Online File W3.1 Selling Prescription Drugs Online - UTH e

Chapter Three: Retailing in Electronic Commerce: Products and Services
Online File W3.1 Selling Prescription Drugs Online
Increasing prescription drug prices are driving millions of U.S. consumers, particularly seniors, to purchase prescription drugs
online (Pharmacy Choice 2006). Both the number of consumers buying online prescription drugs and the number of Web sites
selling them are increasing (CASA 2006). Lower prices and convenience are driving online prescription sales (Lipsman 2005;
Rosson 2006).
Although online prescription drug buyers represent a minority of U.S. consumers, this minority is significant and growing.
An average of 9 percent of adults purchased prescription drugs online during 2005, up from 4 percent in 2004 (Catalyst Online
2005). Those buying online tend to come from higher income households and have at least 6 years’ of online experience. Drugs
purchased online were mostly for chronic disorders (e.g., arthritis). Pew Research suggests that although Americans may be
cautious now, they will likely grow more comfortable as they learn of friends and neighbors ordering without trouble (CNN.com
2004). Some of the more established sites offering online prescription drugs are drugstore.com (which is partnered with Rite
Aid), cvs.com, more.com, and longs.com. These and other companies are experimenting with different strategies to capture a
share of the $140 billion market.
Although welcoming the low prices and convenience of buying prescription drugs online, consumers are concerned about
safety and quality issues (Lipsman 2005). This is particularly the case with low-price drugs bought at non–U.S. online pharmacies (Rock 2005). Experts and legislators also are worried. They fear that the drugs purchased could be inappropriate for
the health condition of the particular consumer or that the drugs could contain inferior or low-quality ingredients. Experts and
legislators also worry about substance abuse and drug addiction. Such concerns led to the Online Pharmacy Consumer Protection
Acts of 2006 and 2007 being introduced into the U.S. Congress (Medical News Today 2006 and WashingtonWatch.com 2007).
An innovation that might significantly help consumers of prescription drugs is a new e-commerce company, BidRx, that
has a Web site that connects consumers and prescribing doctors with pharmacies, manufacturers, and benefit sponsors in an
effort to promote better pharmaceutical decision making along with lower prices and convenience. As well as offering quality
information on health-care issues, including prescription drugs, BidRx offers consumers the opportunity to put their prescriptions out to bid, so they can compare prices and services from various pharmacies. Price savings from this activity have been
reported to be very significant (Pharmacy Choice 2006).
Another element of prescription drugs and e-commerce is e-prescriptions. E-prescriptions include not only the distribution
of drugs but also the entering of prescriptions by physicians by voice, handwriting, or typing directly into special wireless PDAs
that can recognize any entry and have it confirmed by the prescriber (e.g., PocketScript from Zix Corp.). Approximately 7,000
people die each year due to unforeseen drug interactions. According to Callaghan (2004), more than 150 million calls are made
from pharmacies to prescribers in order to verify handwritten prescriptions. It is easy to see the advantage of
e-prescriptions that perform drug-interaction searches as well. According to AIS Healthcare (2004), one of the largest HMOs
in the United States, WellPoint Health Networks, invested $40 million in electronic prescriptions. The system is managed by
Microsoft’s health-care group.
Café Rx is an alliance of organizations (including Microsoft, Cisco, and HP) whose objective is to accelerate the adoption
of e-prescriptions. Also, several national prescribing communication networks have been created (e.g., RxHub and SureScripts
Messenger Services).
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Part 2: Internet Consumer Retailing
REFERENCES FOR ONLINE FILE W3.1
AIS Healthcare. “More E-Prescribing Programs
Begin, Partly in Response to Medicare Law.” March 12,
2004. aishealth.com/DrugCosts/DCMREPrescribing
Begins.html (no longer available online).
Callaghan, D. “Pharmacists Tap Net.” eWeek, September 20,
2004.
CASA. “Report on Selling Drugs Online.” Columbia
University Center on Addiction and Substance
Abuse (CASA), June 19, 2006, casacolumbia.org/
a b s o l u t e n m / t e m p l a t e s / Pr e s s R e l e a s e s . a s p x ?
articleid=445&zoneid=56 (accessed September 2006).
