably. The Internet
offers users other capabilities, however, including e-mail, file transfer, online chat sessions, and
newsgroups (discussion groups on just about any topic). Thanks to browsers, software that allows
users to access the Web with a graphical point-and-click interface, the Web has become the center
of Internet activity, with the largest collection of online information in the world. Because new
technology makes it possible to send audio, video, voice (including telephone calls), 3-D animations,
and videoconferencing over the Net, the Web has become a multimedia delivery system.
Who’s Online, and Why?
The Internet’s explosive growth is unparalleled. The number of host computers connected to the
Internet grew from 1.3 million in 1993 to over 541 million in January 2008 and continues to increase
by 25 to 35 percent a year. 2 With 72 percent of the U.S. population online, it’s no wonder that
Internet use is becoming more demographically varied. Although the Net was male dominated
for many years, Nielsen NetRatings’ monthly survey of Internet usage showed women comprise
51.5 percent of online users, even though they spend roughly five hours less per month online. 3
Historically, the online population has been younger, but Nielsen NetRatings’ April 2008 data
shows that nearly 40 percent of users are under the age of 35 and roughly 60 percent are age 35
or older. 4 Exhibit 1 shows a breakdown of the demographics of Internet users by race, geography,
income, and education. Exhibit 2 on the next page shows a sampling of popular Internet activities
these users are enjoying online.
As the characteristics of Internet users change, businesses must rethink the type of services
they offer and change marketing campaigns to reach new groups. One startling piece of information
from the Nielsen NetRatings survey is that over 15 million children ages 2 to 11 are online. Read the
Managing Change box on the next page to find out how some companies have built large Web sites
to cater to the abilities and interests of the youngest Internet users.
What Attracts Web Surfers?
Using the Hot Links in the other chapters of this book, you’ve discovered the wealth of resources
available on the World Wide Web. From the 10-day weather forecast for any city in the world to
statistics on steel production in Russia to the best-selling CD albums of the week—it’s all on the
EXHIBIT 1 Demographics of Internet Users
Percentage of group
Race/ethnicity who uses the Internet
White, Non-Hispanic 73%
Black, Non-Hispanic 62
English-speaking Hispanic 78
Geography
Urban 73%
Suburban 73
Rural 60
Household income
Less than $30,000/yr 55%
$30,000–$49,999 69
$50,000–$74,999 82
$75,000+ 93
Educational attainment
Less than High School 40%
High School 61
Some College 81
Source: “Demographics of Internet Users: February 15–April 6, 2007 Tracking Survey,” Pew Internet & American Life Project,
June 15, 2007, http://www.pewinternet.org.
browsers
Software that allows users to
access the Web with a graphical
point-and-click interface.
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The Sims for the Elementary-School Set?
Virtual Worlds in the Toy Aisle
When the founder of Ganz, a Toronto-based
company formerly know for its candles and wind
chimes, noticed that kids were spending more
time online, he imagined, rather serendipitously,
what has become the biggest kid’s toy craze
since Ty’s Beanie Babies. Remarkably, though, a key element in Ganz’s new “toy” is a
stuffed toy not too different from those Beanie Babies. What makes Ganz’s stuffed toy
different is that kids don’t want the toy to have the toy: they want the toy for its tag,
which contains a passcode giving the child access to the online virtual Webkinz World
through an avatar that looks like the stuffed toy.
Webkinz (toys) and Webkinz World are wildly successful. Stores struggle to maintain
inventory levels, and the company has developed alternate products with the
Webkinz passcode tags: lip gloss, LiL Kinz (smaller plush toys), body spritz, charms,
bookmarks, and even clothing. In 2007, the site increased traffic from 325,000 unique
visitors to 2.8 million unique visitors. Part of Webkinz’s attraction is that children six
years old (or even younger) can navigate the site easily. The proof is that children
spend more than 1 million hours on Webkinz a month, in sessions averaging 154
minutes, playing through their avatars and chatting with other kids online.
The wild success of Webkinz has spawned imitators. Club Penguin and Neopets were
smallish start-ups that were purchased by Disney and MTV, respectively. Numedeon’s
Whyville is another virtual world for children, but it is closer to a child’s version of Second
Life in that children can start and conduct business, play games, or take jobs to earn
clams (Whyville’s currency). NASA and the J. Paul Getty Trust are sponsors, as is Toyota,
Web. The most visited Web sites are the ones offering news, travel, entertainment, government,
health/medicine, product information, sports, music, and games.
What do people do when they log on to the Internet, whether for work or personal use? Their
activities fall into four main categories:
• Communicating: E-mail, instant messaging, chat rooms, online communities and message
boards, newsgroups, Internet telephony, videoconferencing.
EXHIBIT 2 Popular Internet Activities
which has an engineering lab for Whyville citizens.
Life lessons on Whyville can be hard. A child who
goes on vacation might have her car repossessed if
she doesn’t make her payments. Not all virtual worlds
for kids are as enriching as Whyville: Be-Bratz and
Barbie Girls focus on makeovers, makeup, shopping,
and chatting.
Proponents of virtual worlds remind parents
that they need to watchdog the computer just
as they do television. Still, critics wonder what
effect all this online time has on today’s children.
MIT professor Sherry Turkle worries that so much
technology is robbing children of the opportunity
to be quiet, reflective, and patient, and causing
them to have an alternate view of reality. She’s
not the only one. The MacArthur Foundation has
launched a five-year $50 million program to study
how digital technology is changing the way children
think, learn, play, make judgments, and relate
to others. 5
Critical Thinking Questions
• Is there an age at which children should be
considered too young to use the Internet?
• Do you think the Internet will always be seen
as a youthful medium, or will it mature as the
waves of children reared with it do?
Percent of internet users
Activity who report this activity
Send or read e-mail 91
Use a search engine to find information 91
Search for a map or driving directions 86
Look for information on a hobby or interest 83
Look for health/medical info 80
Look for information online about a service
or product you are thinking of buying
81
Check the weather 78
Get travel info 73
Get news 71
Buy a product 66
Visit a local, state, or federal government Web site 66
Buy or make a reservation for travel 64
Surf the Web for fun 62
Go to a Web site that provides info or support for a
specific medical condition or personal situation
58
Research for school or training 57
Watch a video clip or listen to an audio clip 56
Look for “how-to,” “do-it-yourself,” or repair information 55
Look up a phone number or an address 54
Do any banking online 53
Take a virtual tour of a location online 51
Do any type of research for your job 51
Source: “Internet Activities,” Pew Internet & American Life Project, Survey results (February 2004–December 2007), June 15,
2007, http://www.pewinternet.org.
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© Stockbyte/Getty Images

• Recreation and Education: Audio and video clips, movies, television programs, games, hobbies,
sports fantasy leagues, online classes, pleasure reading.
• Information Gathering: Search engines and directories, electronic publications and article
databases, news sites, financial portals, business and industry research.
• E-commerce: Online retailers (e-tailers) and wholesalers, business-to-business exchanges,
auction sites for consumers and businesses, supply chain networks such as extranets and
virtual private networks.
E-mail is the most popular activity of the millions of Americans who go online on an average
day. Exhibit 3 summarizes the major activities of all adult American users.
How Businesses Tap the Net’s Resources
As we’ve learned from many examples in other chapters, corporations and business users are also
active Web participants. In addition to purchasing supplies and materials and selling products
online, businesses use the Internet’s vast resources to:
•
•
•
•
•
•
•
•
Collect information on the latest economic conditions, competitors,
industry trends, technology, and other developments.
Gather information on customers.
Allow employees in different locations to collaborate on projects.
Provide customer service.
Communicate with suppliers and customers.
Market their products.
Recruit and train employees.
Hold virtual meetings and conferences.
The Evolving Internet Economy
The Internet has significantly changed today’s global economic framework, and companies are
finally reaping the positive results from the increased use of Internet technology in their businesses.
Cost savings and productivity gains are common, but so is increased—and new—competition.
Because the Internet is a constantly and rapidly evolving entity, what were a few years ago
small entrepreneurial companies with disruptive business models may now be giant companies that
are facing the limitations of those business models. For example, Google is now a heavyweight in
search, but recognizing the limits of generating revenue from search-based advertising, Google is
expanding into Web applications, Web security, and other data-based activities. And one of its most
formidable challenges doesn’t even come from its traditional competitors like Microsoft and Yahoo!.
It comes from increased uses of cell phones to surf the Internet. (Google has a hard time placing ads
that work on such small screens.) 6 Let’s now consider how the Internet affects competition, channel
relationships, marketing, and privacy concerns.
Exhibit 3 Most Popular Reasons People Use the Internet
Activity Percent
E-mail 91
Use an online search engine to find information 91
Do an Internet search to answer a specific question 83
Search for map or driving instructions 79
Look for health/medical information 79
Research a product or service before buying it 78
Check the weather 78
Look for info on a hobby 77
Get travel information 73
Get news 68
Buy a product online 67
Surf the Web for fun 66
Look for information at a government Web site 66
Buy or make a travel reservation 63
Look for political news/information 58
How did the Internet develop into a global “network of
networks“?
Who are today’s Web users, and how are Web demographics
changing?
How can managers use the Internet to improve business
operations?
Using the Internet for Business Success 5
2
How has has the the Internet Internet
economy changed the
business environment?
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The New Face of Competition
The Internet has redefined the nature of competition by blurring the traditional barriers of
geography and time. What were once limiting factors for your competition (store location and
hours) are now irrelevant because the competitive universe is unlimited. It doesn’t matter whether
a company is physically located in Portland, Oregon, or Portland, Maine, or even Portland, Dorset,
United Kingdom. On the Web, competitors are just a click away.
New Internet businesses encounter fewer barriers than traditional businesses when entering
new markets. To expand geographically or add new products, traditional retailers must incur
substantial costs for a physical storefront and distribution. Once a company has a Web site,
the cost to acquire a customer in New York is the same as adding one in New Zealand. Setting
up specialized sites for individual countries is another economical way to tap those markets.
Amazon.com has specialized country sites for Canada, China, France, Germany, Japan, and the
United Kingdom. Recall from Chapter 16 that E*Trade also uses country-specific Web sites for its
global expansion.
Not only do online companies find it easier to enter new geographic markets, they may find
it easier to enter new product markets. Amazon.com started with books but now offers a huge
selection of products: apparel, electronics, home furnishings, jewelry, sporting goods, magazine
subscriptions, photofinishing, and more categories added daily. The scope of each category is
astounding. Amazon’s Health & Beauty Store alone features 30,000 items in 12 categories. 7
In addition to selling its own products, Amazon sells and distributes products for its strategic
partners, some of which have their own well-known, successful e-commerce sites (like Target,
Macy’s, Limited Too, The Children’s Place, PacSun, and others), and others of which sell only through
Amazon. The partners divide a percentage of the revenues from these jointly shared transactions. It’s
a win-win situation: Amazon attracts more visitors to its site because it offers so many products and
can boast of having “the earth’s largest selection,” and the other merchants benefit from Amazon’s
online retailing expertise and huge customer base.
