ONLINE FILE W1.1 ZAPPOS CORE VALUES
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M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.1
ONLINE FILE W1.1
ZAPPOS CORE VALUES
1. Deliver WOW Through Service: Anything worth doing should be done with WOW.
2. Embrace and Drive Change: Constant change allows for faster evolution than competitors; most change is driven from the
bottom up—from those employees directly involved with the processes, customers, and issues.
3. Create Fun and a Little Weirdness: In celebrating the individual differences in each employee, employees are more engaged
in the work that they do, and the company as a whole becomes more innovative.
4. Be Adventurous, Creative, and Open-Minded: It’s important for people and the company as a whole to be bold and daring
(but not reckless).
5. Pursue Growth and Learning: The best expertise an employee can bring is expertise at learning and adapting and figuring
new things out—helping the company grow, and in the process, they grow.
6. Build Open and Honest Relationships with Communication: Openness and honesty make for the best relationships because
that leads to trust and faith.
7. Build a Positive Team and Family Spirit: Creating an environment that is friendly, warm, and exciting encourages diversity
in ideas, opinions, and points of view.
8. Do More with Less: Continuous innovation and endeavoring to be more efficient, always trying to figure out how to do
something better, and using mistakes as learning opportunities.
9. Be Passionate and Determined: Passion is the fuel that drives the individual and the company forward.
10. Be Humble: We carry ourselves with a quiet confidence because we believe that, in the long run, our character will speak
for itself.
Source: Zappos.com. Used with permission.M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.2
W1.2 Part 1: Introduction to E-Commerce and E-Marketplaces
ONLINE FILE W1.2 Application Case
MARY KAY’S EC SYSTEMS
Founded in 1962, Mary Kay (marykay.com) has about Movies and videotapes are available on YouTube
1.8 million consultants selling its cosmetics and fragrances in (youtube.com) and on movies.go.com.
34 countries. In 2008, the company had about $2.4 billion in Several blogs are available, both for and against the
wholesale sales. company (e.g., marykayandrews.com/blog).
As a company that has based its reputation on per-
Auctions and fixed-price items are available for sale on
sonal contacts through door-to-door visits and home gath-
eBay.
erings, one might think that Mary Kay would not benefit
from EC. Actually, the opposite is true. Currently, more Mary Kay provides a consultant locator on the Internet
than 95 percent of Mary Kay’s independent salespeople (marykay.com/customerpreferences/locator.aspx).
place orders via the Internet. All of these developments are supported by an exten-
The Problem sive hardware and software infrastructure, including a wire-
The cosmetics market is very competitive, but it is growing less remote management system at the 760,000 square-foot
rapidly, especially in developing countries. Mary Kay is try- corporate headquarters, an extensive wide area network
ing to capitalize on this trend. The Mary Kay business (WAN, see Chapter 8), and a large data center. Some of the
model enables rapid growth into new markets. By the early EC systems are used enterprise wide (e.g., service desk,
2000s, consultants found that more and more customers ticketing system for consultants attending events, and ser-
wanted to shop online. With a long and global supply vice requests made by consultants). Others are functional
chain and the need to manage almost 2 million consul- (e.g., accounting, finance, marketing, and inventory con-
tants, it was clear that automation was needed, but Mary trol). The company uses an intranet for internal communi-
Kay’s existing computer system was old and lacked Web or cations as well as dozens of other EC applications.
e-commerce applications. Therefore, a major overhaul of In addition to providing better support to consul-
the information systems was needed. Finally, it became tants, the EC initiatives produced other benefits, such as
clear that the emergence of social computing might pro- greater efficiency, reduced costs and downtime, and
vide a golden opportunity for Internet marketing by the improved service. In terms of human resources, it enabled
company. the company to handle its rapid growth without a substan-
tial increase in staffing. The changes also have allowed EC
The Solution personnel to focus on strategic tasks. Mary Kay found that
Mary Kay’s IT department is now split into three divisions: its engineers and technical people now have time to spend
e-commerce, supply chain, and back-office support. on new innovations.
Because of pressure from the consultants, the restructuring
focused on e-commerce. Sources: Compiled from Rubin (2007), Channel Insider (2008),
The company’s goals and objectives were set based on LGC Wireless (2008), Dubie (2006), and marykay.com (accessed
industry best practices. Goals and objectives determine June 2009).
what, how, and when the company is operated, and these
also apply to EC initiatives. Mary Kay’s EC solution included
the creation of an electronic service desk that supports Questions
consultants in 30 countries in a standardized way. Mary Kay 1. List the drivers of EC at Mary Kay.
also introduced a global electronic ordering system, called
2. List the business pressures faced by Mary Kay. How
Atlas, that allows the consultants to communicate with
did Mary Kay respond to them?
company warehouses. An intelligent data repository that
dynamically maintains a logical model of the EC environ- 3. What new EC models did Mary Kay implement?
ment can be accessed by Mary Kay IT staff. 4. What types of EC transactions is Mary Kay
Mary Kay and its consultants are also making extensive involved in?
use of social computing. The following are some represen- 5. What social networking activities is Mary Kay
tative examples of how Mary Kay uses social computing: involved in?
The company posts job opening announcements on 6. What were the benefits of the new EC initiative to
several sites, including MySpace Jobs (classifieds. Mary Kay and its employees and customers?
myspace.com/job).M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.3
Chapter One: Overview of Electronic Commerce W1.3
REFERENCES FOR ONLINE FILE W1.2
Channel Insider. “Mary Kay Gets IT Makeover.” April LGC Wireless. “Mary Kay Puts a New Face on
25, 2008. channelinsider.com/c/a/News/Mary- Wireless.” LGC Wireless case study, 2008. lgcwireless.
Kay-Gets-IT-Makeover (accessed March 2009). org/downloads/Case_Study_Mar y_Kay.pdf
Dubie, D. “Mary Kay Makes Over Its WAN.” Network (accessed March 2009).
World, June 1, 2006. networkworld.com/newsletters/ Rubin, C. “More Than Skin Deep.” Communication
accel/2006/0529netop2.html (accessed March 2009). News, March 2007.
ONLINE FILE W1.3 Application Case
DELL—USING E-COMMERCE FOR SUCCESS
The Problem/Opportunity Sales to the first group are classified as business-to-
Founded in 1985 by Michael Dell, Dell Computer Corp. consumer (B2C). Sales to the other three groups are classi-
(now known as Dell) was the first company to offer fied as business-to-business (B2B). Consumers shop at
personal computers (PCs) via mail order. Dell designed its dell.com using an electronic catalog. The sales are com-
own PC system (with an Intel 8088 processor running at pleted using mechanisms described in Chapters 2 and 3.