Catalyst Online. “Pulse Point: Tracking Trends in Online
Health Care Strategies.” November 2005. catline.com/
pdfs/PulsePoint-November%202005.pdf#search=
%22catalyst%20Online%20Pulse%20Point%22
(accessed September 2006).
CNN.com. “Study: Few Buy Drugs Online.” October 11, 2004.
cnn.com/2004/HEALTH/10/11/Internet.drugs.ap
(no longer available online).
Lipsman, A. “Defying Governmental Opinions and
Safety Concerns, Millions of Americans Turn to
Non-Traditional Online Pharmacies.” ComScore
Networks, April 2005. comscore.com/press/release.
asp?id=571 (accessed September 2006).
Medical News Today. “Bill Would Prohibit Online Sale of
Medications, Controlled Substances Without Valid
Prescription.” August 9, 2006. medicalnewstoday.com/
medicalnews.php?newsid=49050 (accessed September
2006).
Pharmacy Choice.“ Worry Over Online Purchases of Drugs as
Number of Online Pharmacy Sites Selling Controlled
Drugs Increases for the Third Straight Year.” Pharmacy
Choice, July 28, 2006. pharmcychoice.com/News/article.
cfm?Article_ID=33297 (accessed September 2006).
Rock, A. “Cut Your Drug Bills In Half.” CNNMoney,
July 1, 2005. money.cnn.com/magazines/moneymag/
moneymag_archive/2005/07/01/8263128/index.htm
(accessed September 2006).
Rosson, P. “Internet Pharmacies,” in Khosrow-Pour (2006).
WashingtonWatch.com. “S. 980, The Online Pharmacy
Consumer Protection Act of 2007.” washingtonwatch.
com/bills/show/110_SN_980.html (accessed August
2007).
ONLINE FILE W3.2
CATTOYS.COM, A SPECIALTY E-TAILER
CatToys.com is a specialized e-tail site that sells cat toys. Its
Web site (cattoys.com) is designed to appeal to cat enthusiasts, with cat images everywhere and informal typefaces to
put buyers at ease. It has no banner ads, is easy to navigate,
is updated weekly, and displays products in clear categories.
The company’s retail prices are comparable with those of
other pet stores and are kept low through aggressive cost
control. Buyers can receive discounts by donating cat toys to
animal shelters. Marketing is mostly accomplished through
search engines and an affiliate program in which any cat
lover can participate. The site has no membership or personalization features.
CatToys.com hosts its site through Yahoo!’s Merchant
Solutions (smallbusiness.yahoo.com/merchant/). This allows
it to use sophisticated technologies (e.g., cookies for the
shopping-cart process and payment security) and have access
to a large audience. Because Yahoo! takes care of the Web
site technology, CatToys.com can concentrate on its core
competency—selecting the right cat toys and marketing
them effectively. CatToys.com is an example of a low-volume
specialized store that attracts people with specific shopping
needs.
A sister company is dogtoys.com, which offers similar
services including gift certificates and the ability to earn
points. Both companies are evaluated at epinions.com.
Questions
1. Visit cattoys.com and examine the company’s revenue
model.
2. Examine the relationship between cattoys.com and
dogtoys.com. These two URLs are owned by the same
company. Why do they have separate URLs for each
product, whereas Amazon.com is adding more products
under one URL?
Chapter Three: Retailing in Electronic Commerce: Products and Services
3
REFERENCES FOR ONLINE FILE W3.2
cattoys.com (accessed November 2006).
dogtoys.com (accessed November 2006).
embracepetcommunity.com (accessed November 2006).
ONLINE FILE W3.3
GATEWAY’S “BOOK-IT-IN-THE-BOX” E-TRAVEL
SOLUTIONS
Gateway, Inc., a Fortune-500 computer manufacturing company that employs 21,000 people globally, with sales and
support centers on four continents, focuses on meeting
clients’ technological needs through strong customer
relationships.
In 2002, the company’s travel expenses exceeded
$10 million and were growing. Gateway took a proactive
step to address these operating costs by implementing an
Internet-based travel management service for its domestic
travelers. With solutions from e-Travel (e-travel.com),
Gateway implemented the “Book-It-in-the-Box” travel program. With this application, Gateway employees can plan,
book, and purchase complete travel itineraries, including air,
car, rail, and hotel, using a standard Web browser. Also, the
company can incorporate the elements of its travel program,
including travel policies, preferred suppliers, and negotiated
rates, into an Internet-based self-service system for travel
planning and purchasing.
