Unit2E-commerceSupplementary ReadingPassage1ASurefootedApproachUnlike many companies at the time, REI didn't treat the Web effort like a pilot project or an experiment.From the start, Hyde says, the company regarded it as a real business and held it to specific service andfinancial goals.Given that the Web was seen as a corepart of REI's business.Hyde decided it was crucial todo all site development in-house. Many brick-and-mortar companies back then chose to outsourcedevelopment to get a site up and running quickly, and, even today, some analysts see outsourcing as a bestpractice. Hyde, however, still believes REI needed to have Web development skills as a core competency.It's alsobeen commonforbusinessrushingtoestablish a Webpresencetocutcornersby limitingoreven skippingintegration withlegacy systems.Butfor Hyde,there was never any question that REI's sitewould integrate with its legacy systems and exiting fulfilment operation: Co-op members needed to be ableto get credit for whatever orders they placed, wherever they placed them.And it would have been crazy tonot take advantageof REI's newdistribution centre with its sixmiles of conveyor belts, it had already beendesigned to handle both store and catalogue fulfilment out of the same inventory.Early on,REI made anotherkey decision:Itwould spendheavilyto launch andmarket its website,andit would accept losses in the early years. In 1996, when REI launched the retail site, and in 1997,the site didnotmake a profitnot unusual in online retailing(Amazon.com hasyetto operate intheblack since itwentpublic.)Madsen wasn't happy about thered ink and neither was REI's board.But at thetime-the height ofthedotcom-fundingfrenzyMadsenfelt hehad littlechoice.“The Internet pure-plays had such deeppocketsthat they weren't spending theirmoney appropriately,and they werecreating hardships forthemselves andfor established retailers like REI,"Madsen says.“We felt compelled to play the game the way the rest oftheretailer were playing it." REI's online group turned a profit in 1998 and 1999. But it dipped slightly into thered in 2000planned losses to pay for improvements such as expending the website overseas and addingfunctionality,according to a spokeswoman.Even though dotcom retailers are struggling,that doesn't meanthepressureis off REI:it still must invest inthefuture.Everyyear we have todo things a littlebit better tostay ahead of customers'expectations,"Madsen says.The same holds true for the company overall,It'sprofitshavedropped slightlyeachyear since1997,inpart because of Web investments and inpartbecauseof other initiatives aimed at growth, such as construction of its newsuperstore in Denver and expansion intoJapan.Otherbrick-and mortarcompaniesfacedwithearlycompetitionfromthen well-fundeddotcomschose
Unit 2 E-commerce Supplementary Reading Passage 1 A Surefooted Approach Unlike many companies at the time, REI didn’t treat the Web effort like a pilot project or an experiment. From the start, Hyde says, the company regarded it as a real business and held it to specific service and financial goals. Given that the Web was seen as a core part of REI’s business. Hyde decided it was crucial to do all site development in-house. Many brick-and-mortar companies back then chose to outsource development to get a site up and running quickly, and, even today, some analysts see outsourcing as a best practice. Hyde, however, still believes REI needed to have Web development skills as a core competency. It’s also been common for business rushing to establish a Web presence to cut corners by limiting—or even skipping—integration with legacy systems. But for Hyde, there was never any question that REI’s site would integrate with its legacy systems and exiting fulfilment operation: Co-op members needed to be able to get credit for whatever orders they placed, wherever they placed them. And it would have been crazy to not take advantage of REI’s new distribution centre with its six miles of conveyor belts; it had already been designed to handle both store and catalogue fulfilment out of the same inventory. Early on, REI made another key decision: It would spend heavily to launch and market its website, and it would accept losses in the early years. In 1996, when REI launched the retail site, and in 1997, the site did not make a profit—not unusual in online retailing. (Amazon.com has yet to operate in the black since it went public.) Madsen wasn’t happy about the red ink and neither was REI’s board. But at the time—the height of the dotcom-funding frenzy—Madsen felt he had little choice. “The Internet pure-plays had such deep pockets that they weren’t spending their money appropriately, and they were creating hardships for themselves and for established retailers like REI,” Madsen says. “We felt compelled to play the game the way the rest of the retailer were playing it.” REI’s online group turned a profit in 1998 and 1999. But it dipped slightly into the red in 2000—planned losses to pay for improvements such as expending the website overseas and adding functionality, according to a spokeswoman. Even though dotcom retailers are struggling, that doesn’t mean the pressure is off REI; it still must invest in the future. “Every year we have to do things a little bit better to stay ahead of customers’ expectations,” Madsen says. The same holds true for the company overall. It’s profits have dropped slightly each year since 1997, in part because of Web investments and in part because of other initiatives aimed at growth, such as construction of its new superstore in Denver and expansion into Japan. Other brick-and mortar companies faced with early competition from then well-funded dotcoms chose