8 MHz) and allowed customers to configure their own In addition, Dell sells refurbished Dell computers and
customized systems using the build-to-order concept. This other products at electronic auctions (dellauction.com).
concept was, and is still, Dell’s cornerstone business Online auctions are an important sales channel. In 2006,
model. By 1993, Dell had become one of the top five Dell opened physical stores, mainly in reaction to customer
computer makers worldwide, threatening Compaq, demands.
which started a price war. At that time, Dell was taking
Business-to-Business EC Most of Dell’s sales are to
orders by fax and snail mail and losing money. Losses
businesses. Whereas B2C sales are facilitated by standard
reached over $100 million by 1994. The company was in
shopping aids (e.g., catalogs, shopping carts, credit card
trouble.
payments; see Chapter 2), B2B customers obtain addi-
The Solution tional help from Dell. Dell provides each of its nearly
100,000 business customers with Premier Dell service.
Direct Marketing Online For example, British Airways (BA) considers Dell to be
The commercialization of the Internet in the early 1990s a strategic supplier. Dell provides notebooks and desktops
and the introduction of the World Wide Web in 1993 pro- to 25,000 BA users. Dell offers two e-procurement services
vided Dell with an opportunity to expand rapidly. Dell to BA purchasing agents. The more basic service, Premier
implemented aggressive online order taking and opened Dell, allows BA (and other businesses) to browse, buy, and
subsidiaries in Europe and Asia. Dell also started to offer track orders on a Dell Web site customized for the user’s
additional products on its Web site. This enabled Dell to requirements. The site enables authorized users to select
batter Compaq, and in 2000 Dell became number one in preconfigured PCs for their business unit or department.
worldwide PC shipments. At that time, Internet sales A more advanced version, Premier B2B, supports
topped $50 million per day (about $18 billion per year). e-procurement systems such as those from Ariba. This
Today, Dell (dell.com) sells about $62 billion a year in provides automatic requisition and order fulfillment once
computer-related products online, from network switches an authorized user has chosen to buy a PC from Dell. BA
to printers, employing over 88,000 people. has placed the e-procurement tools on its E-Working
Direct online marketing is Dell’s major electronic com- intranet. This allows authorized staff to purchase PCs
merce (EC) activity. Dell sells to the following groups: through a portal that connects directly to Dell’s systems.
◗ Individuals for their homes and home offices In addition to supporting its business customers with
◗ Small businesses (up to 200 employees) e-procurement tools, Dell also is using EC in its own pro-
◗ Medium and large businesses (over 200 employees) curement. Dell developed an e-procurement model that it
◗ Government, education, and health care organizations shares with its business partners, such as BA. One aspectM01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.4
W1.4 Part 1: Introduction to E-Commerce and E-Marketplaces
ONLINE FILE W1.3 (continued)
of this model is the use of electronic tendering to conduct execution accuracy, reduce order-to-delivery time, and
bids (see Chapter 5). Dell uses electronic tendering when enhance customer service, Dell partnered with Accenture
it buys the components for its products. to create a new, high-performance supply chain planning
In 2000, Dell created a B2B exchange at dell.b2b.com. solution. Now in place in Dell’s plants around the world,
This venture was a failure, like most other exchanges (see the program, which paid for itself five times over during
Chapter 5). the first 12 months of operation, enables Dell to adapt
more quickly to rapidly changing technologies and the
E-Collaboration Dell has many business partners with
business environment, maintaining its position as a high-
whom it needs to communicate and collaborate. For exam-
performance business. Dell also has automated its factory
ple, Dell uses shippers, such as UPS and FedEx, to deliver
scheduling, demand-planning capabilities, and inventory
its computers to individuals. It also uses third-party logis-
management using information technology and e-supply
tics companies to collect, maintain, and deliver compo-
chain models.
nents from its suppliers, and it has many other partners.
Dell is using Web Services, an EC technology, to facilitate Affiliate Program Dell provides affiliate partners the
communication and reduce inventories. Web Services facili- opportunity to link from their Web sites to Dell.com. Dell
tate B2B integration. Integration efforts began in 2000 pays 2 to 4 percent on any qualified sale made from click-
with other technologies when Dell encouraged its cus- ing on Dell’s link at the partners’ sites (referring buyers).
tomers to buy online. The B2B integration offer combines
The Results
Dell PowerEdge servers based on Intel architecture and
Dell has been one of Fortune’s top five “Most Admired”
webMethods B2B integration software to link customers’
companies since 1999, and it continuously advances in the
existing ERP (enterprise resource planning) or procurement
rankings of the Fortune 500 and the Fortune Global 500.
systems directly with Dell and other trading partners. In
Dell has over 100 country-oriented Web sites, and profits
addition, Dell can provide e-procurement applications and
are nearing $3 billion a year. If you had invested $10,000
consulting services. Dell also educates customers in its
in Dell’s initial public offering (IPO) in 1987, you would be
technologies and offers suggestions on how to use them.
a millionaire just from that investment.
This is particularly true for emerging technologies such as
In 2006, Dell opened physical stores to match its
wireless.
competitors and customer demands. (Its major competitor
Finally, Dell has a superb communication system with
is HP. In 2006, HP regained its “top PC maker” position,
its over 15,000 service providers around the globe.
leaving Dell in second place and stayed in the lead through
E-Customer Service Dell uses a number of different tools 2008.) Michael Dell returned to the CEO position in 2006,
to provide superb customer service around the clock. To and a restructuring of the company began shortly there-
leverage customer relationship management (CRM)—a cus- after. All sales to businesses will be managed centrally,
tomer service approach that is customer centered for last- rather than from three regional headquarters around the
ing relationships—Dell provides a virtual help desk for globe. The company cut its workforce by 8,000 in 2009.
self-diagnosis and service as well as direct access to tech- Still, over 95 percent of its business is online and
nical support data. In addition, a phone-based help desk through mail orders. It also launched a blog called
is open 24/7. Customers can also arrange for a live chat Direct2Dell (en.community.dell.com/blogs/direct2dell). Dell
with a customer care agent. Product support includes trou- also is expanding its business not only in the computer
bleshooting, user guides, upgrades, downloads, news and industry but also in consumer electronics. It is clearly an
press releases, FAQs, order status information, a “my example of EC success.
account” page, a community forum (to exchange ideas,
information, and experiences), bulletin boards and other Sources: Compiled from National Cristina Foundation (2006),
customer-to-customer interaction features, training books Finkle (2008), dell.com and dellauction.com (accessed February
2009).