The results have been dramatic. The company projected
$1.2 million in savings over the first 12 months of usage.
A critical part of installing new software was gaining
employee acceptance. This can be especially tricky when it
comes to corporate travel because employees fear that they
may be forced into uncomfortable or unfamiliar travel habits.
Gateway phased in the new program over a month and was
successful in achieving employees’ behavioral change due to
a number of factors: careful communication about the initiative, guiding employees through the process, and responding
to employees’ questions. Teams from e-Travel and Gateway
worked together to deliver a variety of useful tools to benefit
employees, including in-person and Web-based training
sessions and placing a “Book-It-in-the-Box” icon on
computer desktops company-wide. E-travel’s reservations
were integrated with the global distributions system of
Gateway’s travel agency, Rosenbluth International’s SeniorLevel Management’s Acceptance, which further validated
the use of the program. Future initiatives will bring even
more travel functions online, including full integration with
the travel agency’s technology, rollout of e-Travel’s pretrip
approval function, international bookings, and wireless
access. E-travel Mobile will give traveling employees the
ability to update existing travel plans, book new ones, and
obtain flight status. The wireless program will help Gateway
achieve its goal of 100 percent agent-free travel bookings.
Questions
1. What category of e-commerce is this?
2. Identify the areas in which cost savings have
materialized for Gateway.
3. How was employee participation achieved?
REFERENCES FOR ONLINE FILE W3.3
e-travel.com (accessed October 2006).
gateway.com (accessed October 2006).
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Part 2: Internet Consumer Retailing
ONLINE FILE W3.4
MATCHING WORKERS WITH JOBS IN THE PHILIPPINES
The Philippines is a country with many skilled employees but
few open jobs. In January 1999, the government created a
special Web site that matches people with jobs. The site is
part of a computerized project of the Department of Labor,
and it is a free service.
For those who do not have computers or Internet access,
the government placed kiosks in hundreds of locations
throughout the country. The job placement system is also connected with Philippine embassies around the world, especially
in countries where there are many overseas Filipino workers,
so that they can find a job and return home. Government
employees help those applicants who do not know how to use
the system.
This system gives job seekers a chance to find a job that
would best suit their qualifications. At the heart of the system are its matchmaking capabilities. For the matchmaking
REFERENCES FOR ONLINE FILE W3.4
Agrawal, V., J. M. Manyika, and J. E. Richards. “Matching
People and Jobs.” The McKinsey Quarterly, Special
Edition: Organization (2003).
process, a database stores all the job vacancies submitted by
different employers. Another database stores the job
applications fed into the system. The system matches qualified applicants with companies. It also automatically performs
a ranking based on the matches. This job-matching feature
differentiates this site from other online job sites. Everything
is done electronically, so job seekers can see the match
results in seconds. For more on matching people and jobs,
see Agrawal et al. (2003).
Questions
1. What is the role of Internet kiosks in the Philippines’
employment system?
2. How are jobs matched with applicants?
Chapter Three: Retailing in Electronic Commerce: Products and Services
ONLINE FILE W3.5
THE EUROPEAN JOB MOBILITY PORTAL (EURES
CV-SEARCH) AND XING.COM
EURES CV-Search (europa.eu.int/eures) is an electronic
meeting point for employers and job seekers. Job seekers can
use the site to introduce themselves to employers; employers
can use the site to find and contact promising candidates.
EURES CV-Search gives job seekers the ability to post their
curriculum vitas (CVs i.e., resumes) on the site if they wish to
advertise that they would like to work in another country.
Employers can view job seekers’ CVs by registering with
the service. Job seekers can post their CVs anonymously. If
this option is selected, employers can only contact the job
seeker through the EURES service. Job seekers can present
their profiles in English, German, or French.
EURES is a free service for both job seekers and employers,
subject to the rules set down by individual EURES country
members.
What is offered on the site?
