Context providers create value for customers by simplifying access, providing information, and creating online spaces where customers can gather, interact, and conduct commerce. Many of the portals, such as Yahoo, America Online, and MSN, create Internet malls that fill many of the needs served by physical malls – except, of course, that of allowing early morning exercisers a place to power walk.
Disney established its Go network in December 1998 as a portal for the delivery of content from Disney's media channels: ABC News, ESPN, Family.com, and Mr. Showbiz. At its launch it became the fourth mostvisited portal on the Web. Like owners of physical malls, the context providers depend on the volume of traffic to their sites. They often earn revenues from the rental of choice 'marketspace' and from advertising – both of which are dependent on consumer attention and interest.
Forty years ago, even before mainframe computers, payment-support activities moved to speciality providers through the introduction of credit cards. Companies like American Express and bank consortia like Visa and Mastercard made payment and financial risk management an independently branded activity that today spans almost every industry and every geographic location. Later, these organisations and fledgling independents began to offer corporate procurement cards.
The Internet has created new possibilities. Most ventures in the online payment field have focused on four technology sets for conducting transactions over the Internet: credit cards, digital cash, sales aggregation, and smart cards. Traditional players dominate the online credit card business, but digital cash has seen a number of determined – albeit struggling – new entrants, including CyberCash, First Virtual, and DigiCash. Qpass, Intercoin, and Clickshare have entered the aggregator space; they make it possible for many online charges to show up as a single charge on the customer's credit card.
The fourth technology set, 'smart cards', allows users to cross between the virtual and physical worlds by loading cash balances onto chips imbedded in what looks like a credit card. Mondex has been a leader in this technology, which has been tested in the United Kingdom, but consumer acceptance has been slow.
As electronic commerce continues to grow, the payment specialists must rapidly grow their network memberships to drive efficient scale, or risk being overrun by larger players. This market will probably support only a few vendors. The big winner will be able to manage online bill presentation and payment, an area of cross-channel value destined to belong to the first mover to capture commanding market share.
Fulfilment involves both distribution (the transfer and storage of goods) and the management of information. FedEx, UPS, Roadway, Ryder, SeaLand, CSX and the Postal Services are among the leading providers of fulfilment services. The Internet has reduced costs and made it possible for these companies to offer more options. For example, online technology has helped Ryder and CSX, and their customers, to achieve flexible scale through less-than-load shipping, that is the ability to ship in increments that are smaller than a full truck, train car or container ship. Consequently, between 1991 and 1995 the proportion of Fortune 500 manufacturing companies making use of third-party logistics increased from 37% to 60%. Sales at FedEx have grown from $5.17bn in 1989 to $13.25bn in 1998, a compound average growth rate (CAGR) of 11.03%.
Yet even these market leaders in fulfilment must continue to innovate to prevent new entrants from poaching customers. For example, Pandesic, a joint venture of Intel and SAP, offers a turnkey electronic commerce package that covers all the activities between the storefront and invoicing, including inventory management, warehousing, shipping, and returns. Pandesic and similar fourth-party logistics (4PL) services offer complete logistics outsourcing to clients through a single interface. Two detailed studies, one for a petrochemical company and another for a pharmaceutical firm, found cost savings of 26% and 39% from the use of these services.
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1. The Internet helps customers to buy and use your products
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