the spin-offroutetoraise capital for their Web efforts.Barnes & Nobel,for example, spun off its Web businessand took it public, spurring integration between the two channels- and later got criticized for its click-and-mortar gap. In October,the companydecided to takea radical turn in its strategy,announcing plans to installInternet service counters in Barnes & Nobel superstores and to let online customers return items to stores.Itis also starting a loyalty program that will encompass both online and in-store purchases.The spinoff strategy still appeals to some retailers, although perhaps less so now that the market fordotcom retail IPOs has tanked. Last year, Wal-Mart turned to Accel Partners to help turn around its much-criticized website and launched a separatedotcom group based in Silicon Valley.Still,Madsen believes hemadethe right choice in not carvingoff thewebsitefrom therest of the business.“When customers think ofREl, they don't think of us as a dotcom business or a catalogue business or a brick-and-mortar business,"hesays. “They think of our brand as encompassing all of those channels of distribution. And the expectationsthey have of us are identical no matter how they shop from us."Long before anyone had ever conceived of the Internet as a venue for commerce (or even conceivedof the Internet itself), REI had some built-in advantages for doing business online.The company has decadesofexperience in shipping ordersdirectlyto customers, it started running a catalogue operation notlong afterit was founded in1938 by a Seattle mountaineer.Companies with well-established, direct-to-consumer salescapability offline have an edge when they move online, since they already have fulfilment systems in place,says Andrew Bartels, a senior research analyst at Giga InformationGroup.He contends that's why companieslike L.L.Bean, Lands“End, Southwest Airlines and Computer Discount Warehouse have been successfulonline.What's more, REI is a member-owned cooperative, and its 1.7million activemembersrepresent about85percentof its in-storecustomers.Members share inREI'sprofits,based onhowmuchmoneythey spendThat meansREI haslongneeded tohaveasingleviewof its customers andtheirbuyinghistory acrossallofits distribution channels. It's a useful capability if you're trying to figure out whether your website is bringingin newbusiness or just cannibalizingyourexistingbusiness.In early 1996,REI's then-COO and ExecutiveVicePresident Dennis Madsen began to explore thepossibilities for Web commerce. Madsen, and avid sportsman who likes to conduct “working runs"joggingmeetingsontherunningtrailatREI's campusduringhislunchhour,doesn't considerhimselfa techie.Buthe could see the Web as the natural evolution of direct-to-customer catalogue salesthat is, as another waytoextend REI's reachbeyond thefourwalls of its stores.All the time,therewas no clear roadmapforbrick-and-mortar companies tofollowwhen theywentonline.Many companies withestablished offlinebrands justignored the Web, figuring that online sales wouldn't amount to much anytime soon. But Madsen believedthat the Internet was an opportunity for REI to better serve its customers. In 1997, a customer survey backedMadsen's instincts: REI found that 85 percent of its customers had access to the Internet at home or at work.Madsen's foresight about the Web paid off professionally too, REI's board appointed him CEO earlier thisyear, saying his role as e-commerce champion demonstrated his drive to find new ways for REI to grow.Madsen put together a team to get an e-commerce website up and running, and he made a crucialmanagement pick: He appointed Matt Hyde, a lanky, energetic REI insider, to run the online group, rather