◗ Job vacancies throughout Europe, by country
◗ CV postings by area and country
◗ Information about the transitional rules regarding movement of workers to and from all member countries
◗ Information about living and working conditions in each
country
◗ Information about training opportunities
◗ Information about public employment services
◗ Job-related news
◗ Personalized pages and accounts for applicants and
employers
◗ Employment statistics
◗ Contact information and other resources
◗ A search engine for quick searches
◗ Search capabilities for employers to find the right CV
A similar site is xing.com, which is organized as a
business/social network (see Chapter 1).
Questions
1. Enter europa.eu.int/eures and look at some CVs. How
do you think jobs and people are matched?
2. Assume that you are looking for a job in one of the
countries served by the portal. Do you think that the
site offers sufficient information?
3. What tasks are performed by search agents?
4. Do you have any suggestions about how to improve
this site?
5. Compare europa.eu.int/eures and xing.com. Write a
report.
REFERENCES FOR ONLINE FILE W3.5
europa.eu.int/eures (accessed December 2006).
xing.com (accessed December 2006).
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Part 2: Internet Consumer Retailing
Online File W3.6 The Rise and Fall of Webvan
The online grocery e-business is based on the logic that people have to eat. It seemed that the Internet’s multimedia capabilities
and 24/7 availability of ordering would be the key to creating a desirable market for grocery delivery. The success of such a market
strongly depends on a logistics infrastructure that enables effective and efficient delivery of groceries, perishable products, and
prepared foods to customers’ homes within an acceptable timeframe.
Webvan’s answer to the logistics problem was a huge automated warehouse for each market. Each warehouse would
process product distribution equal to that of 18 grocery stores. The cost was initially estimated to be between $25 and
$35 million per hub. A month after the company’s formal launch, Webvan signed a $1 billion contract with the construction
giant Bechtel to build distribution centers in as many as 26 U.S. markets over a 2-year period.
Webvan opened its initial business in the San Francisco Bay area, with its hub located in Oakland, in June 1999. The
company’s prices were less than regular supermarkets. Shoppers could schedule deliveries between 1:30 P.M. and 10:00 P.M.
Tuesday through Friday, and between 9:00 A.M. and 5:00 P.M. on Saturday. Deliveries were within a 30-minute window
92 percent of the time, and orders were filled accurately 99 percent of the time. Customer service included friendly delivery and
professional, cooperative customer service representatives to handle mistakes and returns.
Between June and September of 1999, Webvan served 21,000 consumers and sales were $4.2 million. In September, repeat
customers made up 70 percent of the company’s business. However, the hub was functioning at less than 20 percent of its
capacity of 8,000 orders per day.
The company opened additional hubs in Los Angeles; Orange County; San Diego; Seattle; Chicago; and Portland, Oregon.
It instituted a Webvan Rewards program that determined same-day delivery status for customers. Consumers earned one point
for every $1 that they spent at Webvan and got a 100-point bonus for orders over $100. Only customers achieving gold
(1,500 points) and platinum status (2,750 points) qualified for same-day delivery.
In January 2001, the company curtailed plans to expand to East Coast cities, and by July 2001 the company was out
of business. The combination of rapid roll-out to 26 markets, heavy investment in the state-of-the-art giant warehouses, the
in-house development of software systems, the inability to raise more capital, and the bursting of the dot-com bubble led
the company to declare bankruptcy. The loss of about $1.2 billion was the largest experienced by any dot-com company.
REFERENCES FOR ONLINE FILE W3.6
Deighton, J. “Webvan: Groceries on the Internet.” Harvard
Business Review Case, 2003.
Dignan, L. “Fresh Direct: Ready to Deliver.”
Baselinemag.com, February 17, 2004. findarticles.com/p/
articles/mi_zdbln/is_200402/ai_ziff119342 (accessed
November 2006).
Enos, L. “Webvan Offers Same Day Delivery in Seattle.”
E-Commerce Times, June 5, 2001. ecommercetimes.com/
story/10261.html (accessed November 2006).
Chapter Three: Retailing in Electronic Commerce: Products and Services
7
ONLINE FILE W3.7
GROCERY SHOPPING IN THE PALM OF YOUR HAND
Safeway Stores, a grocery chain with $14 billion in sales per
year, has implemented its Easi-Order services using a Palm
handheld device (PDA) to allow customers to point and click
their grocery lists and send them to Safeway via phone. The
program is part of the company’s “Collect & Go” service.