(at a discount), and much more. Dell also offers educa-
tional programs at learndell.com.
Dell keeps a large customer database. Using data min- Questions
ing tools, it learns a great deal about its customers and
attempts to make them happy. The database is used to 1. List all the types of EC transactions used by Dell.
improve marketing as well. 2. List the business models used by Dell.
Intrabusiness EC To support its build-to-order capabili- 3. List the competitive advantage of Dell over brick-
ties, significantly improve its demand-planning and factory and-mortar competitors.M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.5
Chapter One: Overview of Electronic Commerce W1.5
REFERENCES FOR ONLINE FILE W1.3
Finkle, J. “Top Dell Execs Leave as PC Maker National Cristina Foundation. “Dell Recycling.”
Restructures.” Reuters, December 31, 2008. Cristina.org. cristina.org/dell.html (accessed January
reuters.com/article/businessNews/idUSWNAB6 2009).
24720081231?feedTy pe=RSS&feedName=
businessNews (accessed April 2009).
ONLINE FILE W1.4 Application Case
BOEING CHANGES THE NATURE OF ITS BUSINESS
WITH GLOBAL COLLABORATION
Boeing, the world’s largest aerospace company, has been a delivery is late, but the actual cost of development and
major player in the global economy for almost a century. manufacturing is spread across its network of collabora-
The company undertook a far-reaching transformation as it tors. At the same time, building such global relationships
used cutting-edge materials and electronics and high-level may help the company sell its planes overseas. The biggest
technology for the design and assembly process of its new savings are in the time saved through the online collabo-
passenger plane—the Boeing 787. The new plane is Boeing’s ration process (from 33 to 50 percent), creating a huge
bid for market leadership in competition with Airbus. The competitive advantage.
new midsize passenger jet will have an outer shell and about Collaboration is a necessity for Boeing for several rea-
half of its parts made of carbon-fiber-reinforced plastic, sons. Airplanes are huge and enormously complex. Politically,
which makes it lighter and gives it better fuel economy. In sales of a “global product” are enhanced when people in
September 2008, the company had over 700 firm orders for other countries are building parts of the airplane. Companies
the new 787, which seats from 250 to 330 passengers in in these countries may then buy from Boeing. Basic collabo-
varying configurations. The list price is about $150 million ration is done through information-flow tools such as
per plane. Microsoft SharePoint. Boeing and partners are using Dassault
The previous innovation in aviation manufacturing Systèmes 3D and Product Lifecycle Management solutions.
was to have global partners work from a common blueprint Other IT tools used are a product suite from Exostar
to produce parts—actually, whole sections of the airplane— LLC, with which Boeing can share two-dimensional draw-
that were then physically shipped to a Boeing assembly ings, conduct forward and reverse auctions (Chapter 2),
plant near Seattle to see if they fit together. Prior to the and respond to RFPs (Chapter 5), and an application called
787, wood mock-ups of planes would be constructed to see CATIA. The plane is designed at Global Collaboration
if parts built by partners around the world would really fit Environment, a special online site maintained by Boeing.
together. When there was no fit, cost in terms of time, Three levels of collaboration are facilitated
money, and delays was extreme. between teams and companies. In the first level—design
Boeing’s changes go beyond making planes faster and collaboration—all parties involved log in and make their
cheaper. The new business model takes Boeing from a changes electronically in the blueprints, and the team
manufacturer to a high-end technology systems integrator. works together. Quality is improved because the computer
In 2004, Boeing’s IT systems people were consolidated finds the mistakes. The next level involves suppliers
into the Boeing Technology Group. Now, parts are designed working with their supply chains. The third level is real-
from concept to production concurrently by partners time collaboration that involves a considerable amount of
(including companies in Japan, Russia, and Italy) and product life-cycle management across multiple countries
“assembled” in a computer model maintained by Boeing enabled by technology that differentiates Boeing’s new
outside its corporate firewall. Boeing’s role is one of inte- model from the previous kinds of global relationships.
grator and interface to the airlines, while the partners take Boeing also uses the new partnership to solicit ideas for
responsibility for the major pieces, including their design. how to improve designs, integration, and so on. This
Boeing still takes the hit if there is no fit and the plane’s results in cost cutting.M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.6
W1.6 Part 1: Introduction to E-Commerce and E-Marketplaces
ONLINE FILE W1.4 (continued)
Boeing maintains 10 multimedia rooms at its Everett, security technology has developed to the point that the
Washington, complex for the use of collaboration teams. security of the information is assured.
These are open 365 days a year, 24 hours a day. A visual- All of this has helped Boeing accelerate the design
ization application developed by Boeing allows the teams process, overcome some unforeseen problems, and deliver
to do real-time design reviews of complex geometry with- the planes in fall 2008.
out any lag time as the models load. Meetings are con-
ducted in English, with sidebar conversations, as needed, Sources: Compiled from Cone (2006), Workforce-Performance (2006),
in a team member’s native language. Collaborative design Berstein (2006), and boeing.com (accessed January 2009).
also speeds the design process, helping Boeing to avoid
expensive penalties from its customers if the plane is not
delivered on time, and it gives the company more flexibility
Questions
in simultaneously designing multiple versions of the 787 1. Describe online collaboration and its benefits to
that are part of its wide-ranging appeal in the marketplace. Boeing.
Finished designs are stored in another Dassault prod- 2. List the levels of collaboration and the parties
uct, Enovia, which is also maintained by Boeing. The stor- involved.
age has become an enormous data-management task. The
3. How does technology facilitate collaboration?
issue of security has also been a concern; however,
REFERENCES FOR ONLINE FILE W1.4
Berstein, M. “Boeing Shrinks Supply Chain to Workforce-Performance. “Boeing 787 Global Design Team
Facilitate Risk Sharing.” World Trade, April 1, Benefits from Collaboration Solution Incorporating
2006. Simulation,” Tech Horizon, May 22, 2006. techlearn
Cone, E. “Flying in Formation.” CIO Insight, March newsline.com/News/05-22-06a.html (accessed January
2006. 2009).
