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E-Business
Issues
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E-Commerce
Business Models
Service as a Differentiator
Amitabh
Kumar
President (Technology) and Director (Corporate), Zee
Telefilms
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There
have been few businesses with a higher mortality rate
than e-commerce. At the last count, over 20,000 companies
had shut shop with over $500 billion written off. Yet
there are many that have not only survived but also
thrived. So what is it that differentiates the e-commerce
winners from the losers?
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Most
e-commerce business models revolve strongly
around technology—fully automated systems interacting
via web and wireless, cutting down the flab
with minimum staffing and expenses
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Viewing
the e-commerce business through the customer’s glasses:
Most e-commerce business models revolve strongly around
technology—fully automated systems interacting via web
and wireless, cutting down the flab with minimum staffing
and expenses. However, these models fail to realise
that this is also what the customers are expecting to
do themselves. When their customers embrace e-commerce,
they are significantly restructuring their businesses
and doing away with a lot of logistics and people. They
expect to be fully supported, their calls answered and
the e-commerce providers to be available as if they
operate solely for the customer. The two models obviously
clash and, therefore, the business fails. On the other
hand, e-commerce businesses which differentiate themselves
on service quality, response and availability create
an undeniable value for their customers and are set
for success.
One of the few B2C companies making a success of e-commerce
was Office Depot which generated sales of $350 million
in 1999, $800 million in 2000, and boasts of industry
leaders such as GE, P&G and MCI as its customers. The
breakthrough came for Office Depot when it stopped being
just a supply company and engaged in helping customers
run their businesses through an array of free human
resources and business tools. Its value from dozens
of sites in many countries increased manifold as it
generated added value for the vendors through an extranet
rather than cannibalise their businesses. On the whole,
it is a success story of outstanding human resources
and customer service.
Components of the service priority business models
The business models placing service and response on
the highest rung actually put themselves in the shoes
of their customers. These businesses invariably integrate
their web systems into the back-office systems of their
customers, providing brick-and-mortar services such
as call centres, trained agents and highly visible customer
response tools. They would have a business transaction
website which focuses only on what the customer would
want to do in a typical e-commerce operating environment,
i.e. place and track orders, deliveries and payments.
Such sites will ensure that the websites allow for queries
to be answered intelligently and keep an elaborate track
of the general nature of what the customers are able
to do using their website. A model based on excelling
in service quality will be based on reliable, uninterrupted
and secure access by the customer and will take into
account the very high level of scalability required
to handle large transactions in demand gracefully.
Online service quality
A survey conducted amongst SMEs in UK in 2000 revealed
that over 80 per cent had Internet access, enabling
online service provisioning and fulfillments. Yet, ‘Content
is King’ became the motto of online e-commerce companies
with service—which was most important to survival—being
relegated to the background. As online transactions
increase and prices are driven down as a consequence
of price transparency between websites, the level of
service quality becomes a key differentiator for online
services. The customers certainly appreciate the content
quality but look for additional comfort, which can be
delivered only by service:
Reliability - to obtain the service consistently
and accurately;
Responsiveness - their belief that this business
is willing to help customers and provide prompt service;
Assurance - the knowledge that their interaction
will receive a prompt and courteous response.
Zona Research have conducted an analysis that suggests
that $4.35 billion were probably lost in e-commerce
revenues in 1999 alone, due to customer ‘bail-out’ when
customers were unwilling to wait for information to
download. The report notes that many customers may not
be prepared to wait longer than eight seconds!
A success story for online commerce is that of HPShopping.com.
The HP Shopping Village is HP’s consumer-direct web
channel with a difference. HP PCs, printers, consumables
and accessories are sold through this channel. The site
uses advanced Broadvision’s applications to create a
service-focused experience for its customers. To date,
feedback received from HP Shopping Village visitors
indicates an impressive 96 per cent approval rating.
Sites such as Keynote (www.keynote.com) help measure
the website performances of companies and put companies
in customer’s shoes. For example, in the top 40 UK sites
in December 2001, EasyJet’s response time was only 0.85
seconds, with the worst sites responding in no earlier
than 11 seconds. It requires little second guessing
where customers will go! While the automated service
is an extremely important component of e-commerce, the
need for companies to achieve a balance between providing
immediate automated service through automatically generated
email responses or web pages that are ‘personalised’
needs to be supplemented by a slower, but genuine personal,
human response through the customers’ preferred channel
(email, phone, mail or in person).
Elements of creating a service- differentiated e-commerce
model:
Gartner Research conducted a study on the major pitfalls
which led to failures of e-commerce businesses and came
up with some startling facts. Either services such as
phone support were dramatically cut back during non-North
American business hours, or they were nonexistent, forcing
international customers to request service outside normal
business hours. There was a general lack of web support
for web channels so that when the customers accessed
them, no agent was available. There was also a lack
of integration between channels, including sites that
also had traditional retail stores. Agents had little
visibility into the web channel, and web sites sometimes
had little correlation with what was available in stores.
All of this confused customers and pushed them towards
competitors with more integrated strategies.
And yet, many companies have overcome these hurdles
successfully. Such as United Parcel Service handling
20 million items a day or Cisco handling billions of
dollars via web business.
So what are the key elements in creating a service-differentiated
e-commerce model?
Successful e-commerce businesses have focused on the
following as the key guiding principles:
Identify USPs
Tailor the customer experience
Implement secure, reliable and scalable platforms
Create CRM processes—people, processes and technology
Establish trust through responsiveness and transparency
Leverage customer-provided information to evolve continuously
Monitor business dynamics
Future portents
The Internet has indeed matured during the fire and
ice years of 1999-2001. It now is no longer a euphoric
technology; it forms the bedrock of most businesses.
Banking, travel, entertainment, shopping and e-governance
now all form part of a new mode in which the society
interacts. However, there is one common thread—that
of technological developments, and these are likely
to continue. Whether it is wireless access to banks
provided by ICICI Bank, or satellite tracking of vehicles
by General Motors using Onstar, the successful business
will still be based on the creation of a successful,
transparent and dependable customer service..
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