Valued customers are given handheld devices that are loaded
with an application that contains a list of thousands of
grocery items, including descriptions and prices. The PDA
that customers are given is a fully functional unit that can
be used for contacts, note taking, e-mail, to-do lists,
calendaring and scheduling, and so on.
Customers can review the items and make their grocery
lists offline when time permits. (The estimated time savings
is 60 to 90 minutes each week.) When the customer is ready
to place the order, the device is plugged into a standard
phone socket, and it dials up the Collect & Go server. The
shopping list is downloaded to the server, and next week’s
suggested list along with suggestions and promotions are
uploaded to the device. The complete transaction takes
about 60 to 90 seconds. The data collected by Safeway allow
the company to offer outstanding customer service on a very
personal basis to each individual customer by evaluating the
individual customer’s purchases and buying habits.
The order is picked and packed by the store and set aside
for the customer to pick up at their specified, convenient
time. Items that customers prefer to select for themselves are
easily added to the order at the time of collection by scanning the bar code of the additional items with the same
handheld device. Collection is done at dedicated check-out
counters. Some Safeway stores are implementing Easi-Pay
terminals, which allow customers to avoid check-out lines
altogether.
In certain areas, delivery to customers’ homes also is
available. To make delivery possible, Safeway purchased
Groceryworks.com, which developed an innovative orderfulfillment model for the e-grocery industry. Safeway and IBM
collaborated on the Easi-Order project to develop the Javabased server. Safeway was able to contact customers in its
loyalty-card database, and the customer orders are downloaded to the same database. Easi-Order takes advantage of
the Internet by making it possible for customers to download
their orders directly to the Collect & Go intranet.
In the future, Safeway’s plan is to have screen phones,
digital TV, and speech-processing devices to assist grocery
shoppers in making their shopping experiences as easy as
verbally telling the program what they want. Safeway and
other supermarkets are experimenting with such tools.
Questions
1. What are the benefits of Safeway’s Easi-Order and
Collect & Go programs for customers?
2. Why is this considered to be an EC application?
3. What is the role of mobile devices?
4. Compare order fulfillment done at stores versus that for
home delivery.
REFERENCES FOR ONLINE FILE W3.7
Business Times Online. “Infinite Possibilities.” Business Times
Online, January 16, 2003. business-times.asia1. com.sg/
sub/supplement/story/0,4574,64197,00.html (no longer
available online).
IBM. “Safeway Stores Puts Grocery Shopping in the Palm
of Your Hands with IBM Built, Java-Based Easi-Order
Solution.” IBM Success Story, www-3.ibm.com/software/
success/cssdb.nsf/CS/KLKR-4BB3R3?Open
Document&Site=default (no longer available online);
safeway.com (accessed October 2006).
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Part 2: Internet Consumer Retailing
Online File W3.8 The Napster Experience: Its Rise, Collapse, and Revival
With improvements in Internet technologies, the possibility exists for widespread distribution of digital content from businesses to consumers and from consumers to consumers. The rise in importance of Napster and similar Web sites that allow
individuals to find and share music files, movies, and even photos and private documents coincided with the near universality
of computer availability on college campuses and the widespread adoption of MP3 as a music file compression standard.
MP3 files are much smaller than earlier file alternatives and allow individuals to download a standard song in far less time.
The Napster network did not require the use of a standard Web browser such as Internet Explorer. Nor did the user’s client
machine actually download the MP3 files from Napster’s servers. Rather, Napster only shared “libraries,” or lists of songs, and
then enabled a peer-to-peer file-sharing environment (see Chapter 8) in which the individual users literally download the music
from each others’ machines (called peers). The growth of the “Napster community”—with over 380 million registered users by
the end of 2002 and as many as 1.3 million using the service at the same time—was nothing short of phenomenal
(Borland 2002). It is said to have grown faster than any other community in history.
Because of the potential challenge to their revenue sources, the Recording Industry Association of America (RIAA) and five
major record labels engaged in a legal battle with Napster, suing it for copyright infringement (see Chapter 17). Napster argued
that its file sharing never actually published music that could be “pirated” or copied illegally in violation of internationally
recognized copyright and licensing laws. However, the court ruled that as a manager of file exchanges, Napster must observe
copyright. Thus, free file sharing is no longer allowed; Napster was forced to charge customers for use of its file-sharing service.