ONLINE FILE W1.5 Application Case
CAMPUSFOOD.COM—STUDENT ENTREPRENEURS
Campusfood.com’s recipe for success was a simple one: company’s customer base. This involved expanding to
Provide interactive menus to college students, using the other universities, attracting students, and generating a
power of the Internet to replace and/or facilitate the tra- list of restaurants from which students could order food for
ditional telephone ordering of meals. Launched at the delivery. Currently, some of these activities are outsourced
University of Pennsylvania (Penn), the company takes to a marketing firm, which enabled the site to add dozens
thousands of orders each month for local restaurants— of schools nationwide. In 2004, the company served 200
bringing pizzas, hoagies, and wings to the Penn commu- schools linked to over 1,000 restaurants.
nity and to dozens of other universities. Financed through private investors, friends, and fam-
Founder Michael Saunders began developing the site ily members, the site was built on an investment of less
(campusfood.com) in 1997 while he was a junior at Penn. than $1 million. (For comparison, another company with
With the help of some classmates, Saunders launched the services also reaching the college-student market invested
site in 1998. After graduation, he began building the $100 million.) Campusfood.com’s revenue is generatedM01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.7
Chapter One: Overview of Electronic Commerce W1.7
ONLINE FILE W1.5 (continued)
through transaction fees—the site takes a 5 percent com- University students who signed up at Titan Poker with
mission on each order from the sellers (the restaurants). a special bonus code provided by Campusfood.com were
When you visit Campusfood.com, you can: eligible to play in a series of exclusive online poker tour-
◗ Navigate through a list of local restaurants, their hours naments (in April 2006). Winners received special
of operation, addresses, phone numbers, and other Campusfood Cash coupons valued at $20,000, redeemable
information. for food orders at participating restaurants.
◗ Browse an interactive menu. The company takes a restau-
rant’s standard print menu and converts it to an elec- Questions
tronic menu that lists every topping, every special, and
every drink offered, along with the latest prices. 1. Classify this application by EC transaction type.
◗ Bypass “busy” telephone signals to place an order online, 2. Explain the benefits of Campusfood.com for its stu-
and in so doing, avoid miscommunications. dent customers and for the restaurants it represents.
◗ Get access to special foods, promotions, and restaurant
3. Trace the flow of digitized information in this venture.
giveaways. The company is working to set up meal deals
that are available online exclusively for Campusfood.com 4. How does the outsourcing of the marketing activi-
customers. ties contribute to the business?
◗ Arrange for electronic payment of an order. 5. What is the benefit of the Titan Poker contest to the
company?
REFERENCES FOR ONLINE FILE W1.5
Campusfood.com. campusfood.com (accessed November February 16, 2006. emediawire.com/releases/2006/2/
2009). emw346598.htm (accessed February 2009).
eMediaWire. “Titan Poker Teams Up With Campusfood
for Tournaments Aimed at College Students.”
Online File W1.6 Major Characteristics of Web 2.0
The following are representative characteristics:
◗ User-created content (self publishing).
◗ The ability to tap into the collective intelligence of users. The more users contribute, the more popular and valuable a Web
2.0 site becomes.
◗ Unique communication and collaborative environment.
◗ Making data available in new or never-intended ways. Web 2.0 data can be remixed or “mashed up,” often through Web
Services interfaces, much the way a dance-club DJ mixes music.
◗ The presence of lightweight programming techniques and tools lets nearly anyone act as a developer (e.g., wikis, blogs,
RSS, and podcasting).
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.8
W1.8 Part 1: Introduction to E-Commerce and E-Marketplaces
Online File W1.6 (continued)
◗ The virtual elimination of software-upgrade cycles makes everything a perpetual beta or work in progress, and allows rapid
prototyping using the Web as a platform.
◗ Unique sharing of content or all media.
◗ Networks as platforms, delivering and allowing users to use applications entirely through a browser.
◗ Open source architecture, which makes connectivity to computing resources simple.
◗ Users own the data on the site and exercise control over that data.
◗ An architecture of participation and digital democracy encourages users to add value to the application as they use it.
◗ New business models are created.
◗ A major emphasis on social networks.
◗ A rich interactive, user-friendly interface based on Ajax or similar frameworks. Ajax (Asynchronous JavaScript and XML) is
a Web development technique for creating interactive Web applications.
◗ More productive organization communication due to improved search, links, user authority, etc.
◗ Global spread of innovation. As soon as a successful idea is deployed as a Web site in one country, similar sites appear
around the globe.
Online File W1.7 What Is a Radio Frequency Identification (RFID) System?
Radio frequency identification (RFID) is a technology that uses electronic tags (or transponders), instead of bar codes, to
automatically identify objects or items. The tags can be attached or embedded in objects, animals, or humans. RFID read-
ers use radio waves to interact with the tags. The radio waves enable the unique identification and location of the objects,
transmission of data, and/or storage of information about the object. Some tags can be read from several meters away and
beyond the line of sight of the reader.
An RFID system consists of (1) an RFID tag that includes an antenna and a chip with information about the item and
(2) an RFID reader that contains a radio transmitter and receiver. An RFID tag remains inactive until radio frequency
energy from the radio transmitter (on the tag) hits its antenna, giving the chip enough power to emit a 96-bit string of
information, which is read by the radio receiver. This is three times the amount of information a bar code can hold, and
the tag can be read through cardboard, wood, and plastic at a range of up to 30 feet. The reader then passes the informa-
tion, wirelessly or through a docking station, to a computer for processing (see Exhibit W1.7.1).
RFID Applications
The number of applications for RFID is rapidly increasing. RFID technology is already being used for a variety of purposes:
◗ Track moving vehicles. The E-Z Pass (ezpass.com) prepay toll system uses RFID, as does Singapore’s Electronic Road
Pricing system, which charges different prices to drive on different roads at different times.
◗ Track people. In some Japanese schools, tags in backpacks or clothes track students’ entry and departure from school
buildings. In Denmark, the LEGOLAND amusement park offers parents a child-tracking system that combines RFID and Wi-
Fi. As of 2006, all new U.S. passports contain an RFID tag that can be scanned on entry and departure from the United
States.
◗ Track individual items. The Vatican Library is tagging over 2 million items in its collection. Retail giant Marks & Spencer
is using antitheft tags on clothes and is tagging employee ID cards to control entrance into secure areas. The
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.9
Chapter One: Overview of Electronic Commerce W1.9
Online File W1.7 (continued)
EXHIBIT W1.7.1 How Does RFID Work?