the spin-off route to raise capital for their Web efforts. Barnes &Nobel, for example, spun off its Web business and took it public, spurring integration between the two channels— and later got criticized for its click-andmortar gap. In October, the company decided to take a radical turn in its strategy, announcing plans to install Internet service counters in Barnes & Nobel superstores and to let online customers return items to stores. It is also starting a loyalty program that will encompass both online and in-store purchases. The spinoff strategy still appeals to some retailers, although perhaps less so now that the market for dotcom retail IPOs has tanked. Last year, Wal-Mart turned to Accel Partners to help turn around its muchcriticized website and launched a separate dotcom group based in Silicon Valley. Still, Madsen believes he made the right choice in not carving off the website from the rest of the business. “When customers think of REI, they don’t think of us as a dotcom business or a catalogue business or a brick-and-mortar business,” he says. “They think of our brand as encompassing all of those channels of distribution. And the expectations they have of us are identical no matter how they shop from us.” Long before anyone had ever conceived of the Internet as a venue for commerce (or even conceived of the Internet itself), REI had some built-in advantages for doing business online. The company has decades of experience in shipping orders directly to customers; it started running a catalogue operation not long after it was founded in1938 by a Seattle mountaineer. Companies with well-established, direct-to-consumer sales capability offline have an edge when they move online, since they already have fulfilment systems in place, says Andrew Bartels, a senior research analyst at Giga Information Group. He contends that’s why companies like L. L. Bean, Lands ‘End, Southwest Airlines and Computer Discount Warehouse have been successful online. What’s more, REI is a member-owned cooperative, and its 1.7 million active members represent about 85 percent of its in-store customers. Members share in REI’s profits, based on how much money they spend. That means REI has long needed to have a single view of its customers and their buying history across all of its distribution channels. It’s a useful capability if you’re trying to figure out whether your website is bringing in new business or just cannibalizing your existing business. In early 1996, REI’s then-COO and Executive Vice President Dennis Madsen began to explore the possibilities for Web commerce. Madsen, and avid sportsman who likes to conduct “working runs”—jogging meetings on the running trail at REI’s campus—during his lunch hour, doesn’t consider himself a techie. But he could see the Web as the natural evolution of direct-to-customer catalogue sales—that is, as another way to extend REI’s reach beyond the four walls of its stores. All the time, there was no clear road map for brickand-mortar companies to follow when they went online. Many companies with established offline brands just ignored the Web, figuring that online sales wouldn’t amount to much anytime soon. But Madsen believed that the Internet was an opportunity for REI to better serve its customers. In 1997, a customer survey backed Madsen’s instincts: REI found that 85 percent of its customers had access to the Internet at home or at work. Madsen’s foresight about the Web paid off professionally too; REI’s board appointed him CEO earlier this year, saying his role as e-commerce champion demonstrated his drive to find new ways for REI to grow. Madsen put together a team to get an e-commerce website up and running, and he made a crucial management pick: He appointed Matt Hyde, a lanky, energetic REI insider, to run the online group, rather
than searching for some hotshot Web guru from the outside. Hyde had started at REI as a part-timer (ageologist by training, he had moved to Seattle in the late 80's to be closer to great climbing, and he needed away to pay the bills). He had risen quickly through the retail ranks, and he had a real affinity for the new-fangledWebtechnology.Butmoreimportant, hehad a deepknowledgeofREI'scustomers.Thisbusiness isn't about technology,"says Madsen,a 34-year REI veteranwho startedworking onthe retail store floor when he was just a teenager. “It's about understanding the customer and translating thatunderstanding into strategies and tactics that will take care ofhis needs and expectations."EaercisesI.Discuss thefollowingquestions1.Whileother companiestreatthe Web effort likeapilotprojectoran experiment,REI's attitudeis totallydifferentfrom beginning.CanyouexplainREI'sattitude?2.Do you think the website brought profit toREI in the earlyyears?3.Why has REI's profits have dropped slightly each year since 1997? Do you agree with this strategy?Il. Fill in the blanks with the words given below in their proper forms.tacticbudgetpersuadeadvantagesrevenueintendvendorssubstantialfacilitatestrategy1. This moneyfor the development of the tourist industry.2.Thenewairportthe development of tourism.3. You should try toHigh-Techtopaythetransport costsfromthe shiptotheir warehouse inHongKong.4. In other words, the whole storage and pipeline system does not belong to the homeowners nor to the townbut rather to Tri-State. How does Tri-State get itsfrom this plan?5. New computer is the major expense, we suggest that thefornewcomputer install should notbemorethan1.5million dollars6.They are ice-cream7. Has your company thought through itsinthiswhole“discretionarybuying"area8.We felt that if they employed this,it was likely enough the best one.9. They signed a contract which wasto their country.10. It is clear that there are some differences in the ratings, but there isagreement.IL.CompareAmazon,Ozon and REI withTmall.com,Taobao.com and JD.com,and figure outtheircommon ground. Do you think the later ones are successful in their sales strategies? Why or why not?Passage Two