The users of the free services were not happy with the charge and abandoned the service, driving Napster into bankruptcy.
Napster’s assets have been acquired by Roxio Inc. which revived Napster as a for-fee service. In 2004, Napster introduced
its for-fee file sharing, making agreements with several universities for deep discounts to students. (For additional information,
see napster.com.)
More recently, Napster has launched a new advertisement-supported free music download service in a bid to legally offer
music fans the services they desire. In addition, it is broadening the range of services available, which now include the ability
to legally listen on-demand to a massive catalogue of music from major and independent labels. A music subscription service
offers unlimited access to CD-quality music and additional discovery, community, and programming features in an advertisingfree environment, and Napster To Go subscribers enjoy unlimited transfer of music to a compatible MP3 player.
In late 2005 Napster 3.5 award-winning subscription service became available. While the new version enhanced audio
fidelity and was easier to navigate, it also included song recommendation engine (Billboard.biz 2005).
Despite these initiatives, Napster is struggling financially to some extent, and its future is by no means certain. Napster
may be challenged by a new venture, SpiralFrog, scheduled to launch summer 2007 which has signed both the Universal Group
and EMI to its advertisement-supported music download service. In addition, EMI has agreed to allow the publication of its
lyrics online.
However, given the difficulty large branded players such as Napster are experiencing to make these services profitable, the
future of this type of initiative is uncertain (Marketingshift.com 2006). Furthermore, it would appear that such services will
need to address concerns about copyright infringements if they are to survive and prosper long term.
REFERENCES FOR ONLINE FILE W3.8
Billboard.biz. “Napster 3.5 Offers Unique Personalization
Features and Higher Fidelity Sound Quality.” November
9, 2005. billboard.biz/bbbiz/content_display/industry/
e3ida27a19ad4f62ef3db2e374c2a1a3b2d
(accessed
August 2007).
Borland, J. “Napster CEO Touts New Swapping Service.”
News.com, January 9, 2002. news.com.com/2100–
1023–806886.html (accessed November 2006).
Marketingshift.com. “EMI Leaps to SpiralFrog.” September 6,
2006. marketingshift.com/2006/9/emi-leaps-to-spiralfrog.
cfm (accessed September 2006).
Chapter Three: Retailing in Electronic Commerce: Products and Services
ONLINE FILE W3.9
A BLOOMING SUCCESS
Jody Yan had been running a steady floral business in downtown Hong Kong since 1987. In 1997, an online auction site
asked Yan to sponsor gifts for auctions, and she agreed.
Intrigued by the potential of the Internet, in 1998 she set up
an online store named Ambassador.com (ambassador.com.hk).
When the orders started to flow in, Yan decided to expand
the business by adding functions such as online payments.
Ambassador.com sells customized designer flower baskets,
flower bouquets, cakes, and fruit and gourmet gift baskets,
all attractively packaged, at an average price of $100 each.
Colorful pictures of all products are displayed on the online
storefront.
The firm runs a warehouse on the south side of Hong
Kong. In addition to sourcing from local wholesalers, fresh
flowers are air-shipped from Holland and New Zealand. Yan
realized that it would be very difficult to develop and maintain in-house software to address the requirements of an
online store. So she hired an IT consulting firm to develop
the online store from scratch and also retained them for
maintenance, hosting, employee training, and operational
support. “There is absolutely no need to build an in-house IT
function when you can outsource it to reliable experts,” says
Yan. To stay ahead of competitors, Yan emphasized good
product design. Another strength was her loyal staff, most of
whom had been with her for over 6 years.
In the first year of operations, the online store
accounted for about 10 percent of the firm’s revenue. Online
sales have since doubled every year and accounted for
30 percent of the firm’s total revenue of around HK$6 million
(US$750,000) in 2002. In 2001, the company closed its
physical retail shop. The remaining sales channel comprises
mail-order catalogs and the online store. Local telephone
purchase orders are also accepted. Customers receive a
detailed picture of the product at the time of delivery via
e-mail. Both an in-house team and an outsourced company
support local deliveries, helping Ambassador.com to cope
with seasonal fluctuations. Courier companies carry out all
international deliveries. This multichannel business model for
floral gift products works very well.