RFID Tag Wireless
(Transponder) Transmission Antenna RFID Reader
Host Processor Control
Business Rules
Source: Drawn by E. Turban.
Jacksonville, Florida, airport has a pilot test for RFID tracking of luggage. The U.S. army is tracking inventory, including
weapons, with RFID tags. The Star City Casino in Sydney, Australia, is using RFID to keep track of 80,000 costumes and
uniforms.
◗ Protect secure areas. FedEx uses RFID-tagged wristbands to give drivers access to their vehicles, reducing theft and
speeding delivery time. The New York Police Department uses RFID tags embedded in ID tags to track visitors.
◗ Record transactions. Exxon Mobil Corp.’s Speedpass cards and key rings allow customers to speed through checkout lines.
At the Baja Beach Club in Barcelona, Spain, an RFID chip embedded just under a guest’s skin is used to pay for purchases,
including drinks at the pool.
Most RFID tags contain at least two parts. One is an integrated circuit for storing and processing information, modu-
lating and demodulating a (RF) signal, and other specialized functions. The second is an antenna for receiving and trans-
mitting the signal.
Tags can be active or passive. Active tags have their own internal power supply; passive ones do not have it. Passive
tags collect power from the incoming signal. Active tags are more reliable due to having their own power supply, and they
have a larger memory range (500 feet to 1,500 feet). For details see en.wikipedia.org/wiki/Rfid.
The major capabilities of RFID are:
◗ Quick tracking of where items are (their location) in real time
◗ Finding extensive information about the items
◗ Enabling quick inventory taking of items
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.10
W1.10 Part 1: Introduction to E-Commerce and E-Marketplaces
Online File W1.7 (continued)
In contrast with a bar code, the information can be read from a much greater distance (about 30 feet or 10 meters with
passive tags; 500 feet to 1,500 feet with active tags) and no line of sight is required. The technology is in extensive use
in transportation, hospitals, libraries, and the like (see en.wikipedia.org/wiki/Rfid). Its most promising use is in enterprise
supply chain management to improve the efficiency of inventory tracking (see Online Appendix A).
These capabilities result in the following benefits:
Benefits for Manufacturers
RFID solutions provide the real-time information that’s necessary to improve operating efficiencies in a number of indus-
trial applications. By automatically detecting product movements throughout the manufacturing process, RFID provides
real-time inventory visibility while minimizing the need for human intervention.
With RFID, it is possible for manufacturers to:
◗ Increase speed and efficiency, with fewer errors throughout the entire assembly process.
◗ Take inventory and perform picking operations to update inventory levels in real time.
◗ Improve efficiencies for work-in-process (WIP) reporting.
◗ Improve inventory visibility to production employees who use just-in-time (JIT) systems.
◗ Reduce stock levels, resulting from improved inventory management.
◗ Automate reporting of all material moves both inbound/outbound and within your facility.
Benefits for Retailers
RFID technology empowers retailers to increase inventory visibility, reduce labor costs, and improve profitability by deliv-
ering the benefits of enterprise mobility to a variety of applications:
◗ Read/write RFID tags automatically at shipping and receiving doors to expedite loading and unloading processes.
◗ Improve customer satisfaction by ensuring that products are stocked and available.
◗ Reduce shrinkage, fraud, and spoilage.
◗ Increase in-stock merchandise for higher sales volumes and increased profits.
◗ Reduce human intervention and decrease labor costs.
◗ Dramatically improve overall warehousing efficiencies.
Benefits for Transportation Companies
RFID solutions can provide fast, accurate information to improve operational efficiencies in a variety of transportation
applications. By automatically tracking assets throughout the course of transit, RFID transforms the tracking process and
yields unsurpassed asset management and visibility. RFID can:
◗ Enhance passenger and employee safety by virtually eliminating security risks.
◗ Improve the efficiency of baggage-handling processes to reduce loss and theft, and increase customer satisfaction.
◗ Streamline cargo processes and reduce labor costs.
◗ Control cost by improving all facets of inventory tracking and management.
Benefits for Federal Government and Defense Agencies
RFID technology provides the solutions that government agencies need to improve security and inventory visibility
throughout the world. With RFID, government and defense agencies can:
◗ Locate and track military personnel instantaneously.
◗ Increase the speed and accuracy of deliveries by allowing items to be inventoried at the container level.
◗ Augment available staff power by automating functions previously executed manually.
◗ Access real-time inventory to improve visibility and reduce shrinkage.
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.11
Chapter One: Overview of Electronic Commerce W1.11
Online File W1.7 (continued)
Examples
RFID implementation is slow due to privacy and security concerns, especially when it involves consumers. On the other
hand, an increasing number of companies use the technology internally frequently in combination with other IT systems,
as is done by Nokia.
RFID at Nokia
Security guards employed at Nokia carry mobile phone handsets with an attached RFID tag and RFID reader. RFID tags are
also installed at various points around the facility. At the start of a shift, guards use the phones to read their RFID-
enabled name badges. Then, security guards do their rounds, opening the handsets to read the various tags as they pass
by them. Details of the phone number and RFID tag just read are transmitted over the cell phone network. Supervisors are
thus given accurate information as to when a particular guard started and finished a shift, whether the guard patrolled all
the required locations, and where the guard was at a particular point in time. In addition, supervisors can use the text and
phone function to ask guards to recheck an area, vary their route, and the like.
RFID at Harmon Hospital
Keeping track of relatively small, movable assets (such as wheelchairs, pulse oximeters, and other medical devices) in hos-
pitals can be time-consuming and difficult. Equipment may be stored in cupboards, moved to other wards and not
returned, or sent home with patients and not returned. Studies also suggest that when hospital staff are unable to find the
equipment they need, rather than instigating a full-scale search, they tend to place an order for more equipment. Thus,
hospitals incur significant costs in both searching for equipment and in ordering equipment that is not actually necessary.
Harmon Hospital in Las Vegas is addressing these concerns by attaching active RFID tags to various medical devices and
installing RFID readers at various points throughout the hospital. This enables staff to locate any required item of equip-
ment, with the system providing a text-based report or a map of the hospital indicating the location of the desired piece
of equipment. Many other organizations in a variety of industries experience similar problems as those at Harmon Hospital.