than searching for some hotshot Web guru from the outside. Hyde had started at REI as a part-timer (a geologist by training, he had moved to Seattle in the late 80’s to be closer to great climbing, and he needed a way to pay the bills). He had risen quickly through the retail ranks, and he had a real affinity for the newfangled Web technology. But more important, he had a deep knowledge of REI’s customers. “This business isn’t about technology,” says Madsen, a 34-year REI veteran who started working on the retail store floor when he was just a teenager. “It’s about understanding the customer and translating that understanding into strategies and tactics that will take care of his needs and expectations.” Exercises I. Discuss the following questions. 1. While other companies treat the Web effort like a pilot project or an experiment, REI’s attitude is totally different from beginning. Can you explain REI’s attitude? 2. Do you think the website brought profit to REI in the early years? 3. Why has REI’s profits have dropped slightly each year since 1997? Do you agree with this strategy? II. Fill in the blanks with the words given below in their proper forms. tactic persuade advantages revenue budget vendors substantial strategy facilitate intend 1. This money _ for the development of the tourist industry. 2. The new airport _ the development of tourism. 3. You should try to _ High-Tech to pay the transport costs from the ship to their warehouse in Hong Kong. 4. In other words, the whole storage and pipeline system does not belong to the homeowners nor to the town but rather to Tri-State. How does Tri-State get its _ from this plan? 5. New computer is the major expense, we suggest that the _ for new computer install should not be more than 1.5 million dollars. 6. They are ice-cream _. 7. Has your company thought through its _ in this whole “discretionary buying” area. 8. We felt that if they employed this _, it was likely enough the best one. 9. They signed a contract which was _ to their country. 10. It is clear that there are some differences in the ratings, but there is _ agreement. III. Compare Amazon, Ozon and REI with Tmall.com, Taobao.com and JD.com, and figure out their common ground. Do you think the later ones are successful in their sales strategies? Why or why not? Passage Two
WhatIs E-business?E-business,thetransformationofkeybusinessprocessesthroughtheuseof InternettechnologiesThe Web is changing every aspect of our lives, but no area is undergoing as rapid and significant achange as the way business operate. Today companies large and small are using the Web to communicatewith their partners, transform their order processing systems and transact commerce. This is e-business-wherethestrength and reliabilityof traditional information technology meetthe InternetIt's about Business, notTechnologyE-business isn't about re-inventingyourbusiness.It'sabout streamliningyour currentbusiness processto improve operating efficiencies, which in turn will strengthen the value you provide to your customers-value that cannot be generated by any other means, and value that will give you a serious advantage over thecompetition.We believe that the best place to start is with yourmostcritical business process-customer relationshipmanagement. Start by improving your customer interactions and internal processes. To achieve this, look atthe individual processes that contribute to the overall customer experience: processes such as customerrelationship management, supply chain management and e-commerceCustomers-theKey IngredienttoSuccessTheconceptofcustomer self-serviceiscentral toe-business.Analyzingpartcustomerbehaviorenablesan e-business to personalize its offerings and to anticipate customer wants and needs. Providing qualitycustomer self-service involves providing customers with secure web-browser access to automated ordersystems. These system give customers controlled access to the data they need. In other words, not only areyou managing your relationship with your customers, bur also giving them the tools to manage theirrelationship with you.SupplyChainManagementSupply chain management is about optimizing business processes in every corner of the businessenterprise-fromyour supplier'suppliertoyour customer'scustomer.Byusing e-business concepts andWebtechnologies,you can manage beyond theorganization.Manufactures and vendors can share sales forecasts,manage inventories more effectively, schedule labor accordingly, optimize deliveries and improveproductivity.E-commerceNo aspect ofe-business has attracted more attention than e-commerce. The ability to offer goods andservices overtheWeb has alreadyhad a remarkableimpact.Last year,for instance,over s750million inairline tickets were sold overtheWeb.By using e-commerce solution, companies can present their goodsmore effectively,take orders and invoice online, automate customer account enquiries and handletransactions electronically.Not only does this mean improved margins for you, but also means yourcustomers receive the faster, more responsive service they demand.Eacercises