The following success factors helped Ambassador’s
online business blossom:
◗ Yan’s extensive experience in the floral gift products
business
◗ Yan’s analysis that floral gift products are suitable for
Internet sales
◗ Back-end operations for the online floral gift shop were
already in place, hence additional costs were marginal
◗ Identification of the online store as part of a multichannel
retailing strategy
◗ An initial pilot implementation that resulted in orders
◗ Plans and budgets prepared for experimentation
◗ The decision to outsource the implementation
◗ Hosting, maintenance, and training are done by one vendor
◗ Integration of online store functions with other business
models and IT
By 2006, the company had become one of the most successful online gift shops in Hong Kong.
Questions
1. Why was the physical store closed?
2. What are the major success factors of Ambassador.com?
REFERENCES FOR ONLINE FILE W3.9
Lee, M. K. O., and C. M. K. Cheung. “Internet Retailing
Adoption by Small-to-Medium Sized Enterprises
(SMEs): A Multiple-Case Study.” Information Systems
Frontiers, October–December 2004.
oliver.com (accessed December 2006).
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Part 2: Internet Consumer Retailing
Online File W3.10 Transformation to Click-and-Mortar Operations: Circuit City
Circuit City is the second-largest U.S. retailer of consumer electronics (behind BestBuy), operating about 632 superstores located
across the United States. Internationally, Circuit City operates more than 950 stores. Prior to the summer of 1999, Circuit City’s
Web site was largely a brochureware site, capable only of selling gift certificates. When Circuit City launched the new
circuitcity.com in 1999, it already had some of the needed EC systems in place—the credit card authorization and inventorymanagement systems at its brick-and-mortar stores. However, linking the company’s brick-and-mortar systems with the EC system
was neither cheap nor easy. “It’s safe to say that millions of dollars need to be spent to have a Fortune 500 kind of presence on
the Web in a transactional way,” indicated George Barr, Circuit City’s director of Web development. “It’s just not something you
could do for $100,000” (Calem 2000).
A few features of the Circuitcity.com site (click “services”) deserve special attention. First, through its Click & Learn facility,
the site educates customers about the various features and capabilities of different products, cutting through the jargon to help the
customer understand why these features may be desirable. In this personal and nonthreatening way, customers can gain valuable
knowledge to assist them in the purchase decision. (Some consumers find shopping in the traditional brick-and-mortar Circuit City
store to be intimidating because they do not understand the terms and product features discussed by store personnel.)
Second, at the Web site customers can perform powerful searches on a product database to help find the appropriate models
to consider. Third, the site offers an extensive amount of generic information about electronics and other products, organized in
a very flexible way. This assists buyers as they gather information before a purchase is made, whether or not they eventually buy
from Circuitcity.com. Visitors can select several product models and compare them by viewing a dynamically created table of
purchase criteria, displayed side-by-side, with drill-down details if necessary. Recently, CircuitCity has launched a 24/7 new service
for customers, called firedog (firedog.com). This service is designed to help customers in installing, repairing, and optimizing a
range of consumer technology products. Firedog personnel will appear in CircuitCity stores and will be available for home calls,
and online technical assistance for PCs is available via the Web site.
Circuit City has engineered the online purchase to be smooth, secure, and seamless. Poor process design will scare off
many customers. It has been reported that in other stores only 17 percent of all online purchase processes are completed,
versus over 50 percent for Circuit City. Customers who abandon purchases typically do so because of confusion and complexity,
surprises (such as shipping costs), concerns about security and privacy of personal information, system errors, slow transmission speeds, and other factors.
Finally, the site’s order fulfillment method is flexible. The customer is given three choices: (1) receive the purchase via
common carrier with no sales tax but with a small shipping charge for 3-day delivery, (2) pay a larger shipping charge for
overnight delivery, or (3) pick up the item at the nearby brick-and-mortar store and pay sales tax but no shipping, and thus
have the item almost immediately. If the customer chooses the self-pickup, the customer prints a confirmation page and takes
it to the service desk of the store, along with a picture ID. The customer can pick up a new purchase, such as a DVD player, in
under 2 minutes.
REFERENCE FOR ONLINE FILE W3.10
Calem, R. E. “Deal Clinchers: How to Get from
Brochureware to Online Business.” Industry Standard,
February 14, 2000.