Going Direct
The Internet is changing relationships among all channel members: manufacturers, distributors,
retailers/service providers, and customers. No longer do companies have to rely on intermediaries
to connect with other participants in the supply chain. They can go directly to customers, bypassing
traditional channels and displacing some intermediaries.
Take the travel industry, for example. Instead of calling a travel agent, cyber travelers can now
make their own arrangements on the Web—and are doing so with increasing frequency. Online
travel represents a terrific amount of overall e-commerce. In 2007, about 40 million households were
expected to spend $85 billion making travel arrangements online. That figure is expected to jump to
$128 billion by 2011. 8 The success of the online travel booking industry is due to the functionalities
of the Internet. Travelers can easily check airplane schedules, find the lowest fares and room prices,
view panoramic photos of hotel rooms, obtain maps showing the best route between cities, get
advice from experienced travelers in discussion groups, read ratings of the lodgings and activities
they’re contemplating, and then make their own reservations. Online travel brokers aren’t the only
ones benefiting from the conveniences and functionality of the Internet. Airlines and hotel chains
also like online bookings, which reduce their overhead, and they encourage passengers to buy at
their own Web sites by giving Web-site-only discounts and special offers to customers who receive
the companies’ e-mail newsletters.
Manufacturers with strong brands can also sell directly on the Web. Computer giant Dell’s
direct-sales model has pushed prices lower while raising its operating margins. Other electronic
manufacturers—for example, Iomega, which makes several types of hard drives—sell at their
own Web sites in addition to using wholesalers and traditional retailers. Most manufacturers,
however, don’t have the breadth of product to sell exclusively on the Web and will use it to provide
information to support sales and refer customers to dealers. Nor is it economically feasible for most
manufacturers to fill small orders for individual customers. These limitations, along with the risk of
alienating business partners, have discouraged many manufacturers from selling direct. They will
continue to sell in large quantities to resellers.
In some industries, going direct takes on additional meaning. Customers no longer have to wait
to get boxed software from many developers. They can download programs directly from a Web
site, using a special password to unlock the software for their use. Technology to deliver music and
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video over the Web has changed the dynamics of the music and film industries. As entertainment
companies cracked down on unauthorized music downloads, companies have begun offering pay
services. Apple’s iTunes Music Store is one of the most successful. Over 50 million customers have
bought more than 4 billion songs since iTunes came online in 2003. 9 Today, the service also sells
thousands of music videos, Pixar and Disney short films, hit TV shows (including HBO’s hit series
Sopranos and Sex in the City), and movies from venerable Universal Studios Home Entertainment,
Fox, Warner Home Video, Sony Pictures, Paramount, and Lionsgate. In many cases, customers can
download the movies for viewing the same day the films release on DVD. 10
Power to the Consumer
The radical shift in bargaining power from sellers to buyers is probably the most fundamental
development being shaped by electronic commerce. By providing consumers with more
information, electronic commerce dramatically enhances customers’ bargaining power in dealing
with vendors. All customers, from corporate purchasing agents to individuals, can search sites of
various providers to compare products and prices. They can find the best products for their needs,
rather than simply accepting what retailers offer. Successful online vendors recognize that knowing
what customers want is more important than focusing on the latest technology.
The availability of neutral sources of product information gives consumers greater freedom
of choice and control. For example, sites for Kelley Blue Book, Consumer Reports, and J.D. Power
and Associates help consumers evaluate new and used cars, and Carfax.com allows shoppers
to determine if a used car they’ve seen has been in a collision or had other major repair work. A
2007 survey indicated that 34 percent of car shoppers would actually prefer to buy their next car
directly from the manufacturer and eliminate the dealership altogether. 11 Editors and individuals at
CNET.com rate nearly every electronic gadget on the market. Videos demonstrating and describing
the attributes of everything from MP3 players to PDAs to laptops provide independent information
to consumers before they head to the store.
New types of “infomediaries” make it even easier for buyers by pulling together product
information from many vendors. Thanks to intelligent agents that scour the Web’s many databases,
consumers no longer have to go from site to site to compare prices and obtain information. For
example, Epinions (http://www.epinions.com) offers product reviews from consumers, as well as
price and feature comparisons for a wide range of products. BizRate (http://www.bizrate.com),
PriceSCAN (http://www.pricescan.com), and mySimon (http://www.mysimon.com) are other
comparison sites that streamline the comparison shopping process. Portals are also becoming
popular. These Web sites gather many resources into one convenient gateway to the Web. Some,
such as Yahoo! (http://www.yahoo.com), are general portals with links to popular destination sites
and featured areas like Yahoo! Finance.
Service industries are also noticing a change in consumer buying patterns. Whereas previously,
travelers would go to one of the online travel brokers, like Expedia, Travelocity, or Orbitz, and search
each for the same trip (often keeping open three browser windows to facilitate comparison),today
a new wave of travel sites like Kayak.com aggregates the search results from all of those sites and
others. Essentially, sites like Kayak are shopping bots for travel purchases.
Privacy Goes Public
The Web’s ability to provide personalized service comes at a price. To receive it, consumers must
supply personal information, raising concerns about how that collected information may be used.
A Web site’s ability to follow an electronic trail is another issue. A related concern is the amount of
Internet fraud, which can include identity theft. One tactic cyber thieves use is called “phishing,”
which involves sending official-sounding and -looking e-mails asking for verification of username
and password, with a link to what appears to be a reputable Web site—eBay or a credit card or bank
site, for example. In fact, clicking on the link takes you to a bogus site, where the thief can get the
information required to use your account.
Most commercial Web sites now post their information-collection and privacy policies. The
Federal Trade Commission (FTC), the agency in charge of online privacy, recognizes five fair
information practices:
1. Providing notice to users of their information practices before collecting personal information;
2. Allowing users choice as to whether and how personal information is used;
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spyware
Programs that secretly install
themselves without the user’s
consent and then track and
monitor all or part of the
computer’s operation for the
benefi t of a third party.
3. Allowing users access to data collected and the ability to contest its accuracy;
4. Ensuring security of the information from unauthorized use; and
5. Enforcing posted policies.
There has been some progress in the quest for e-privacy, although 70 percent of online users
remain concerned about online privacy—and rightfully so. News of security breaches involving
sensitive personal and financial data continues to make the front pages, and many more such
incidents are never publicized. When AOL mistakenly released 21 million search queries from almost
660,000 subscribers, the data was anonymous. It did, however, contain intimate and potentially
personally identifiable data with numeric IDs that could be used to collect information about a
particular user. AOL apologized for the breach, but privacy advocates were still concerned. “Sometimes
what people are searching for may be an indicator of who they are and who they know,” commented
Richard Smith, founder of Boston Software Forensics, an Internet security consultancy. 12
More sites now ask Web users to opt in when the sites collect personal information, rather than
requiring users to opt out. (The term opt in refers to a requirement that a person give affirmative
consent to an information practice, whereas opt out means that permission is assumed unless the
person indicates otherwise.)
Such privacy gains, however, have been moderate, and with increased Internet use comes
the increased potential for loss of privacy. One of the most recent concerns about online privacy is
growing out of tech company mergers like that of Google and DoubleClick. Privacy advocates fear
that Google’s technology for search combined with DoubleClick’s capabilities to track users online
will allow the merged entity to know more than is desirable about the individuals who use Google’s
search engine. Google would, in fact, have the deepest and broadest profiles of Internet users of any
company in the world. And that data is not subject to any regulation. Take for example the Health
Insurance Privacy Protection Act (HIPPA), which prevents medical providers from sharing medical
information about patients. Google is not an insurer or a medical provider and so is not bound by
HIPPA. Many patients, however, use Google’s search capabilities to educate themselves about their
own medical conditions and those of friends and family members. Those search strings may send
red flags up for insurers. Because Google is not bound by HIPPA, it could theoretically sell the data
on its search strings to insurers. Marc Rotenberg of the Electronic Privacy Information Center says,
“I don‘t think there is any doubt that this is the single biggest privacy meltdown that the Internet is
currently facing.“ 13
Another concern is spyware, programs that secretly install themselves on your computer, track
the Web sites you visit, and then deliver pop-up ads related to your Web-surfing preferences. In
addition to being very annoying, especially when the ads include offensive material, pop-ups can
slow your computer’s performance and even disable your computer. Some especially malicious
forms of spyware try to record typed passwords and credit card numbers. According to McAfee,
a computer security software company, nearly three-quarters of sites offering free downloads of
screen savers or music also download spyware. Consider these recent statistics: 14
•
•
•
•
Search engines collectively serve up 8 billion risky sites per month.
Twelve percent of the overall search results that returned landing pages were associated with
malicious content due to unsafe ads.
Sixty-five percent of Americans online are more worried about clicking unsecured search
listings than the threat of neighborhood crime, getting one‘s wallet stolen, or e-mail scams.
In one week, 27 percent of the PCs tested had malicious spyware masquerading as an
innocuous MP3 file.
Companies argue that their self-regulation programs are sufficient and that increased privacy
legislation is not needed. Self-regulation efforts include logos that are displayed in the privacy
section of Web sites that conform to the privacy policies of the organization issuing the seal. TRUSTe
(http://www.truste.org), WebTrust and SysTrust (http://www.cpawebtrust.org), and the Council of
Better Business Bureaus (http://www.bbbonline.org) are among those offering seals of approval.
Consumer groups such as the Electronic Privacy Information Center (http://epic.org) and the
Privacy Rights Organization (http://privacyrights.org), however, want stronger privacy protection
legislation and believe that corporate self-regulation is insufficient. Consumer advocates argue that
disclosure of a privacy policy does not necessarily mean that that policy sufficiently protects privacy.
They are particularly concerned about online profiling, in which companies collect data about the
Web sites visited by a particular user and use that data to develop profiles of that user’s preferences
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and interests for targeted advertising. Moreover, Internet users are
concerned about inadvertent leaks caused by viruses hitting computers
in any industry, especially because consumers often find out about the
leaks only if a resulting widespread disruption of service creates publicity
about the problem.
Internet service providers have capitalized on consumers’ concerns
by adding privacy and security protection as competitive features. Most
now provide subscribers with free security software, including antivirus
updates, protection for e-mail attachments, firewall capabilities, ad
blocking, and programs preventing spyware and other forms of online
monitoring.
