NONE: ONLINE-ADS>> _at_d.Tech.Chicago: 6/23/98 - Report #6
ONLINE-ADS>> _at_d.Tech.Chicago: 6/23/98 - Report #6
richard_at_tenagra.com
Tue, 23 Jun 1998 10:31:44 -0500 (CDT)
_at_d.Tech.Chicago
Report 6
June 23, 1998
This is the sixth in a series of 10 reports from Richard Hoy, who
covered _at_d.Tech.Chicago. You will receive these reports in addition
to your normal Online Ads posts/digests.
This coverage is archived at:
http://www.o-a.com/adtech.Chicago/adtechChig-archive.html
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This conference coverage is generously underwritten by:
AdKnowledge makes planning, placing and tracking web advertising easy.
If the web spells chaos to you when it comes to developing a web media
plan, it's time to check out MarketMatch Pro and SmartBanner from
AdKnowledge. Find out how to automate the entire web advertising
process from pre-planning to billing and everything in between. Gain
control over your campaigns with a single point of contact. Save time
and money with the experience and know-how of AdKnowledge. Contact us
today!
e-mail: mailto:info_at_adknowledge.com
phone: 1-800-286-6778
URL: http://www.adknowledge.com/
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FEDEX - TURNING BITS TO ATOMS
Mike Janes
The FedEx presentation was more a glance into e-commerce's
future rather than advertising, but a fascinating one
nevertheless.
THIRD GENERATION SHIPPING
Back in December of 1996, WIRED branded FedEx the "Airline
of the Internet" (see:
http://www.wired.com/wired/4.12/features/ffedex.html )
FedEx actually sees the Internet as a kindred spirit. What
FedEx did for package delivery is akin to what the
Internet will do, and is doing, for transactions.
Twenty-five years ago if you wanted to send something
overnight you had to be a big company. With FedEx, the
playing field was leveled. The Internet has really done
the same thing for e-commerce.
"The Internet basically does the same thing in the virtual
space that we did in the physical space," explained Mike.
"And that is, it made place not matter anymore."
Mike points out that we are moving into the third
generation of computing - network computing; which follows
Metcalfe's Law (Bob Metcalfe is the inventor of the
networking protocol Ethernet) Metcalfe's Law says that
each computer added to a network adds exponential power to
that network because the computer has access to all other
computers. This, in Mike's assessment, is what is driving
businesses to change.
"My point to you is that in the future, all businesses are
network businesses," he said.
Just like computing, FedEx is in its own third generation
of evolution - that of supply chain management. In the
same way information is stored and moved within a computer
network, FedEx is storing and moving physical inventory.
By interfacing the two systems, FedEx can seamlessly turn
bits into atoms. This has powerful implications for
e-commerce. And it is causing FedEx to morph from a
shipper of packages into a supply-chain management
service/consultancy.
But just like most success stories, it wasn't planned that
way.
THE BIRTH OF FEDEX.COM
In October of 1994, the FedEx marketing people started to
take notice of the Internet. They went to their IT people
to see how marketing might incorporate this new
technology. To the marketing folks' surprise, a FedEx
programmer on his own initiative had already registered
FedEx.com and wrote an HTML front-end to the package
tracking system. No one in marketing knew the site existed
and there had been no promotion, yet the site was already
logging 10,000 tracking requests per day.
It was trivial for FedEx to tie its Web site into its
package tracking because a decade earlier they began
laying the ground work. They already had a private package
tracking network - their own little Internet - for major
customers. At first only customers shipping 100 or more
packages a day could become part of this network because
FedEx supplied the computer. Over the years that minimum
dropped as customers just needed the software because more
and more had their own computers. When the Web came along,
the economics suddenly dropped to near zero because you
didn't even need software anymore, just an Internet
connection.
FedEx has determined from customer surveys that if the Web
site did not exist, 50 percent of those using the Web site
would have called FedEx to track their package.
A full 20 percent of tracking requests that come in
through the Web don't originate on the site, but rather
are passed by CGI scripts from other sites on the Web.
Being able to tie into the FedEx system in this way
reduces what direct marketers term the WISMO call -
"Where's My Order?" WISMO calls cut deeply into, and can
often destroy, a direct marketer's profit margin.
FedEx's strategy today focuses on getting more and more of
its customer base online. Moreover, FedEx is porting more
and more of the shipping and customer service processes to
the Internet. For example, their new service, Ship Alert,
sends the package recipient an e-mail containing the
tracking number and contents of the package.
E-COMMERCE FROM THE FRONTLINES
If any company has been on the front-lines of e-commerce,
it is FedEx. It has not been as a player, though, but more
as an observer. And they've observed a lot.
Mike said the companies really making money online are
those that have successfully convinced their existing
customers to buy through the Internet rather than
traditional channels. And the money is made because it
costs less to fulfill the order.
Another major point Mike made about e-commerce is that as
more and more large companies go direct, the big problem
will be rebuilding these companies' systems so they can do
lots of little transactions.
"[Large companies] are set up to send 5,000 large
shipments to their distributors," explained Mike. "As they
start trying to go direct, they may now have 5 million
individual transactions. Their systems and operations
aren't set up to handle that."
WEB SITE FAILURES ARE MARKETING FAILURES
Mike says in the future, business will be about who is the
best marketer and product developer, and no longer about
who owns the distribution network. The Internet is
definitely equalizing the distribution of products.
"On the Web, when you have 41 companies [that sell
computers], you don't care what position in the supply
chain they play, or where they used to be, or where most
of their revenue is, or where their owners are located. It
is irrelevant. What matters is the value proposition and
how they fulfill it," he said.
Mike put forth the argument that the failures of all Web
sites are marketing failures. He contends that companies
often get into the Internet with no thought as to what the
value proposition is.
"If it is easier to deal with your 800 number, why would
somebody go to your Web site?"
This ends the sixth report of _at_d.Tech.Chicago. Stay tuned for more
in-depth session analysis.
======================================================================
----------------------------------------------------------------------
This conference coverage is generously underwritten by:
AdKnowledge makes planning, placing and tracking web advertising easy.
If the web spells chaos to you when it comes to developing a web media
plan, it's time to check out MarketMatch Pro and SmartBanner from
AdKnowledge. Find out how to automate the entire web advertising
process from pre-planning to billing and everything in between. Gain
control over your campaigns with a single point of contact. Save time
and money with the experience and know-how of AdKnowledge. Contact us
today!
e-mail: mailto:info_at_adknowledge.com
phone: 1-800-286-6778
URL: http://www.adknowledge.com/
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