What Is E-business? E-business, the transformation of key business processes through the use of Internet technologies. The Web is changing every aspect of our lives, but no area is undergoing as rapid and significant a change as the way business operate. Today companies large and small are using the Web to communicate with their partners, transform their order processing systems and transact commerce. This is e-businesswhere the strength and reliability of traditional information technology meet the Internet. It’s about Business, not Technology E-business isn’t about re-inventing your business. It’s about streamlining your current business process to improve operating efficiencies, which in turn will strengthen the value you provide to your customersvalue that cannot be generated by any other means, and value that will give you a serious advantage over the competition. We believe that the best place to start is with your most critical business process- customer relationship management. Start by improving your customer interactions and internal processes. To achieve this, look at the individual processes that contribute to the overall customer experience: processes such as customer relationship management, supply chain management and e-commerce. Customers-the Key Ingredient to Success The concept of customer self-service is central to e-business. Analyzing part customer behavior enables an e-business to personalize its offerings and to anticipate customer wants and needs. Providing quality customer self-service involves providing customers with secure web-browser access to automated order systems. These system give customers controlled access to the data they need. In other words, not only are you managing your relationship with your customers, bur also giving them the tools to manage their relationship with you. Supply Chain Management Supply chain management is about optimizing business processes in every corner of the business enterprise - from your supplier’supplier to your customer’s customer. By using e-business concepts and Web technologies, you can manage beyond the organization. Manufactures and vendors can share sales forecasts, manage inventories more effectively, schedule labor accordingly, optimize deliveries and improve productivity. E-commerce No aspect of e-business has attracted more attention than e-commerce. The ability to offer goods and services over the Web has already had a remarkable impact. Last year, for instance, over $750 million in airline tickets were sold over the Web. By using e-commerce solution, companies can present their goods more effectively, take orders and invoice online, automate customer account enquiries and handle transactions electronically. Not only does this mean improved margins for you, but also means your customers receive the faster, more responsive service they demand. Exercises
I.Discussion1.What isthedifferencebetween e-businessande-commerceandwhat istheirrelationship?2.Whatarethebenefits ofe-business ande-commerce?II.Fill each gap with a suitable word.Many companies haverecentlybeentaking theirfirsttentative steps intheworld ofelectronicbusinesse1more than an 'add on' to 2Initially, they expected the Internet to becurrent businessprocedures. However, companies are now discovering3_ electronic business will not just prove to bean efficient or cheaper sales channel 4_will fundamentally change theway theydo business. Companiesin sectors5as retailing or financial services are already realizing substantial savings by using theInternetto encourage6growth of ‘self-service"activities for customers and suppliers.Corporateintranets nowallowstaff toaccesstrainingat7timeandmaketravel arrangementsandfileexpenseson-line,reducing the costs8_are common to suchprocesses
I. Discussion 1. What is the difference between e-business and e-commerce and what is their relationship? 2. What are the benefits of e-business and e-commerce? II. Fill each gap with a suitable word. Many companies have recently been taking their first tentative steps in the world of electronic business. Initially, they expected the Internet to be 1 more than an ‘add on’ to 2 current business procedures. However, companies are now discovering 3 electronic business will not just prove to be an efficient or cheaper sales channel 4 will fundamentally change the way they do business. Companies in sectors 5 as retailing or financial services are already realizing substantial savings by using the Internet to encourage 6 growth of ‘self-service’ activities for customers and suppliers. Corporate intranets now allow staff to access training at 7 time and make travel arrangements and file expenses on-line, reducing the costs 8 are common to such processes