Capitalizing on E-Commerce
The entire process of selling a product or service via the Internet is called electronic commerce
(e-commerce) or electronic business (e-business). E-commerce includes two distinct market
segments. Business-to-business e-commerce (B2B) involves transactions between companies—
for example, purchasing raw materials to manufacture products or supplies, or providing other
types of e-business services, such as order fulfillment and site hosting. Business-to-consumer
e-commerce (B2C), also called e-tailing, involves transactions between businesses and the end
user of the goods or services. Although the consumer market has received more media attention,
the dollar volume of B2B transactions in the United States is roughly 25 times that of consumer
spending. 15
E-commerce goes beyond selling products through an electronic catalog, however. Among the
benefits of the Web’s interactivity are increased convenience and efficiency, better customer service,
lower transaction costs, and new relationship-building strategies. More and more corporate and
individual purchasers go first to the Web to buy products and services ranging from diesel engine
parts to employment consultations. Like the number of Internet users, the size of the e-commerce
market is hard to estimate due to the different criteria used by various research firms.
E-Commerce Business Models
Companies can choose from several e-commerce business models, each of which generates revenue
from different sources:
• Selling merchandise or services on the Internet. Bluefly.com and CrateandBarrel.com are two
examples of business-to-consumer sales sites. At the other end of the spectrum are niche
businesses like Fridgedoor.com, which sells only decorative refrigerator magnets. Cisco
Systems sells about 75 percent of its computer networking products from its Web site. Other
companies sell only to other companies through the B2B market.
• Providing entertainment or information on a fee-for-service or subscription basis. With the vast
amount of free information on the Internet, the subscription model has taken a while to catch
on. Some online gaming sites charge players to play certain types of games. Music sites like
iTunes that offer a legal way to download songs and videos are growing in popularity. Netflix
(http://www.netflix.com), which now offers subscription-based movie downloads, and The
Wall Street Journal Interactive Edition (http://online.wsj.com) are among the more successful
subscription sites. Sites commonly offer multiple service levels, for example a base level of
free information and one or more paid subscription levels for enhanced services. For example,
investment sites like Morningstar.com (http://www.morningstar.com) provide basic stock and
mutual fund reports to all site visitors but require purchase of a premium subscription to access
in-depth securities research, ratings, and other services.
• Providing advertising or referral-supported entertainment or information sites. CNET, ESPN
SportsZone, and search engines like Google and Yahoo! are examples of advertiser-supported
sites that provide free information to visitors. These and other high-traffic sites, like MSN.
com, earn substantial revenue from ad sales. Other sites earn fees by referring consumers
to merchant sites. Large companies like Amazon, Target, and Zappos, and even smaller
e-tailers like Uncommon Goods, have corporate affiliate programs that pay commissions
when visitors at other sites use special links on the affiliate site to reach the e-tailer’s site and
purchase products. The advertising model has remained popular: online ad revenues reached
Describe the impact of the Internet on competition and
channel relationships among manufacturers, distributors,
and retailers.
Do you agree that the increasing power of the consumer is
the most important eff ect of the Internet on the business
environment? Explain your answer.
What can online merchants do to lessen consumers’ privacy
concerns and reduce opportunities for identity theft?
Using the Internet for Business Success 9
3
How can companies
incorporate e-commerce
into their overall business
strategies?
electronic commerce
(e-commerce)
The entire process of selling
a product or service via the
Internet; also called electronic
business (e-business).
business-to-business
e-commerce (B2B)
Electronic commerce that
involves transactions between
companies.
business-to-consumer
e-commerce (B2C)
Electronic commerce that
involves transactions between
businesses and the end user of
the goods or services; also called
e-tailing.
9075X_18_CH18_p001-026 pp3.indd 9 9/29/08 9:52:58 AM

•
•
•
•
•
$21.1 billion in 2007. 16 Nonetheless, ad revenues are not insulated from economic downturns.
In late 2007 and early 2008, the number of times that U.S. consumers clicked on a served ad
declined 7 percent each month for a series of three months. 17
Auctions to sell merchandise and services to businesses and consumers. Examples of online
auctions include eBay (http://www.ebay.com), the leading person-to-person auction site, and
Yahoo Auctions (http://auctions.yahoo.com). eBay has expanded beyond its original individual
consumer focus to offer business and industrial products and even cars. Companies with used
equipment to sell often turn to DoveBid (http://www.dovebid.com), an industrial auctioneer
for more than 70 years that saw its usage soar when it moved its operations online. Ubid.com
is a unique auction site that sells items (primarily electronics) in lots. Bidding starts very low
and Ubid listings include how many items they are auctioning. For example, an auction listing
might indicate that there are 10 Dell desktop computers for sale. An individual can bid on one
or all of the computers.
E-services for consumers. These serve, for example, consumers who want to sell items on eBay but
either don’t know how or think it’s too much trouble and therefore turn to trading assistants. The
number of drop-off stores for auction items has soared in the past two years. Net2Auction (http://
www.net2auction.com), The Online Outpost (www.theonlineoutpost.com), I Sold It (http://
www.i-soldit.com), and Snappy Auctions (http//www.snappyauctions.com) are franchised
“trading posts” that accept items on consignment for sale on eBay. For a commission tied to the
article’s selling price and additional fees for specialized listing options, these companies prepare
a detailed product description, list the item on eBay, and handle the rest of the transaction
details. Once the item sells, the customer receives a check.
E-service providers that help other firms establish e-commerce operations and infrastructure.
The e-services market—from consultants to business process and technology outsourcing
companies—continues to grow. Companies such as Colgate-Palmolive and Diebold are
saving hundreds of millions of dollars by outsourcing e-procurement. 18 For example,
Gap Inc. turned to Ariba (http://www.ariba.com), a specialist in managing spending and
procurement processes, for help with developing Web-based sourcing and procuring
solutions for nonmerchandise operating goods and services. Streamlining the purchasing
of shopping bags, heating and ventilation systems, IT services, and other nonmerchandise
items that are essential to the customer experience has reduced the cost by 10 to 20 percent.
Because these indirect costs could run as high as $1 billion for a company of Gap’s size, the
savings could reach $100 million to $200 million. “E-sourcing reduces project lead times
20% to 50%,” says Eric Germa, Gap’s senior director of strategic sourcing. He believes that
e-sourcing leads to making better decisions because managers have to thoroughly research
their needs first. “At the end of the day, we want to have fewer but better relationships with
the right suppliers,” Germa explains. 19 E-commerce outsourcer Digital River (http://www.
digitalriver.com) develops, hosts, and manages online business sites for more than 40,000
clients, which include software publishers, manufacturers, distributors, and online retailers.
Its specialized expertise helps companies expand their global e-commerce operations in a
cost-effective way that also minimizes risks. 20
Online business marketplaces and exchanges. These were slow to catch on, and some of
the first industrial exchanges no longer exist. Over time, however, the model has been
refined and is now helping companies to source materials more efficiently. Many, such as
Airparts.com (http://www.airparts.com), are industry-specific virtual warehouses.
Airparts features an inventory database of more than 35 million aircraft parts from leading
manufacturers and suppliers worldwide. Members can also submit requests for quotations
for listing on the site. BakeryExchange (http://www.bakeryexchange.com) offers an
online marketplace to buy, sell, and lease bakery equipment and bakery services. BidNet
(http://www.bidnet.com) focuses on linking government purchasing agencies and vendors
who want to sell to them.
Consumer infomediaries and portal sites. These sites simplify the online experience by bringing
together a combination of information, goods, and services from many individual companies.
Some operate like virtual malls. Shop.com (http://www.shop.com) is a multimerchant
marketplace where consumers can find thousands of stores. Shop.com simplifies the online
shopping experience by enabling registered users to set up one account so they can shop at
all merchants. Bizrate.com (http://www.bizrate.com), a comparison shopping site, also rates
online merchants based on its own research and customer feedback.
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Companies often incorporate more than one business model into their e-commerce strategy.
Yahoo!, for example, began as an advertising-supported Internet directory. It is now a leading portal
where visitors can do investment research, make travel reservations, shop, bid at its own auction
site, and more.
The Business-to-Business Boom
Fortune 500 corporations and small businesses alike are embracing business-to-business
e-commerce to save hundreds of millions of dollars through lower costs and reduced inventories.
Companies without a Web site may lose significant business opportunities. Business-to-business
(B2B) e-commerce includes all aspects of the supply chain, from product information to order,
invoice, fulfillment, payment, and customer service. In addition to Web-based e-commerce,
many electronic data interchange (EDI) networks are moving to the Internet, replacing expensive
proprietary networks.
Another e-commerce tool used by businesses is the exchange, which links multiple businesses,
often in the same industry, and allows them to save costs and build relationships. At OEConnection
(http://www.oeconnection.com), automotive dealerships and body shops can shop online for
replacement parts from the original manufacturer using CollisionLink. Its dealer-to-dealer (D2D) link
allows dealers to exchange or buy replacement parts from each other. Many industry sectors, such
as food services and industrial equipment, are shifting to private exchanges. EquipNet (http://www.
equipnet.com) is a private marketplace that works with businesses, including many of the largest
corporations, to buy and sell industrial machinery. It also helps them manage these assets more
effectively by suggesting ways to use machinery in other areas of the firm and offers other services
including asset analysis, project management, and consulting services. 21
Extranets are a popular business-to-business e-commerce tool for such activities as
purchasing, inventory management, order fulfillment, information transmission, training, and sales
presentations. Like an intranet (described in Chapter 13), an extranet is a private network that uses
Internet technology and a browser interface. Extranets, however, are accessible only to authorized
outsiders with a valid username and password. Companies can easily designate portions of their
Web sites to share specific information and processes with suppliers, vendors, partners, customers,
and other businesses at remote locations. For example, customers can find account balances and
customized catalogs with account-specific pricing.
Extranets are a very efficient format for business-to-business e-commerce. Retailers like Circuit
City use extranets to provide vendors with the electronics chain’s most current requirements. Tyco
Electronics’s extranet links more than 700 distributors, manufacturing representatives, and sales
managers. For franchised restaurant company Johnny Rockets, its extranet enhances corporate
communications between franchisees and corporate managers and contributes to a better customer
experience. In addition to facilitating communication, the extranet provides the latest information
and downloads for promotions or advertising materials. 22
E-Tailing Hits Its Stride
Since Amazon.com turned the retailing world on its head in 1994, selling consumer goods over the
Internet has become big business. Market research firm Forrester Research and the National Retail
Federation reported that for 2007, online sales totaled $175 billion and were projected to rise to
$204 billion in 2008; by mid-2008, online sales actually surpassed offline sales in volume. 23 (Each
market research firm uses a different methodology to compile online sales statistics, so numbers
will vary.) 24 Many online retailers are small businesses; in fact, another report by Forrester Research
found that small Web sites run by entrepreneurs drive a full one-fourth of all online retail revenue. 25
Holiday season sales are an important indicator of online shopping trends. During the 2007 holiday
shopping season, cyber shoppers spent more than $29 billion online, an increase of nearly 20 percent
over the prior year. 26
E-tailing is becoming a driver of primary demand in the retail sector, influencing a significant
percentage of retail spending in the United States. Most consumers now turn to the Web first to
research products before they buy. Successful early adopters like Costco, The Gap, and Office Depot
recognized that the Web was another way to reach customers and complement their basic business.