RFID in Philadelphia Cabs
Taxicabs in Philadelphia, Pennsylvania, are equipped to accept payments using RFID technologies. Passengers can use RFID-
enabled credit cards, such as PayPass from MasterCard or similar cards from Visa or American Express, to pay their cab fares. A
terminal is located behind the front seat, facing the passenger. To activate the system, passengers wave their RFID-enabled
cards near the reader. The driver can then complete the transaction using either credit or debit facilities. Payments are processed
by sending payment information over wireless networks. Such technologies are reducing the time taken to complete a transac-
tion. This system also can be used by the cab driver for routing and navigational information, for work scheduling (signing on
and off a shift), for keeping logs of trips, and for tracking items mistakenly left by passengers in the cab (O’Connor 2006).
RFID Use by CHEP
The Asia Pacific Division of CHEP (famous for its pallets and reusable containers, based in Florida) has developed an
innovative use of RFID for the automotive industry in Australia. CHEP manufactures and then rents reusable, custom-made,
plastic stacking crates for transporting parts and components along the automotive supply chain. In addition to the tradi-
tional text tags and bar-coded labels, CHEP has now added RFID tags to the outside of these crates. CHEP is able to easily
determine which customer has which crate, while it gives the automotive companies much more precise insights into the
location of parts both within their manufacturing environment and along their extended supply chains.
Some good sources for information on RFID are aimglobal.org/technologies/RFID, rfidjournal.com, and
ceng.usc.edu/~anrg/SensorNetBib.html.
REFERENCES FOR ONLINE FILE W1.7
Heinrich, C. RFID and Beyond. Indianapolis, IN: rfidjournal.com/article/articleprint/2852/-1/1
Wiley, 2005. (accessed February 2009).
O’Connor, M. C. “Philly Cabs Taking RFID Payments
on the Road.” RFID Journal, November 29, 2006.M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.12
W1.12 Part 1: Introduction to E-Commerce and E-Marketplaces
Online File W1.8 Examples of Innovative EC Applications
Pearson Education, Inc., the publisher of this book, in collaboration with O’Reilly & Associates, offers professors reason-
ably priced, customized textbooks for their classes by compiling material from thousands of Pearson’s publications and the
instructors’ own materials. The customized books are either electronic (Chapter 6) or more expensive hard copies.
In Japan, a person can wave a Casio watch over a scanner to purchase products from a vending machine, pay for food
in a cafeteria, or pay for gasoline.
More than 60 percent of all airline tickets sold in the United States are electronic tickets. It costs more to purchase a
ticket from a local travel agent or by phone directly from the airline. In large airports, travelers can get their boarding
passes from a machine. Most airlines allow travelers to print their boarding passes at home.
In January 2004, NASA’s Web site received more than 6.5 billion hits in a few days—the biggest Internet government
event to date—because people were interested in viewing the Mars Exploration Rover’s landing on Mars.
Several banks in Japan issue smart cards that can be used only by their owners. When using the cards, the palm vein
of the owner’s hand is compared with a prestored template of the vein stored on the smart card. When the owner inserts
the card into ATM or vendors’ card readers that are equipped with the system, it will dispense the card owner’s money. The
police are alerted if anyone other than the card’s owner tries to use it.
Jacobi Medical Center in New York tracks the whereabouts of patients in the hospital. Each patient has an RFID in a
plastic band strapped to the wrist. Each time a patient passes an RFID reader, the patient’s location is transmitted in real
time to the responsible staff member. The RFID is linked to the hospital’s computer network, connecting the patient’s
records to labs, billing, and the pharmacy.
Online File W1.9 How Obama Used EC to Win
Obama’s campaign team was everywhere on the Internet: MySpace, YouTube, Flickr, Facebook, and Twitter. At
my.barackobama.com (MyBO) 1.5 million volunteers were registered, who in turn mobilized supporters and organized com-
munities. Through the site, the campaign was able to train a large number of volunteers, arm them with up-to-date tar-
geted information, and provide field-workers with names, contact coordinates, and voting histories. They started with
voter registration and then turned their efforts to a get-out-the-vote campaign. MyBO redirected the energy of social net-
workers to specific, campaign-oriented tasks. The site raised $600 million from just 3 million people.
The campaign also built a consensual database of 3 million mobile numbers by promising (and keeping the promise)
to get campaign news to the supporters before the news media. Obama’s e-mail list contained about 13 million addresses.
Over the course of the campaign, aides sent more than 7,000 different messages, many of them targeted to specific donation-
level participants. On average, supporters received 5 to 20 text messages per month, depending on where they lived and
what kind of messages they opted to receive.
Because social media is such a direct engagement and communication between friends, contacts, and families, ideas,
opinions, and information are shared and become part of a close, trusted network. So, social networking brought Obama
into the homes and hearts of millions who felt they knew him because they spent so much time with him.
Obama’s campaign integrated online marketing methods with a viral campaign using word-of-mouth advertising and
marketing techniques to create a real buzz about him. One instance of the marketing campaign was a viral video on
YouTube that raised $300,000 in a week. The word-of-mouth advertising helped him raise enormous amounts of money and
build his brand.
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.13
Chapter One: Overview of Electronic Commerce W1.13
Online File W1.9 (continued)
Obama on MySpace
The official profile page for Barack Obama included a blog, blurbs, news clips, videos, and comments from his MySpace
friends. In January 2008, MySpace users selected Obama as the presidential winner taking 46 percent of the vote.
Obama on YouTube
Barack Obama speeches, events, and TV ads are still available at the official Obama-Biden Campaign YouTube channel.
Obama campaign-related videos got 14.5 million hours of viewing time on YouTube. This time would have cost $47 million
to buy on television. Obama’s 38-minute speech on race had more than 2 million views on YouTube in just two days after
posting. In November of 2008, President Obama chose YouTube as the media stream for his “Saturday Fireside Chats” in
both video and audio forms.
Obama on Flickr
On Flickr, photos of the president were organized by set and tags, including archives, favorites, and his profile. The cam-
paign posted intimate photographs from a Chicago hotel room showing the minutes before Obama became president-elect.
Obama on Facebook
Obama supporters on Facebook found it impossible to be on the site at any given time and not see an Obama ad driving
them to BarackObama.com. His Facebook friend count was over 3.1 million. Facebook cofounder Chris Hughes quit the
company in early 2007 to help run the Obama campaign’s Web operations.
Obama on Twitter
On Twitter the campaign used an automated script that let users know that the Obama folks were following them. This
sent the message they wanted to communicate, and they wanted to hear from the user. This built a sense of community.
