Until the Internet came along, most companies focused on two core customer needs: buying and using. The Internet has made it possible to do a much better job of helping customers to buy and use products. Dell, for example, combined standardised components with direct sales, phonebased and online ordering and product support, to set a new standard in its industry. Dell does 30% of its business on the Web. Its 'Premier Pages' offer customised, account-specific information to streamline the buying process for corporate customers.
Toyota has also used the Internet to make buying more comfortable, convenient and customised. Toyota's customers will soon be able to shop for a car online by specifying the car they are interested in and receiving in return a listing of all matching vehicles in stock at dealers nationwide. Toyota customers will be able to buy in several ways. Those who are completely comfortable with online business will have the opportunity to complete their vehicle purchase via the Internet. Others may choose what part of the buying process they want to do via online access and what part they still prefer to use a dealer for.
eToys.com, Drugstore.com and Priceline.com have all tapped the power of the Internet to offer consumers more or better buying opportunities. Hewlett Packard puts EXPRESS terminals in convenience stores to sell printer cartridges and other supplies. Some sites allow mobile users to type or scan product barcodes into a handheld device and get in return comparison prices from online sources, contact information, and links to purchase the item from eCommerce vendors. In the B2B sector, Altra Energy built a large and successful electronic energy trading platform. General Electric established a trading post network for intra-company purchases from external suppliers. Chemdex built a virtual warehouse for the global life-science market. Each of these companies redefined 'buying' in its industry. Boeing sells two-thirds of its spare parts online (a $3bn business). But buying is just the beginning. eCommerce provides powerful tools to improve the way customers use products and services. Online updates of software and customer service support are common examples. 3Com, for instance, provides a self-service database of technical information to enable customers to diagnose problems or upgrade their data networks, while Double Click, an Internet advertising business, enhances the use of their services by compiling case studies and posting thoughts on successful Web marketing and advertising strategies.
In the travel industry, InfoHub.com plans meetings, tracks frequentflier award points and miles, and offers an online travel magazine full of travel tips and entertaining stories. InfoHub upgrades its site every six weeks with new, first-class applications and programs that make it hard for members not to use the service. Among the recent offerings are: 'BizAlert' sends messages of gate information, updates on delays or cancellations to members' pagers; 'CalendarDirect' downloads travel itineraries to members' Palm Pilots or other calendar programs. The home improvement vendor Home Depot creates value for users of its Web site by giving step-by-step instructions for over a hundred home improvement projects – and recommends the tools required to complete them.
Although many success stories came out of the effort to improve how customers buy and use products, competitors are converging on that end of the customer-value spectrum. It is important, therefore, to find new ways to create value. Some early entrants have shown how value can be added by helping customers sell/transfer, co-create, and integrate.
There is an old joke about the sign in the window of a small shop: 'We buy junk, sell antiques.' What has the Internet done to that store? After posting positive earnings for three years – quite a claim to distinction among Internet businesses – online-auctioneer eBay.com achieved a market capitalisation of more than $19bn by the spring of 2000.
Thousands of similar sites had sprung up on the Internet, selling everything from used sports equipment to farm equipment. Neoforma extended the concept to the resale of medical equipment and almost everything else related to healthcare. Auctioning of such devices as CAT scanners and X-ray machines changes not only the used equipment market but also the outlook for new product sales in this industry. For a fee, Neoforma will also handle liquidations, even to the point of selling off an entire hospital full of equipment. Returnexchange has found its niche in helping companies to recover residual value from returned products. By offering its business customers a channel through which they can resell returned merchandise, it hopes to become the king of used goods recovery. That is potentially quite a lucrative kingdom – Forrester Research predicts US companies will have to deal with $11bn in returns by 2002.
The popularity of online resale sites has incidentally created entirely new business opportunities. Consider iEscrow, a company that makes money by reducing customer risk in these resale markets. Buyers send funds to iEscrow, which then instructs the seller to send the goods to the buyer. Once the buyer approves the merchandise, iEscrow releases the funds to the seller.
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