These and other multichannel retailers are finding ways to improve the synergy between offline and
online operations, such as helping customers find an item at the Web site and then order it online
or pick it up in a local store. After receiving customer requests for the buy-online-pick-up-in-store
option, upscale retailer Nordstrom even launched a trial version of the service in 2008. Even though
extranet
A private computer network
that uses Internet technology
and a browser interface but is
accessible only to authorized
outsiders with a valid username
and password.
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4
Otto’s Leadership in B2C E-Commerce
Integration
A billionaire who relaxes by playing volleyball
with his workers, Michael Otto is not your typical
chief executive. And most people don’t know
that his company, Hamburg-based catalog
retailer, Otto Group, ranks alongside Amazon.com
Inc. in business-to-consumer e-commerce worldwide. Founded in 1949 by Michael
Otto’s father, Werner, now 96 and a refugee from Poland, the business began as a
mail-order company selling shoes. Soon Otto catalogs, thick as phone books and
similar to the Sears catalog in America, offered consumers a wide range of goods and
services.
When Michael became chief executive officer in 1981, he expanded overseas.
The company now generates half its revenues outside Germany through subsidiaries
like Bonprix, which sells clothing and housewares in Britain, Russia, Poland, and elsewhere.
Otto has no interest in taking his company public, partly because he thinks
the market encourages shortsighted management. “We don’t have to come up with
a good story every quarter for the investors and the press,” he says.
Otto’s modest, unpretentious approach is responsible for a business model that
has built his company into an Internet powerhouse with online sales of $3.8 billion
in 2005. Other international holdings account for 20 percent of Otto Group’s total
revenues of $18.5 billion. His multichannel strategy helped the company survive a
dip in German spending and the sale of two major U.S. mail-order businesses it had
acquired—Spiegel, Inc. and outdoor-clothing company Eddie Bauer—due to mismanagement,
in 2003. However, Otto Group’s majority ownership of retailer Crate &
Barrel—where e-commerce sales have tripled to $1.2 billion—has compensated for
those losses.
What benefits do
businesses achieve
through e-commerce?
their trial started with women’s apparel, men’s apparel, cosmetics, and shoes, they planned to include
all their products within five months of the launch of the service. 28 They also support all channels
equally with customer service. This strategy pays off: customers who use multiple channels—for
example, store visit, catalog purchase via mail or phone, or online shopping—spend four to six times
as much as customers who confine themselves to one channel for all their purchases. 29
What makes a successful cyber merchant? The answer is convenience, selection, community
service, and pricing. As noted above, consumers love the convenience of Web shopping. They can
get more product choice and information in the same or less time. Chats and online discussion
groups create a sense of community among shoppers with similar interests. Bargains are easy to find
as intelligent agent software learns customer preferences and quickly scouts the Web for the best
products and lowest prices.
Cyberspace also gives retailers a chance to break out of the size constraints of a physical store.
A store might support 10,000 items, but on the Internet, a retailer can offer millions of them without
adding expensive shelf space. In addition to selling a broader merchandise mix, retailers can also
use their Web sites for special promotions, merchandise that may be out of season in their regular
stores, and excess inventory.
B2C e-commerce is a global phenomenon. Although Amazon.com is the worldwide leader, a
little-known German company called Otto Group ranks second. The Expanding Around the Globe
box above explains how this company’s integrated, multichannel approach to e-commerce has
contributed to its success.
Benefiting from E-Commerce
Chicago-based Crate & Barrel has become the
template for integrating stores, catalogs, and the
Internet. The virtually identical product mix found in
the company’s retail stores, online, and in its catalogs
eliminates distinctions between sales channels.
Items bought online can be returned in stores,
and one back-office and delivery system serves all
customers. Internet sales account for 25 percent
of Crate & Barrel’s $1.2 billion in annual sales. “Otto
really supported and pushed that effort,” says Crate
& Barrel founder and chief executive officer, Gordon
Segal, who has plans to expand into Canada and
Europe.
To further set his company apart, Otto aims to
offer better service and reliability, including local
phone representatives, a quick-dial number for
mobile phones, and the company’s own package
delivery service. “It’s extremely hard for competitors
to replicate that and nibble away at Otto’s market
share,” says Dan Bieler, an analyst in Cologne at
market researcher Ovum Ltd. But it would not be
Michael Otto’s style to boast about this. 27
Critical Thinking Questions
• How has the Otto Group combined
e-commerce sales with its more traditional
mail-order catalog business?
• What has Otto done to set itself apart from its
e-commerce competition?
As many examples in this book demonstrate, companies that use the Internet effectively gain clear
advantages. Among the attractions of incorporating e-commerce into business strategies are the
following:
1. Lower prices. Competition among online vendors leads to lower prices, for both businesses and
individual consumers.
2. Greater selection of products and vendors. The Web makes it possible for corporate purchasing
agents and individuals to find numerous vendors and retailers for almost any product.
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© Digital Vision/Getty Images

3. Access to customer and product sales data. Companies can develop customer lists and learn
customers’ buying characteristics. Companies can also immediately learn which products are
selling best.
4. Around-the-clock ordering and customer service. Company Web sites provide extensive product
information for prospective customers around the world on a “24/7” basis, thereby expanding
markets and facilitating more transactions, without hiring additional personnel. Customers
themselves decide how much information they require by clicking on site links. Well-designed
sites offer solutions to customer problems and make product suggestions.
5. Lower costs. Cost savings are a major benefit of e-commerce. These can take many forms, from
distribution savings to staff reductions, procedural efficiencies, and lower costs of purchasing
supplies. Training is another area where e-commerce has proven cost-effective.
6. Customized products. The Internet is revolutionizing product design and manufacturing. No
longer do companies have to design and build products well in advance of the sale, basing
product decisions on market research. They can use the Internet to take orders for products
tailored to customer specifications. Dell was one of the first to allow computer buyers to
configure their ideal computer from menus at Dell’s Web site. Even though Dell’s build-toorder
procedures were remarkably efficient when customers phoned in their orders, the Web
has increased the system’s efficiency and profitability.
7. Personalized experiences. Both B2B and B2C companies use the Internet to link more effectively
with customers and to develop one-to-one marketing models. The Web’s unique ability to
provide immediate communication with and feedback from customers allows merchants to
meet customer demands on an individual basis. Companies can target and deliver messages
geared to a specific market segment based on demographics and interests, and build loyalty
with chat sessions, personalized product recommendations, and more. A popular method of
personalization is through recommendations like those given at Amazon, iTunes, and Google.
Those and other recommendation engines are built on algorithms
that take into account prior selections. One of the most successful
personalization services is Netflix’s movie recommendation engine.
Pandora, an Internet radio service, is founded on the concept of
helping subscribers create their own personal radio station. Staffed
by a team of professional musicians and music scholars, Pandora
runs a subscriber’s song selection through a proprietary program
that analyzes the music on many levels. The team then makes
recommendations based on their knowledge in conjunction with
the software results for interesting musical similarities. 30
Launching a Successful E-Business
E-commerce involves more than building a flashy Web site to attract customers. It’s also about
adding value. Internet shoppers don’t just want to duplicate the in-store experience when they
visit a company’s Web site—they want a better experience than they can get in their local store. In
addition, e-commerce requires the right infrastructure to retain customers and encourage repeat
purchases. In and of itself, e-commerce cannot make a company a winner; companies still need the
right product, timing, and distribution channel strategies to be successful.
Businesses can get involved with e-commerce in stages:
• Stage 1—Promoting: A basic promotional Web site with corporate information and marketing
materials that is regularly updated.
• Stage 2—Marketing: A Web site that adds marketing and interactive capabilities to attract
and retain customers. Features include: more corporate, product, and service information;
personalized content; and e-mail customer support.
• Stage 3—Integrating business processes: More sophisticated sites that integrate Web activities
into a company’s existing business structure. Using greater process efficiencies, targeted
marketing, self-service support, advanced search capabilities, and online communities,
companies achieve profitability.
• Stage 4—Transforming business: Sites that totally integrate with back-office systems and
communicate more efficiently with suppliers and regular customers; also, electronic
transactions replace paper. Reduced operating costs and greater depth and breadth of sales
channels improve profitability.
Why are businesses incorporating e-commerce into their
overall business strategies? Describe the diff erent revenue
models for e-commerce.
Diff erentiate between the two major e-commerce market
segments. How do their needs diff er?
What benefi ts can businesses gain from using the Internet?
Give specifi c examples.
Using the Internet for Business Success 13
5
What steps are involved in
launching an e-commerce
venture?
9075X_18_CH18_p001-026 pp3.indd 13 9/29/08 9:53:03 AM

The first three stages supplement rather than replace business procedures that can be
performed offline. At Stage 4, the highest level of strategic value, the company is transformed as it
creates new business and shifts traditional business to the Internet.
As the potential benefits from the site increase, so do the costs. Developing a successful
e-commerce strategy also takes time. Companies may not achieve positive returns on their
Internet investment until they reach Stage 3—and even then it may take four to six years to see
a productivity payoff. Moving up the learning curve by working through the first stages before
implementing more sophisticated technology is more likely to lead to success than attempting to
transform the business in one step.
Once a company decides to roll out or expand an e-commerce strategy, it faces a series of
high-level decisions involving merchandising, Web site costs and design, marketing, customer
service and order fulfillment, Web site operations, and infrastructure. These decisions, summarized
in Exhibit 4, form a road map leading to an Internet strategy that complements the firm’s overall
business strategy.
Merchandising
Many companies underestimate the effort required to effectively merchandise products on the
Internet. First they must decide which products to sell and how to price them. Not all products can
be sold successfully online. And slapping a picture of a product with a basic description on a site
isn’t sufficient. As we’ve already noted, successful sites provide guidance and have accurate and
lively product descriptions. Other merchandising issues include testing to make sure links to product
pictures and descriptions are correct, and designing easy-to-use order forms.