Obama’s posts were filled with words like encourage and friends, and every post was a clear call to action.
In conclusion, the Obama campaign did not invent anything completely new. Instead, by using social networking
applications, they created a powerful way to raise money, organize locally, fight smear campaigns, and get out the vote
that helped them bring down Hillary Clinton first, and then the Republicans in 2008.
REFERENCES FOR ONLINE FILE W1.9
Carr, D. “How Obama Tapped into Social Networks’ Cone, E. “Local Area Networks: How the Obama
Power.” New York Times, November 9, 2008. Campaign Works on the Ground.” CIO Insight,
Cone, E. “All Politicking Is Local: How the Obama September 29, 2008. blogs.cioinsight.com/
Campaign Is Using Technology to Change Elections knowitall/content001/local_area_networks_how_
on the Ground.” CIO Insight, September 29, 2008. the_obama_campaign_works_on_the_ground.html
blogs.cioinsight.com/knowitall/content001/all_ (accessed March 2009).
politicking_is_local_how_the_obama_campaign_ The Guardian. “Barack Obama’s Flickr Page Shows
is_using_technology_to_change_elections_on_the Family as Their Lives Changed Forever.” November
_ground.html (accessed March 2009). 7, 2008. guardian.co.uk/world/deadlineusa/2008/
Cone, E. “Connecting the Campaign: How the nov/07/barackobama-uselections2008 (accessed
Democrats Built Their Network.” CIO Insight, March 2009).
September 29, 2008. blogs.cioinsight.com/ Kiss, J. “Why Everyone’s a Winner.” The Guardian,
knowitall/content001/connecting_the_ November 10, 2008. guardian.co.uk/media/2008/
compaign_how_the_democrats_built_their_ nov/10/obama-online-strategy (accessed March
network.html (accessed March 2009). 2009).M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.14
W1.14 Part 1: Introduction to E-Commerce and E-Marketplaces
REFERENCES FOR ONLINE FILE W1.9 (continued)
Learmonth, M. “How Barack Obama Won Facebook.” obama-and-hillary-use-twitter-for-social-networking
BusinessInsider.com, July 7, 2008. businessinsider. (accessed March 2009).
com/2008/7/how-barack-obama-won-facebook Needle, D. “Huffington: ‘Obama Not Elected Without
(accessed March 2009). Internet.’” InternetNews.com, November 7, 2008.
McCarthy, C. “Surprise! Barack Obama, Ron Paul Win internetnews.com/webcontent/article.php/3783741
MySpace ‘Primaries.’” CNET.com, January 3, 2008. (accessed March 2009).
news.cnet.com/8301-13577_3-9839328-36.html Tumulty, K. “Obama’s Viral Marketing Campaign.”
(accessed March 2009). Time.com, July 5, 2007. time.com/time/magazine/
McKeever, C. “Obama and Hillary Use Twitter for Social article/0,9171,1640402,00.html (accessed March
Networking.” OpenSourceMarketer.com, February 27, 2009).
2008. opensourcemarketer.com/marketing-tools/
Online File W1.10 Response Activities by Organizations
Strategic Systems. Strategic systems provide organizations with strategic advantages, enabling them to increase their mar-
ket share, better negotiate with their suppliers, or prevent competitors from entering into their territory. There are a vari-
ety of EC-supported strategic systems. One example is FedEx’s tracking system, which allows FedEx to identify the status of
every individual package, anywhere in the system. Most of FedEx’s competitors have already copied the FedEx system. In
response, FedEx has been forced to continuously introduce EC innovations, but so are its competitors, especially UPS.
Agile Systems. Agile organizations have the ability to consistently improve productivity—especially during periods of
change. To create business agility, organizations use IT in general and EC in particular. The solution provided by EC enables
capitalizing on changing industry, government, and business requirements; assimilating required resources and business
processes quickly to meet demand; promptly adapting technology to fit new or modified business processes; leveraging
existing resources to do the above; and doing it all economically.
Continuous Improvement Efforts and Business Process Restructuring and Management. Many companies continuously
conduct programs to improve their productivity, quality, and customer service. Two examples of how EC can help companies
are Dell and Intel. Dell takes its orders electronically and immediately moves them via enterprise resource planning (ERP)
software (see Online Tutorial T1) into the just-in-time assembly operation. Using an almost real-time extranet-based moni-
toring system, Intel tracks the consumption of its products by a dozen of its largest customers in order to plan production
schedules and deliveries.
However, continuous improvement programs may not be a sufficient solution for some business problems. Strong busi-
ness pressures may require a radical structural change. Such an effort is referred to as business process restructuring or
reengineering (BPR). E-commerce is frequently interrelated with process restructuring that may be needed for implementa-
tion of EC initiatives such as e-procurement.
Customer and Partner Relationship Management. One of the major symptoms of the digital revolution is that the bar-
gaining power of customers is stronger than ever, and that power is growing. The availability of information and the abil-
ity to make quick comparisons online (e.g., google.com/products) increases this trend. Customers are called “kings” and
“queens,” and organizations must make their customers happy in order to keep them. This may be accomplished through
customer relationship management (CRM).
EC is not just about buying and selling. Supporting CRM, as we will see throughout the book, is a major function of
EC. Such support is done by multiple technologies, ranging from computerized call centers to intelligent agents. Some of
the e-CRM topics highlighted in this book are sales force automation, call center tools and operations, personalization,
empowerment of customers and frontline employees, support of mobile employees, and partner relationship management.
(continued)M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.15
Chapter One: Overview of Electronic Commerce W1.15
Online File W1.10 (continued)
Business Alliances. Many companies realize that alliances with other companies, even competitors, can be beneficial. For
example, General Motors, Ford, and others in the automotive industry created a huge B2B e-marketplace called Covisint
(see Chapter 5). Other types of business alliances include resource-sharing partnerships, permanent supplier–company rela-
tionships, and joint design and research efforts.
Electronic Markets. Electronic markets, private or public, can optimize trading efficiency, enabling their members to com-
pete globally. Most electronic markets require the collaboration of different companies, sometimes even competitors, as
you will see in Chapters 5 and 6.
Reductions in Cycle Time and Time to Market. Cycle time reduction—shortening the time it takes for a business to com-
plete a productive activity from its beginning to end—is extremely important for increasing productivity and competitive-
ness. Similarly, reducing the time from the inception of an idea to its implementation (time to market) is important,
because those who are first on the market with a product or who can provide customers with a service faster than their
competitors enjoy a distinct competitive advantage. Extranet-based applications can expedite the various steps in the
process of product or service development, testing, and implementation.