EXHIBIT 4 Key Issues in Developing an E-Commerce Strategy
Merchandising
•
•
•
•
Which products to sell
Complete and accurate product descriptions
Pricing
Inventory management and analysis
Web Site Costs/Design
•
•
•
•
•
Site budget that includes maintenance and updates
Easy navigation
Quality content
Visual appeal
Quick downloads
Marketing
•
•
•
•
•
Partnerships
Advertising
Promotions
Reward programs
Personalized e-mail
Customer Service/Order Fulfillment
•
•
•
•
•
Prompt response to questions
Easy-to-use order forms
Prompt order fulfillment
Order tracking
Returns policy
Web Site Operations
•
•
•
•
Site hosting
Testing of Web pages
Maintenance
Security
Infrastructure
•
•
•
Required hardware and software
Integration with other information systems
Staffing
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Site Costs and Design
Establishing an e-commerce Web site has become much easier in the past few years. Small
businesses can use off-the-shelf e-commerce software available at stores like H.H. Gregg and
Best Buy. Packages like goEmerchant, ProBusiness, merchandiZer, and Bigstep include things like
point-and-click design templates, site hosting, the capability to sell up to dozens (and sometimes
hundreds or thousands) of products, custom e-mail addresses, a search engine manager, and basic
Web site traffic analysis. Many even offer credit card payment processing capabilities, calculation
of shipping fees, and affiliate programs. Off-the-shelf software packages like these cost as little as
$30. 31 Packages with more sophisticated features like search engines and databases to manage
inventory cost about $2,000 to $5,000. Companies can also hire a Web designer or outsource Web
site development to a specialist. The cost of a corporate Web site can range from $30,000 to over
$2 million and includes not only the design and equipment but also site maintenance and frequent
updates to site content and technology.
Regardless of who develops a site, managers responsible for the company’s e-commerce
strategy must plan carefully to ensure that the site meets the company’s e-commerce objectives,
in terms of both content and budget. Among the most important design considerations for
e-commerce sites are simplicity, ease of navigation, visual appeal, download speed, and good
product information. Exhibit 5 provides tips for creating successful Web sites.
Marketing
Building brand equity is critical for e-commerce marketing. The first companies to build an online
relationship with the consumer have a large advantage.
One of the underlying differences between Internet marketing and traditional marketing is
the difficulty of turning shoppers into buyers. Studies show that only a small percentage of Web
site visitors actually makes a purchase. To increase the profitability of a Web site, e-businesses must
raise that conversion percentage or increase traffic to obtain more volume. This requires marketing
strategies that create “stickiness,” an increase in the amount of time visitors spend at a Web site, and
bring visitors back to the site. The 10 stickiest sites in March 2008, for example, included five online
gaming sites (of which four were poker sites), Boost Mobile, AOL, and Juno Online Services. 32
What brings site visitors back? For most Web surfers, high-quality content, ease of use, fast
download time, and frequent updates are key factors. Studies show that when a potential customer
arrives at your Web site, you must make an impact within the first 15 seconds. Flashy Web sites aren’t
always the answer, though they may help in some categories. What visitors want is a clean, easyto-navigate
site where they can get the information they need in a few clicks. Many visitors find
sites with too much clutter or animated features frustrating and annoying.
EXHIBIT 5 Tips for Creating Successful Web Sites
•
•
•
•
•
•
•
•
Know what you want to accomplish. Is the site mainly informational, or is it interactive, with searching
and ordering capabilities?
Follow the 30-second rule. Viewers have a short attention span and will move on to one of the millions
of other sites unless they can see what the site is within 10 seconds, what it’s about within the next
10 seconds, and how it’s organized and what links it has in 10 more seconds.
Keep the design appropriate to the company. A no-frills site such as Cheap-CDs (http://www.cheap-cds.
com) gives the customer the impression that this company offers the lowest prices—even if it doesn’t
always have the cheapest CDs.
Create strong content and update it regularly. Quality content is a primary reason that users return to Web
sites. Provide complete and accurate product information. Regular updates give visitors a reason to
return to your site.
Flashy is not necessarily better. Clarity, not clutter, is key; too many colors or graphic elements can be
distracting.
Make navigation easy. Users want to move around a site as quickly as possible. Two common navigational
tools are tabs along the top of the screen and a navigation bar on the left side. Search features also help
visitors find what they need. Make sure links work.
Shorten download times. Users like speedy sites. Multimedia effects can make pages slow to load,
frustrating customers who may well leave a site without ordering if they have to wait for images to
appear. Offer a text-only version of your site for visitors with slower connections.
Keep text sections short. Reading lots of text is difficult on the small screen. Users prefer to see headlines
and article summaries, with links to the complete article for those who want more information.
Using the Internet for Business Success 15
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•
•
•
•
•
•
Companies use a variety of strategies to achieve these marketing objectives, including:
Partnerships with other organizations, such as alliances with consumer providers like AOL or
with complementary retailers for placement of banner ads.
Advertising in both electronic and traditional media. In addition to banner ads on high-traffic
Web sites, companies can buy sponsorships on Web pages that put their message into the
content of the other Web sites. Often traditional print and television ads are very effective in
creating awareness of and bringing visitors to a Web site.
Promotions, contests, and sweepstakes at the Web site or through e-mail—for example, e-mail
newsletters with notices of sale items, an e-mail dollars-off coupon for customers who haven’t
ordered for a while, and sweepstakes giving away trips and popular products.
“Frequent buyer” programs for Internet retail sites, sponsored by individual merchants or by
companies like ClickRewards (http://www.clickrewards.com) that offer awards for purchases
at hundreds of member sites.
Personalized e-mail with links to Web sites, which increases sales by driving traffic to Web
sites and improving customer retention. This type of e-mail marketing costs less than banner
advertising and has a much higher rate of viewers who “click through” to the advertiser’s site.
Affiliate programs to bring customers to the site. This is a good example of how to use the
Internet to market effectively and at reasonable cost.
Online advertising continues to evolve into a more efficient and valuable medium. In 2007,
companies spent $21 billion on online advertising, marking the fourth consecutive year of record
revenues, according to the Interactive Advertising Bureau (IAB). Keyword search (paid search links)
represented 41 percent of ad spending, followed by display ads at 21 percent and classifieds at
19 percent. 33
SABMiller, the American licensee of Australian beer company Foster’s Group, believes strongly
in the ability of the Internet to deliver a targeted audience. In 2006, Foster’s decided to allocate
its whole U.S. advertising budget to online ads at sites frequented by 21- to 25-year-old males.
Because its total ad budget was fairly small, about $5 million, Foster’s couldn’t afford enough
television advertising to make an impact, nor were its TV ads reaching the desired audience. The
new campaign featured regular ads on Heavy.com, a music-and-video Web site targeted at young
men, and ads disguised as amateur videos that would run on Heavy.com and other Web sites. 34
Customer Service and Order Fulfillment
On the Internet, disgruntled shoppers usually don’t wait around. Slow service? Poor information?
Difficult ordering process? With just a click of the mouse, consumers find another site that makes
shopping easier. Therefore, good customer service and order fulfillment are critical to gaining a
competitive edge on the Internet. A March 2006 Jupiter Research study indicated that more
than 50 percent of online shoppers will look for another e-tailer or service company if they are
dissatisfied with the customer service. 35
The gap between customers’ expectations and the service they receive is wide. Most customers
want an answer to an e-mail query within 24 hours, and many expect an even speedier response.
These customers are going to be disappointed, as about half of the companies in recent surveys
failed the 24-hour test, and about one-quarter of e-mails are never answered. Although many
companies send automated replies to acknowledge the receipt of an e-mail and promise a reply
within a specified time period, many either never follow through or send inadequate information
that doesn’t resolve the problem.
Because customers see the Web as a way to speed up the entire buying process, companies
must set up effective customer relationship management (CRM) systems, add more customer
service staff, and train them to sell and to advise online customers—whether online through realtime,
live chats with customer service or tech support representatives, by e-mail, or even by phone.
Another option is to automate the process where possible, such as routine order confirmation and
shipping notification. Often buyers receive a confirming e-mail within a minute of placing the order.
The Customer Satisfaction and Quality box on the next page describes how the Web’s biggest shoe
store is really a service site.
Order fulfillment strategies are just as critical. Companies must fill orders from the Web site
without loss of data. Inventory management is critical for e-commerce sites. Businesses that
underestimate order volume and do not have adequate inventory to fill customer orders risk losing
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© Digital Vision/Getty Images
The Shoes Are Great, but the Service . . .
the Service Is Fantastic
Zappos.com boasts the Web’s largest inventory
of shoes at 4 million shoes in 200,000 styles
from 1,200 shoemakers, but even more than its
assortment of shoe styles, its customer service
makes it stand out from other online retailers.
When founder Nick Swinmurn launched Zappos,
he described it as a customer service company that happened to sell shoes. Indeed,
Zappos’s stated goal is to be the online service leader. And under the leadership of
CEO Tony Hsieh, Zappos is well on its way.
Since it launched in 1999, Zappos has offered free return shipping, 365-day
returns, which means that a customer can return a shoe up to a year after purchasing
it. Free shipping and generous return policies are rather common these days, but
Zappos still stands out. Ninety percent of orders arrive the next day (shipping costs
run $100 million annually). Getting much-desired shoes so quickly “creates a ‘wow’
experience and generates positive word of mouth,” Hseih says.
Positive word of mouth also comes from the interactions customers have with
Zappos employees. When a customer had not paid for shoes she had ordered, a
Zappos representative called to check on the payment. The customer explained that
she had purchased the shoes for her ailing mother, but in the meantime, her mother
had died. The woman meant to send back the shoes. The Zappos representative
arranged for UPS to pick up the shoes and then sent flowers to the customer with a
condolence note. The customer responded with a blog post that bounced around
the Web and ended up as a tapestry of positively effusive comments about Zappos’s
commitment to service.
Zappos’s customer service starts with seeing its customers as people. Representatives
are not given a time limit on their sales calls, allowing them to spend as much
time as a customer needs. Reps are also allowed to help customers by shopping
competitors’ sites when Zappos is out of stock on a desired item. Another key
customers for good. Companies are reevaluating operational strategies in response to the realities
of e-commerce. We examine order fulfillment again in the Trends section of this chapter.
Web Site Operations and Infrastructure
When planning an Internet strategy, managers must develop a plan for Web site operations and
infrastructure. Some of the questions they need to ask include:
1. What hardware and software will we need?
2. Will design and operations, such as hosting the Web site on a server and setting up distribution,
be handled in-house or outsourced?
3. How will sales be integrated with the financial, accounting, and manufacturing systems?
4. What are our staffing needs?
5. Is the Web site secure so that customers feel comfortable ordering online? Have we created
firewalls to protect internal company data from unauthorized access?
Once the Web site is online, managers must monitor its performance and regularly evaluate its
effectiveness. They also need to know whose sites are best for their ads and promotions.
Measuring the return on an Internet investment is no easy task,
however. As yet, the Web offers no standard measurement procedures.
Auditing services use different methods to analyze Web-traffic data,
often with conflicting results. Some common measurements include
page impressions (number of times a page is seen), reach (number of
unique visitors to a site), total number of site visits, time online, clickthroughs
on linked ads, and a newer metric called “view-through”
rates, which measure whether the customer acted within 30 days of
seeing the online ad. Companies must use caution in interpreting these
results, however. A service that tells a company how many times its site
is seen may not know if the visitor spends time on a page or quickly links
to another site.
ingredient in Zappos’s customer service is the way it
treats its employees.
Workers at the Zappos fulfillment center are
just as committed to customer service as are
their front-end colleagues. Catered meals are
served twice daily, employees are encouraged
to advance in the company, and an education
enrichment program pays for employees to
attend college. When Zappos hires employees, it
uses a cultural-fit interview. One of the questions
is “On a scale of 1 to 10, how weird are you?” The
company doesn’t hire 1s or 10s; Hsieh says they
like 7s or 8s. It hires for attitude. In fact, every new
trainee is offered $1,000 and their current pay at
the end of the training period if he or she wants
to quit. The company is glad to see those who
take the money leave. According to William Taylor
of Harvard Business Online, those who take the
money “obviously don’t have the sense of commitment”
that Zappos requires. But the proof is in
the pudding. Zappos sold over $1 billion in merchandise
in 2007, beating its own goal of topping
$1 billion in sales by 2008. That’s a lot of satisfied
customers. 36
Discussion Questions
• Are there business risks to extreme customer
service and satisfaction?
• What do you think of Zappos’s litmus test of
offering new hires $1,000 if they want to quit?
What are the four stages in developing an e-commerce
strategy?
Describe the types of design, marketing, operations, and
infrastructure decisions companies face when implementing
an e-commerce strategy.
Describe several ways to ensure superior Internet customer
service.
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6
What lies ahead for
e-commerce?
Trends in E-Commerce
The Internet has become integral to our daily lives as businesses move their operations online.
As the evolution of this dynamic medium continues, new opportunities as well as challenges
arise in both the B2B and B2C sectors. Among them are the rise in drop-shipping fulfillment,
the growing popularity of Internet telephony and click-to-call features, and the next-generation
Internet infrastructure–Web 2.0.
Drop Shipping Fulfillment
Distributors are using their customers’ move to the Web to their advantage. They are providing
warehousing, logistics, and e-commerce services to retailers and manufacturers. Distributors offer
economies of scale to small retailers that want to set up Web shops. A new category of virtual
merchant is emerging. Buy.com, for example, outsources order fulfillment and focuses only on selling
products at extremely low prices to consumers. eBags.com, which carries more than 200 brands and
10,000 products on its Web site, uses a technique called drop shipping to handle order fulfillment.
With this virtual inventory system, e-tailers receive orders from customers and then send the
orders to affiliated wholesalers, who ship the items, usually with the merchant’s label on the package,
directly to the customer. Even though retailers must share a portion of the sales with these partners,
they can carry many more items than possible were they to hold all inventory themselves. “If you
don’t sell anything, you’re not out anything,” says Steve Craig, chief technology officer at ShopNBC,
which drop ships about 20 percent of its merchandise. Because merchants are spared the expense
of maintaining a distribution center, many swear by drop shipping. Rob Robertson of OutdoorDecor
.com, a specialty furniture maker, says, “Drop-shipping allows us to offer a much wider product line
than we ever could trying to warehouse our own products entirely.“ 37
Some common services offered by drop-ship suppliers include: 38
•
•
•
•
•
Automates order delivery process
Sends order notification via e-mail
Provides shipping updates
Invoices shipped items only
Processes returns and updates order status (exchanges, credits, refunds)
Relying on drop shipping is not without risks, however. “Freedom has its costs,” Craig warns.
Merchants must monitor and manage these supply chain relationships very closely. Red Envelope,
the gifts merchant, grades its drop-shipping vendors and meets with them to go over their report
cards. 39 Vendor reliability and efficiency are crucial, and a vendor may be selling the same product
to many other online stores, so items may no longer be available to fill orders. Merchants may
have little room to mark up prices, and returns become more complex logistically. 40
Click-to-Call
Click-to-call and click-to-chat solutions enable online shoppers to directly communicate with a
human customer service representative at the click of a button. Amazon.com now includes clickto-call
on help pages of its U.S. sites, as well as several European sites. Potential customers can ask a
question and request a phone call from a customer service representative immediately or in 5, 10, or
15 minutes. 41
The increasing use of Internet telephony makes click-to-call functionalities accessible to
smaller companies as well. For example, MotoSport, a small retailer for motorcycle and motorbike
enthusiasts, has click-to-call capabilities on its e-commerce site. Visitors can click on a link, enter their
phone number, and be seamlessly transitioned to either a telephone or a PC-based conversation
with a sales associate. Click-to-call allows smaller niche sites to develop more personalized
relationships with their customers. The same technology allows larger companies, like Amazon, to
resolve customers’ frustration that stems from interacting with such a large and seemingly faceless
retailer. 42
Web 2.0 Is Here
Wikis, blogs, AJAX, RSS, podcasts, mashups—these are a few of the technologies coming to you
courtesy of Web 2.0. The next generation of Web applications is based on a new Web model: a huge,
decentralized network that is created by Web users themselves. A new crop of start-up companies is
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developing the applications that facilitate Web 2.0, which is also called Live Web. It emphasizes active
participation in a real-time environment, rather than simply viewing static Web pages provided by
commercial providers such as CNN, CNet, ESPN, Yahoo!, and online publications. “Web 2.0 services
are harnessing the collective intelligence of the Net,” says Tim O’Reilly, CEO of O’Reilly Media, Inc.
Some examples of the technologies include:
• Wikis: Collaborative Web sites where multiple users can both post and edit contributions.
Wikipedia (http://en.wikipedia.org) is a free encyclopedia that anyone can edit.
• AJAX (Asynchronous JavaScript and XML): A Web development technique for creating
interactive Web applications that load quickly and are easy to use. Google Maps (http://maps.
google.com) and Flickr (http://www.flickr.com), a photo-sharing site, were created with AJAX.
• Really Simple Syndication (RSS): Web formats that aggregate and deliver live feeds of new
information, such as news, sports, and stock quotes, to subscribers.
• Mashups: Web sites or applications that combine content from more than one source into
a new integrated user application. Users can blend several information sources into a
customized application.
MySpace.com is one of the world’s most visited English-language sites. This interactive
community is a good example of Web 2.0 and how established online and traditional media
corporations are recognizing the potential of MySpace and similar social networking sites. Media
giant NewsCorp acquired MySpace, and Yahoo! owns Flickr, a photo-sharing site. Google paid
$900 million for the privilege of becoming the exclusive search engine for MySpace and other Fox
Interactive Media units. The partnership benefits both sides: Google searches were the main reason
people left MySpace. Adding a Google search button keeps users at the site.
Another popular site that embodies the spirit of Web 2.0 is Craigslist. Millions use this online
community bulletin board to find jobs, apartments, and items for sale, and even to look for dates.
“The fact that our site is completely self-service and community moderated allows our tiny staff of
19 to manage the seventh largest Web site in the world,” says CEO Jim Buckmaster. Because only
a small percentage of users pay fees, Craigslist poses a threat to the future of paid classified ads at
newspapers.
Web 2.0 is also attracting the attention of corporate users. “We are seeing growing interest by
businesses for Enterprise Mashups, which are driving a whole new breed of ‘instant applications’ by
people needing specific and tailored information,” says Rod Smith, IBM’s vice president of emerging
Internet technologies. Internal wikis can save time and frustration by allowing employees to post
items such as meeting agendas, reports, documents, schedules, and other materials on a wiki Web
site—rather than send numerous e-mails to coordinate their efforts.
Corporations also like the ability to blend external information with enterprise content to
create custom applications that facilitate real-time problem solving. For example, IBM worked with
a home improvement retail chain to optimize delivery logistics for special situations. When a major
snowstorm is predicted, the logistics manager can develop an application with National Weather
advisory reports, Google Maps, and the company’s national hardware inventory data. The results
identify the areas most affected by the storm and whether they need additional supplies of snow
blowers, shovels, and rock salt.
Companies now use social networks such as LinkedIn, where people post career profiles, to
recruit new employees and find potential customers. “In 2003 people thought of us as a weird form
of social networking,” says Reid Hoffman, LinkedIn’s CEO. “Now people are saying, ‘Oh, I get it, it’s a
business tool.’”
Even blogs (“Web logs,” or personal online journals) have corporate applications. Blogs that
solicit customer feedback provide another avenue for market research. Many blogs are written by
ordinary consumers, others by professionals in their fields. The beauty products field alone has
more than 350 blogs, some attracting many thousands of readers each day. Even the companies
themselves are creating blogs and online forums or advertising on blogs as part of their marketing
strategy.
Using Web 2.0 to its advantage requires a new, more flexible corporate culture, however.
Because it is a form of employee empowerment, it complements other current management trends.
However, its do-it-yourself nature is difficult for traditionalists to accept and reduces reliance on
IT departments.
Currently, one of the hottest Web trends is Twitter, a free service that transmits moment-bymoment
messages with a 140-character limit. Twitter is basically a microblogging tool that Twitterers
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What are the potential rewards and risks of using drop
shipping in e-commerce?
What is click-to-call and what role does it play in
e-commerce?
How is Web 2.0 changing the nature of the Internet?
Should businesses embrace the new technology? Why or
why not?
1
What is the Internet,
who uses it, and for
what?
2
How has the the
Internet economy
changed the business
environment?
3
How can
companies
incorporate
e-commerce into
their overall business
strategies?
4
What What benefits benefits do
businesses achieve
through e-commerce?
5
What steps
are involved
in launching an
e-commerce venture?
use to post information on almost a minute-by-minute basis. Generally
Twitterers follow the people they know or care about. In early 2008, traffic
on Twitter exploded, and one of its cofounders, Biz Stone, plans for Twitter
to grow by a factor of 10, or even 100. Although skeptics think Twitter will
fizzle out, companies like Dell, Hormel Foods, and Blip.Tv are starting to
scan tweets (term for a Twitter posting) and tweet-streams for customer
service issues they may face. Some companies like Zappos and H&R Block
use Twitter to respond to customer queries. Because Twitter is simple to
use, it might just take off. More likely, though, is that it gets gobbled up
and becomes another application in a larger Web company. 43
Summary of Learning Goals
The Internet is a global “network of networks” that combines high-speed communications and
computing power to transmit information immediately. All networks in the Internet use TCP/IP,
a special language that enables different types of computers to communicate. In addition to
the resources of the World Wide Web, the Internet provides file transfer capabilities, e-mail, chat
sessions, and newsgroups. About 1.4 billion people worldwide use the Internet. Over 218 million
in the United States are regular users. Although early adopters of the technology were younger,
more affluent, and better educated than the general population, the profile of the Net user is
moving closer to the national averages in these areas. Among the most popular Web sites are those
with company and product information, news, reference materials, periodicals, financial quotes,
and entertainment. Businesses use the Internet to research economic trends; gather industry
information; learn about competitors; provide customer service; communicate with employees,
vendors, and customers; market and sell products; and purchase supplies.
New types of companies provide enabling technology and services. The competitive arena is
expanding as the Internet eliminates barriers of time and place and reduces barriers to entry.