Empowerment of Employees. Giving employees the authority to act and make decisions on their own is a strategy used
by many organizations as part of productivity improvement programs. Management delegates authority to individuals or
teams who can then execute the work faster and with fewer delays. Empowerment of employees may also be part of e-CRM.
Empowered salespeople and customer service employees are given the authority to make customers happy and do it
quickly, helping to increase customer loyalty. EC allows the decentralization of decision making and authority via
empowerment and distributed systems, but simultaneously supports a centralized control. Empowerment can also be
achieved by using automated decision systems.
Supply Chain Improvements. EC, as is shown throughout the book, and especially in Chapter 5 and Online Appendix A,
can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies. The use of e-supply chain mod-
els to automate factory scheduling, which reduces response time and inventory management, can be seen in companies
such as Dell and Toyota.
Mass Customization: Made to Order in Large Quantities. Today’s customers demand customized products and services;
the business problem is how to provide customization and do it efficiently. This can be done, in part, by changing manu-
facturing processes from mass production to mass customization (Anderson 2002). In mass production, a company pro-
duces a large quantity of identical items. In mass customization, items are produced in a large quantity but are customized
to fit the desires of each customer. EC is an ideal facilitator of mass customization, for example, by enabling interactive
communication between buyers and designers so customers can quickly and correctly configure the products they want.
Also, orders placed online can reach production facilities in minutes. Note that mass customization is not easy to achieve;
however, EC can help. Mass customization requires a build-to-order process (see Online File W1.15).
Intrabusiness: From Sales Force Automation to Inventory Control. One area where EC has made major progress in sup-
porting organizational responses is applications inside the business. The support can be provided to field representatives,
warehouse employees, designers, researchers, and office workers. The improvements in productivity for these kinds of
employees were fairly slow until the introduction of EC.
Knowledge Management. Knowledge management (KM) refers to the process of creating or capturing knowledge, storing
and protecting it, updating and maintaining it, and using it whenever necessary. Knowledge management programs and
software are frequently associated with EC. For example, knowledge is delivered via corporate portals to assist users or to
teach employees. Also, EC implementation requires knowledge, and EC activities such as market research create knowledge.
For more on the EC–KM connection, see Chapter 6.
Questions
1. List the major business pressures faced by organizations today.
2. List the major organizational responses to business pressures.
3. Describe how EC supports organizational responses to business pressures.
4. Describe an agile organization.M01_TURB9235_03_SE_WC01.QXD 8/13/10 4:51 PM Page W1.16
W1.16 Part 1: Introduction to E-Commerce and E-Marketplaces
REFERENCE FOR ONLINE FILE W1.10
Anderson, D. Build-to-Order and Mass Customization: Production Without Forecasts or Inventory. Los
The Ultimate Supply Chain Management and Lean Angeles: CIM Press, 2004.
Manufacturing Strategy for Low-Cost On-Demand
Online File W1.11 Representative EC Business Models
1. Name your own price. Pioneered by Priceline.com, the name-your-own-price model allows buyers to set the price they
are willing to pay for a specific product or service. Priceline.com will try to match a customer’s request with a supplier
willing to sell the product or service at that price. This model is also known as a demand-collection model.
2. Find the best price. According to this model, also known as a search engine model, a customer specifies a need and
then an intermediate company, such as Hotwire.com, matches the customer’s need against a database, locates the low-
est price, and submits it to the consumer. The potential buyer then has 30 to 60 minutes to accept or reject the offer. A
variation of this model is available for purchasing insurance: A consumer can submit a request for insurance to
Insweb.com and receive several quotes. Many companies employ similar models to show price comparisons and find the
lowest price. For example, consumers can go to eloan.com to find the best interest rate for auto or home loans. A well-
known company in this area is Shopping.com.
3. Affiliate marketing. Affiliate marketing is an arrangement whereby a marketing partner (a business, an organization,
or even an individual) refers consumers to a selling company’s Web site. The referral is done by placing a banner ad or
the logo of the selling company on the affiliated company’s Web site. Whenever a customer who was referred to the sell-
ing company’s Web site makes a purchase there, the affiliated partner receives a commission (which may range from 3
to 15 percent) of the purchase price. In other words, by using affiliate marketing, a selling company creates a virtual
commissioned sales force. Pioneered by CDNow, the concept is now employed by thousands of retailers and manufactur-
ers. For example, Amazon.com has over 1 million affiliates, and even tiny Cattoys.com offers individuals and organiza-
tions the opportunity to put its logo and link on their Web sites to generate commissions.
4. Group purchasing. In the offline world of commerce, discounts are usually available for purchasing large quantities. So,
too, EC has spawned the concept of demand aggregation, wherein a third party finds individuals or small-to-medium
enterprises (SMEs), aggregates their small orders to attain a large quantity, and then negotiates (or solicits a tender
offer) for the best deal. Thus, using the concept of group purchasing, a small business, or even an individual, can get a
discount. This model is also known as the volume-buying model. One leading aggregator is Letsbuyit.com. Online pur-
chasing groups are also called e-co-ops.
5. Online auctions. Almost everyone has heard of eBay, the world’s largest online auction site. Several hundred other com-
panies, including Amazon.com and Yahoo!, also conduct online auctions. In the most popular type of auction, online
shoppers make consecutive bids for various goods and services, and the highest bidders get the items auctioned. E-
auctions come in different shapes and use different models. For example, eBay is using about 40,000 “assistants” in a
model where the assistants perform the order fulfillment function.
6. Product and service customization. With customization, a product or service is created according to the buyer’s spec-
ifications. Customization is not a new model, but what is new is the ability to quickly configure customized products
online for consumers at costs not much higher than their noncustomized counterparts. Dell is a good example of a com-
pany that customizes PCs for its customers.
7. Information brokers (infomediaries). Information brokers provide privacy, trust, matching, search, content, and other
services (e.g., Bizrate.com, google.com/products).
8. Bartering. Companies use bartering (see Chapter 2) to exchange surpluses they do not need for things that they do
need. A market maker (e.g., web-barter.com or tradeaway.com) arranges such exchanges.
9. Deep discounting. Companies such as Half.com offer products and services at deep discounts, as much as 50 percent off
the retail price (see Chapter 3).
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