Channel relationships are changing as well. The Internet enables companies to sell directly to
consumers without using distributors. Some distributors are finding new roles by providing services
to online merchants who want to outsource order fulfillment. The Internet also empowers consumers
by increasing access to information and making it easy to compare prices. Consumers now expect
businesses to disclose privacy policies and carefully safeguard the information they collect.
E-commerce, the entire process of selling a product or service via the Internet, has two market
segments: business-to-business and business-to-consumer. The business-to-business market
accounts for more than 95 percent of all e-commerce revenue. Among the many models for
e-commerce are selling goods and services over the Web, providing information for a fee, supporting
an information or entertainment site with advertising or referral fees, facilitating sales through
auctions, providing e-commerce–enabling services for consumers and businesses, and offering
online business exchanges.
E-commerce reduces costs by streamlining company operating procedures. It offers the
convenience of lower prices, greater selection of products and vendors, around-the-clock ordering
and customer service availability (increasingly important in the global economy), ease of updating
and distributing product catalogs without incurring printing costs, and the ability to track customer
and product sales data. Companies can eliminate intermediaries and sell directly to consumers, and
can offer customized products. The increased efficiency results in better customer service, lower
transaction costs, and new relationship-building strategies.
Companies can choose from several levels of e-commerce, starting with a basic promotional Web
site and then adding order-taking and customer service features. More sophisticated strategies
integrate Web activities into a company’s existing business structure. To implement an e-commerce
strategy, companies must consider merchandising, Web site costs and design, marketing, customer
service and order fulfillment, operations, and infrastructure.
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Drop shipping is taking over as a fulfillment method and enabling more Web retailers to offer
broader assortments of products without incurring the costs of inventory management and
warehousing. Click-to-call technology is becoming more pervasive as companies seek ways to
initiate and maintain direct relationships and feedback loops with their customers.
Web 2.0 is a new, more interactive Web model featuring active participation by users, who
create most of the content. Businesses are also using Web 2.0 services and technology. They recruit
at networking sites and use mashup technology to instantly create custom applications that
facilitate real-time problem solving. The future is uncertain for microblogging services like Twitter.
More people and businesses are using it, but without a way to monetize the service, Twitter may
eventually become a tool in a larger Web company’s suite of applications rather than remain a
stand-alone offering.
Key Terms
browsers 3
business-to-business e-commerce (B2B) 9
business-to-consumer e-commerce (B2C) 9
electronic commerce (e-commerce) 9
extranet 11
hypertext 2
Internet 2
Internet service providers (ISPs) 2
spyware 8
transmission control protocol/Internet
protocol (TCP/IP) 2
Web sites 2
World Wide Web (WWW) 2
Preparing for Tomorrow’s Workplace: SCANS
1. Team Activity Divide the class into three groups representing retailers, distributors, and manufacturers.
Each group should examine how the Web is changing channel relationships and
prepare for a class discussion on the future of distributors. Include actual company examples
in your presentations. (Interpersonal, Information)
2. Choose two of your favorite Web sites to explore and analyze. Using the four stages described
in the Launching a Successful E-Business section, decide which stage of e-commerce strategy
each site represents and explain why. (Information, Resources)
3. How can a company determine whether a Web site is accomplishing its objectives? Research
the techniques used by different ratings services such as comScore Networks and Nielsen/
NetRatings to measure site traffic. Develop a list of criteria that would be useful for evaluating
a site that sells a product and a site that provides news information. (Information,
Resources)
4. Web 2.0 allows everyone to create and post digital content. Supporters praise it as empowering
and democratic and believe it promotes creativity. Critics feel it flattens and waters down
culture; with so many authors, they fear that mainstream media, which provides higher-level
entertainment, will suffer. What do you think? Using what you’ve learned about Web 2.0 in the
trends section of this chapter and from additional research, prepare a defense of your position.
Take a vote in class to learn how many support Web 2.0, then discuss the different opinions.
Did you change your mind after hearing other viewpoints? (Information, Resources)
5. Many Internet service providers now offer customers the chance to have their own Web
site. Develop a proposal for a personal or business Web site, including the purpose, features,
estimated cost, maintenance, update plan, and similar details. Refer to the tips in Exhibit 5.
For more help, visit Jakob Nielsen’s Alertbox site (http://www.useit.com) for his advice columns
on improving Web site usability. If possible, create and test the Web site. (Information,
Resources)
Using the Internet for Business Success 21
6
What lies ahead
for e-commerce?
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Ethics Activity
Your company’s online store has not lived up to your expectations,
and you and your marketing team are looking for
ways to boost its visibility. As you explore various options,
you come across a company called FakeZilla, which offers
sophisticated traffic-generating software that claims to “build
your site’s traffic and popularity”. By appearing to be a busy
place with many site visitors, your site will get higher rankings
from search engines and attract more customers. It may even
allow you to gain paid advertisers who want to reach your
audience.
The materials on the Web site explain that “FakeZilla is
intended to test different web site aspects, such as search
engine optimization (IP-Delivery, Agent-Name Delivery, or other
The Music Keeps
Playing for
Ticketmaster
Working the Net
SEO techniques) or web server resources. Our software is NOT
intended for fraudulent use and it is 100% legal.”
You could buy the software for between $40 and $139,
depending on the number of features you wanted (Note: This
software is no longer available.)
Using a Web search tool, locate articles about this topic and then
write a response to the following question. Be sure to support your
arguments and cite your sources.
ETHICAL DILEMMA: Should you recommend that your company
buy FakeZilla’s software to direct more traffic to your company’s
Web site? (Note: Assume this software is currently available.)
Sources: Fakezilla Web site, http://www.fakezilla.com (August 21, 2006); and Burt
Helm, “Click Fraud Gets Smarter,” Business Week, February 27, 2006.
1. Compare the features of two product comparison services such as BizRate (http://www
.bizrate.com), mySimon (http://www.mysimon.com), Epinions (http://www.99epinions.com),
ConsumerSearch (http://www.consumersearch.com), and PriceSCAN (http://www
.pricescan.com). Do several searches for the same product at each site. How easy is it for
consumers to use the site? Which do you prefer, and why? What features were factors in
your answer?
2. Use ClickZ Stats (http://www.clickz.com/stats) to track the latest statistics and demographics
on Internet users and to research the latest studies on e-commerce and business use.
Summarize your findings in a brief report on key trends.
3. To avoid government intervention, Internet industry organizations are working toward selfregulation
to protect consumer privacy. Visit the sites for the Online Privacy Alliance (http://
www.privacyalliance.org) and TRUSTe (http://www.truste.org) and evaluate what they are
doing. What criteria must firms meet to win the right to display the TRUSTe seal of approval?
4. What makes a good Web site? Check out the site for the Webby Awards (http://www
.webbyawards.com). Summarize the qualities that these sites share.
5. How good are “prebuilt” Web site templates for e-commerce? Use a search engine to find
three sites, such as The Coding Studio (http://www.thecodingstudio.com), that offer these
services and compare them. If you were starting an online retail business, would you use one
of these or hire an outside site designer? Summarize your research by developing a plan for
your e-commerce site.
Creative Thinking Case
When you want to attend a concert or sporting event, chances are you will purchase your seats
through Ticketmaster (http://www.ticketmaster.com), the world’s leading ticketing company serving
more than 9,000 entertainment clients worldwide through 19 telephone call centers and 6,500
retail ticket outlets—and one of the largest e-commerce sites on the Internet.
Headquartered in West Hollywood, California, and an operating business of IAC/InterActive
Corporation, the company sold 128 million tickets in 2006. “Ticketmaster offers its clients across all
event categories a powerful single solution for all aspects of event ticketing,” said Sean Moriarty,
the company’s president and chief operating officer. “By integrating new services with our ticketing
technology, we are better positioned to develop and deploy more streamlined sales programs to
sell more tickets for our clients. Our flexibility and our scalability enable us to generate measurable
and meaningful results that continue to reinforce our clients’ decisions to select Ticketmaster as
their ticketing provider.”
Two new client services groups—Ticketmaster Venue Relations, dedicated to facilitating ticketing
programs and services for the company’s domestic and international venue clients, and
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Cottonblend, the company’s new in-house media design studio—provide specialized programs
and services integrated with event ticketing. Ticketmaster has also expanded its ticketing system to
offer specialized solutions for its arts and university clients, reflecting its continuing commitment to
servicing clients across all event categories with targeted sales and marketing programs.
Other innovative product offerings include TicketExchange, which allows season ticket holders
to sporting events to post resale tickets for games they cannot attend, and TicketFast, e-mail delivery
of tickets that can be printed on any standard printer, thus avoiding costly overnight-delivery
charges to consumers. And Ticketmaster Auctions allow venues, promoters, and artists to sell tickets
directly to fans at a fair-market price.
From a small company started in 1976 by Arizona college students, Ticketmaster now has an
international presence that extends to the United Kingdom, Canada, Ireland, Mexico, Australia, Latin
America (Chile, Argentina, and Brazil), the Netherlands, Denmark, Sweden, Finland, New Zealand,
and Germany. In addition to concerts, sporting events, exhibitions, and other special events, the
company handles such large-scale happenings as the 2004 Athens Olympics and the inaugural
Manchester International Festival scheduled for the summer of 2007. Ticketmaster celebrated its
30th anniversary in 2006 and it looks like the music continues to keep playing for this e-commerce
giant.
Critical Thinking Questions
• E-commerce companies come and go, so what is responsible for Ticketmaster’s longevity and
success as an e-commerce company?
• Describe the company’s innovative programs that target new customers and generate new
revenue streams.
• What other products/programs could the company offer its clients that would tie into its existing
product mix and structure?
Sources: Press releases: “Minnesota Vikings and Ticketmaster Expand Ticketing Relationship,” August 14, 2006; “Ticketmaster
Appointed as Official Ticketing Agency,” July 15, 2006; “Ticketmaster Forms New Groups Delivering Specialized Client Services
Across All Event Categories,” August 3, 2006, all from http://www.ticketmaster.com; Ticketmaster corporate Web site http://
www.ticketmaster.com, August 1, 2008.
Exploring Business Careers
If asked about the country’s national treasures, people might easily list our natural wonders, our
architectural and engineering triumphs, or the makers of our history. The Grand Canyon, the Golden
Gate Bridge, the Empire State Building, or the Lincoln Memorial might all make the list. Rarely would
the neighborhood deli pop into people’s minds. However, slip an authentic pastrami on rye into
their hands, and they are sure to agree: nothing is quite like a neighborhood deli. Unfortunately,
true deli fare has historically been a delicacy of the nation’s larger cities, such as New York, Chicago,
or Philadelphia. Until recently, that is. With the launch of Zingerman’s Web site in 1999, http://www.
zingermans.com, people across the country suddenly had access to true deli cuisine.
Along with partner Paul Saginow, Ari Weinzweig opened Zingerman’s Delicatessen in Ann Arbor,
Michigan, in 1982. Today they have several businesses in addition to the deli. Despite this growth,
they remain only in Ann Arbor, sticking to the belief that “if we were on every corner across the
country, we wouldn’t be Zingerman’s anymore.” Luckily for those of us who don’t happen to live
within driving distance, Zingermans.com brings much of what makes Zingerman’s special right to
our doorsteps.
Good food is one of Weinzweig’s passions. And one of the main functions of the Web site is to
allow people across the country access to the food that he and the rest of the Zingerman’s staff
believe is the best. “The Web site is really an extension of our mail order business, another way to
reach customers who are seeking our gourmet products.” Whether you’re craving an exquisite olive
oil or one of their signature sour cream coffeecakes, you can find it on Zingermans.com. And while
you won’t find any of the made-to-order sandwich specialties that make the deli famous, you can
order the Zingerman’s Rockin’ Reuben Sandwich Kit Tote, which provides all the fixings for you to
prepare your own deli sandwich feast.
Beyond this, Zingermans.com establishes a presence for the company. The design of the
Web site is welcoming and informal—visitors feel the same comforting environment online that
Ari Weinzweig
Zingerman’s
Delicatessen
Using the Internet for Business Success 23
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© South-Western/Exploring Business Careers

they would were they to walk into one of Zingerman’s businesses. People can sign up for an e-mail
newsletter, make dinner reservations, and check the dates of upcoming events. It is a tool that creates
a Zingerman’s community throughout the country.
Weinzweig and Saginow made a commitment to keep Zingerman’s small and local, which they
saw as a commitment to keeping it great. With Zingermans.com, however, they have found a way
to stay small and local and still bring that greatness to everyone, whether they live in Ann Arbor,
Brooklyn, or Independence, Kansas. All in all, it’s quite a treasure.
24 Online Enrichment Chapter
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1. http://www.internetworldstats.com/stats.
htm, (May 27, 2008); “Nielsen Online
Reports Topline U.S. Data for April 2008,”
Nielsen NetRatings, May 15, 2008, online
at http://www.nielsen-netratings.com/
pr/pr_080515.pdf; Linda Rosencrance,
“Ecommerce Sales to Boom for Next 5
Years: Forecasts Project Online Sales
of $215B to $335B Annually by 2012,”
ComputerWorld, February 5, 2008, online at
http://www.computerworld.com/action/
article.do?command=viewArticleBasic&ar
ticleId=9061108.
2. “Internet Domain Survey, January 2008,”
Internet Software Consortium, http://www.
isc.org (May 27, 2008).
3. “Nielsen Online Reports Topline U.S. Data
for April 2008,” Nielsen NetRatings, May
15, 2008, online at http://www.nielsennetratings.com/pr/pr_080515.pdf.
4. Ibid.
5. Roxanne Cooke, “Webkinz Toys Combine
Internet with Real Play,” Puyallup Herald,
May 6, 2008; Brian Hando, “Toys with a
Second Life,” Business Week, December 31,
2007, p. 91; Emily Bryson York, “The
Hottest Thing in Kids Marketing? Imitating
Webkinz,” Advertising Age, October 8,
2007, p. 38; Lisa Davis, “Interactive Toys
Like Webkinz Are Drawing Young Kids,
Worrying Some Parents,” Fort Worth
Star-Telegram, October 4, 2007; Dan Cox,
“Whyville Starting to Captivate Young
Internet Audience,” Los Angeles Business
Journal, December 18, 2006, p. 18; “Is
Edu-Gaming the Future of Scientific and
Technological Education,” April 2007, p.
2; Bob Tedeschi, “Fuzzy Critters with High
Prices offer Lesson in New Concepts,” New
York Times, March 26, 2007, p. C4; Eugenia
Levenson, “New ’Kinz on the Block,”
Fortune, March 5, 2007, p. 18.
6. Ben Kunz, “The Real Threat to Google,”
BusinessWeek Online, April 29, 2008.
7. “Amazon.co.jp Launches Health & Beauty
Store,” Amazon.com press release, August
3, 2006, http://www.amazon.com.
8. “Forrester: 40 million U.S. Households to
Spend $86 billion on Online Travel in 2007,”
Metrics2.com, January 9, 2007; “Online
Travel Spending to Reach $128 Billion
by 2011, Jupiter Research,” Metrics2.com,
November 15, 2006.
9. “4 Billion,” New York Times Upfront, May 5,
2008, p. 5.
10. Jennifer Netherby, “Apple Seeds New
Releases,” Video Business, May 5, 2008, p. 1.
11. Steve Miller, “A Whole Lot of Questions: The
Dealership System Is the Only Way to Buy
a New Car in the U.S. It‘s Also Antiquated,
Inefficient and a Sinkhole for Ad Budgets.
What Would Happen If It All Just Went
Away?” AdWeek, April 9, 2007, pp,. 22–28.
12. “AOL Says Privacy Breach Was a Mistake,”
CNN.com, August 8, 2006, http://www.
cnn.com; and Dawn Kawamoto, “AOL
Apologizes for Release of User Search Data,”
CNETnews.com, August 9, 2006, http://
news.com.
13. Patrick Thibodeau, “Marc Rotenberg,
the Privacy Advocate, Talks about the
Dangers of a Google-DoubleClick Merger,”
ComputerWorld, February 2008, pp. 19–21.
14. “Yahoo Partners with McAfee to Make
Search More Secure; The Collaboration
Covers Web Site Security Issues, Such as
Identifying Sites Associated with Adware,
Malware, Spyware, Phishing, and Spam,”
Information Week, May 6, 2008; “Fake MP3
Trojan Detected on 27% of Machines,“
Information Week, May 7, 2008.
15. Enid Burns, “B2B Directory,” Forbes Best of
the Web, Winter 2005, http://www.forbes.
com (August 11, 2006).
16. Kevin J. Delaney, “On the Web, Signs of
a Click Recession,” Wall Street Journal,
February 27, 2008, p. B3.
17. Ibid.
18. “Streamlining Procurement,” Start-It, June
14, 2006, http://www.specialtypub.com.
19. Ariba Web site, http://www.ariba.com
(May 27, 2008); and Paul Demery, “Sourcing
Sense,” Internet Retailer, May 2006, http://
www.internetretailer.com.
20. “Digital River Expands Global E-Commerce
Agreements with Business Objects,” Digital
River press release, June 8, 2006, http://
www.Digitalriver.com.
21. “B2B Directory,” Forbes Best of the Web,
Winter 2005, http://www.forbes.com
(August 2006).
22. Sonya Moore, “Johnny Rockets: Streamlined
Operations Give a Fresh Spin to the Chain’s
Classic Diner Fare and Dancing Servers,”
Nation’s Restaurant News, May 15, 2006,
pp. 66–68.
23. “E-Commerce Will Grow 17% to $204 Billion
This Year, Study Says,” Internet Retailer–
April 8, 2008, http://www.internetretailer.
com/dailyNews.asp?id=25984; http://
www.census.gov; Census findings also
reported in “Online Sales Growth Outstrips
Offline in Q1, Although at a Slower Rate,”
Internet Retailer, May 15, 2008, http://
www.internetretailer.com/dailyNews.
asp?id=26411.
24. “comScore Forecasts Total E-Commerce
Spending by Consumers Will Reach
Approximately $170 Billion in 2006,”
comScore Networks, August 2, 2006, http://
www.comscore.com.
25. Matthew Bandyk, “Online Retailing Offers a
Bright Spot,” U.S. News & World Report,
April 28, 2008.
26. “2007 Online Shopping Season Surpasses
$29 Billion in Sales, Up 19 Percent Versus a
Year Ago,” comScore Networks, January 7,
2008, http://www.comscore.com.
27. Jack Ewing, “Otto the Modest,” Business
Week, June 5, 2006, p. 42; “Otto Group
Preliminary Figures for the Financial Year
2005/2006,” The Otto Group press release,
April 3, 2006, http://www.ottogroup.com;
The Otto Group Web site, http://www.
ottogroup.com (August 22, 2006).
28. “Nordstrom Launches ‘Buy Online, Pick up
In-Store,’” PRNewswire, May 20, 2008.
29. Love Goel, “Surviving Retail’s New Age,”
Barron’s, March 20, 2006, p. 55.
30. Thomas Pack, “Pandora Lets Users Create
Online Radio Stations,” Information Today,
May 2008, pp. 38–40.
31. “Why eCommerce Software for Small
Businesses?” http://ecommerce-softwarereview.toptenreviews.com/
(May 27, 2008).
32. “Top 10 Stickiest Brands at Home and
Work, March 2008,” http://www.clikz.com
(May 27, 2008).
33. “Internet Ad Revenues Top $21 Billion in
’07, Reaching Record High,” Interactive
Advertising Bureau, May 15, 2008, online at
http://www.iab.net.
34. Aaron O. Patrick, “Foster’s to Launch Web-
Only U.S. Ad Strategy,” Wall Street Journal,
August 3, 2006, p. B2.
35. Irene Cherkassky and Hallie Mummert,
“How Good Is Your Customer Service?”
Target Marketing, July 1, 2006, p. 26.
9075X_18_CH18_p001-026 pp3.indd 25 9/29/08 3:07:31 PM
25

36. Helen Coster, “A Step Ahead,” Forbes,
June 2, 2008, p. 78; Dan Mitchell, “Shoe
Seller’s Secret of Success,” New York Times,
May 24, 2008, p. C5; “The Biggest Challenge
Is Not the Volume of Shipments but the
Timing,” Chain Store Age, April 2007, p.
66; Brian Morrissey, “These Brands Build
Community,” ADWEEK Online, May 12, 2008.
37. Mark Del Franco, “Delivering on a Promise,”
Multichannel Merchant, September 1, 2007.
38. Ibid.
39. Ibid.
40. James Maguire, “Make Drop-Shipping Work
for You,” E-Commerce Guide.com, July 24,
2006, http://www.ecommerce-guide.com.
41. Jessica E. Vascellaro, “Online Stores Adopt
Click-to-Call Customer Service,” Wall Street
Journal, March 15, 2006, p. D4.
42. “MotoSport Selects eStara Click to Call
and Click to Chat for Proactive Sales and
Support; Online Motorcycle Parts, Apparel
and Accessories Retailer Looks to Improve
Customer Loyalty and Increase Sale,”
InternetWire, January 2, 2008.
43. Stephen Baker, “Why Twitter Matters:
Can the Fledgling Microblogging Service
Become a Social Media Powerhouse to Rival
Giants like Facebook, or Will It Be Gobbled
Up?” Business Week Online, May 16, 2008;
David Kirkpatrick, “Web 2.0 Gets Over Its
Goofing Off Stage,” Fortune, March 31,
2008, p. 32.
26 Endnotes
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