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Thursday, June 24, 2010

Teaching e-commerce by shopping only online

AB Issues discussed concern a professor of marketing who shops only online to teach students the best ways to run an Internet-based business. Topics addressed include buying and selling on the Internet, consumer choice online, and efficient home delivery of goods purchased over the Web.


 
   BRUCE D. WEINBERG has set foot in a store only once in the past six
   months, but his shopping diary is required reading for his M.B.A.
   students at Boston University.
  
   Mr. Weinberg, an assistant professor of marketing who has vowed to
   shop only over the Internet, is apologetic about his slip-up. It
   happened in late September, when one of his bike tires blew out and
   there was no computer in sight.
  
   Other than that, he's kept a strict vow of cyber-purity since
   September, shopping over the Internet for everything from a $5 bottle
   of Mylanta stomach medicine to a vintage Rolls-Royce.
  
   His goal? To give his electronic-commerce students an inside glimpse
   at what works, and what bombs, when selling in cyberspace.
  
   Mr. Weinberg keeps a detailed diary of his shopping experiences on a
   World Wide Web site that awards "Brucies" to companies that go out of
   their way to please him and "Noosies" to those that tick him off
   (http://people.bu.edu/celtics). Mr. Weinberg has also created a second
   Web site that seeks to educate consumers and businesses about
   electronic commerce  
   He originally planned to end his e-commerce experiment January 1, but
   now that he's on a roll, he thinks he can hold out until September,
   one full year after he started.
  
   EARRINGS, TIRES, AND HOT SAUCE
  
   The diary is filled with chatty, often hilarious accounts of his
   purchases, which include dress shoes, ruby earrings for his wife,
   Batman action figures and memorabilia, tires for his car, Cajun hot
   sauce, and a water heater.
  
   "Hurricane Floyd is not going to interrupt this e-shopper," he wrote
   on September 16. "As long as electricity is humming through the veins
   of my PC, I can burn up the digital aisles of the world. I need to get
   a battery for my watch.... Tomorrow, I think I'll order some groceries
   as I am getting hungry, and then, after that, maybe I'll buy some
   retirement real estate."
  
   Mr. Weinberg hopes his experiences will make better Internet shoppers
   and consultants out of his students, many of whom will be helping
   companies plan Web sites after they graduate. They're tapping into an
   area with a staggering potential for growth, but a sobering number of
   failures. Businesses sold some $177-billion in goods and services to
   other businesses over the Internet last year--an amount that is
   expected to jump to $2.7-trillion by 2004, according to Forrester
   Research Inc., which analyzes the impact of changing technology on
   business. Meanwhile, businesses sold $20-billion in goods to consumers
   last year.
  
   Despite the boom in online sales, many companies are struggling to
   make a profit, and even those that succeed in attracting first-time
   buyers have trouble retaining them, Mr. Weinberg says.
  
   He hopes to help his students, and the business community, determine
   why so many e-commerce efforts falter.
  
   "I figured, companies aren't making enough money, and customers aren't
   happy," he says. "Why can't I dive in there and analyze why that is
   and pass it on to practitioners?"
  
   Students enrolled in his electronic-commerce course must complete a
   series of exercises that require them to become both buyers and
   sellers.
  
   Working in teams of two, the students create their own Web sites,
   which may make money but don't have to. For instance, one student
   created a Web site with everything a consumer might need to know about
   buying watches, while another set up an online travel agency.
  
   Students must buy something online and interact with a company's
   customer-service representatives. They must also return an item and
   buy and sell something in an online auction. For each exercise, they
   write a short paper on their experiences.
  
   A second-year M.B.A. student, Greg Crescenzi. says becoming a
   more-savvy online customer will help him next year, when he begins
   work at a consulting company in Cambridge, Mass., that handles
   business-to-business electronic commerce.
  
   "I'm finding that I take a much more critical look at Web sites," says
   Mr. Crescenzi. For instance, while renting a car for a vacation, he
   swore off one site that required him to go through many cumbersome
   steps before it gave him the information he needed.
  
   Customers who buy online are generally better informed and have more
   clout, Mr. Weinberg says.
  
   "You can reach C.E.O.'s. If you send them an e-mail, they'll often
   respond. Granted, I'm a professor and the company might have more
   reason to respond to me, but I still think it speaks to the impact
   consumers can have in this industry. They're definitely empowered," he
   says.
  
   "Seven years ago, when you bought a car, the dealer held all the
   cards. If he knocked $1,000 off the price, you thought you got a good
   deal. Now, as a customer, you know what he's paying and what is a fair
   price. The information is all out there in the open."
  
   "SO DARN MUCH FUN'
  
   Wading through all of that information isn't everyone's idea of a good
   time. But for Mr. Weinberg, a computer-science major turned e-commerce
   guru, online shopping is addictive.
  
   "What I think is so incredible is that it's so darn much fun," he
   exclaims in typical exuberance. His diary entries reflect his
   excitement.
  
   "Big Big Big Brucie to OutPost.com and a Big Big Brucie to Kozmo.com,"
   he wrote on December 16. "The Palm V [an electronic organizer] that I
   ordered from OutPost.com at 10:54 pm last evening, arrived today at
   11:30 am. Wow, I was blown away."
  
   But treat him wrong, and this Internet shopper tears into a rant.
  
   In his January 22 diary entry, he shared the e-mail he had sent to
   DrugEmporium.com. "Congratulations, you have earned a NOOSIE for poor
   service on shipping this order. I placed the order on January 19 with
   NEXT DAY delivery requested. You managed to take a couple of days to
   get the order out, and then managed to send it with GROUND service.
   Not the way to treat a customer, and particularly no way to treat a
   customer who earlier in the week gave you a Brucie."
  
   A customer-service representative responded 10 days later with an
   apology and a coupon for $10 off of future orders. Mr. Weinberg says
   he'll place another order, but if the service is poor, he'll award the
   company "a lifetime Noosie."
  
   SHIPPING A ROLLS
  
   The most expensive item he shopped for was a 1958 Rolls-Royce Silver
   Cloud. After months of searching the Internet and bidding on a few
   cars, he ended up inheriting a Rolls that had been in his family.
   Still, he did use an online transportation company to deliver the car
   from Kansas.
  
   In his November 5 entry, he casually mentioned that his new car had
   arrived, but reserved most of his enthusiasm for an impulse buy he had
   made the same day on the eBay auction site: the Batman's Villain
   Gallery and action figures.
  
   Mani Rafii, a second-year M.B.A. student, says Mr. Weinberg's passion
   for Internet buying makes for some entertaining classes.
  
   "He's like a small kid who's jumping around when he's gotten a big
   gift. He's especially excited if he's gotten something for free," says
   Mr. Rafii, who has accepted a job with a consulting firm in Boston
   that advises German companies that are selling online.
  
   "This is helping us understand both sides of the industry--what the
   consumer wants, like fast delivery and no minimum orders, and what
   problems businesses are likely to run into."
  
   M&M DELIVERY TEAM
  
   Mr. Rafii conducted his own experiment during a recent class. The
   general manager of one of Mr. Weinberg's favorite Internet sites,
   Kozmo.com, was visiting the class that day to talk about his service,
   which promises to deliver items like videos, CD's, and food within an
   hour in designated cities, for no delivery fee. Mr. Rafii decided to
   put the company to the test. He typed his order into his laptop
   computer at 6:05 p.m., just as the class was beginning. At 6:40, two
   delivery men knocked on the door and asked for Mr. Rafii. They handed
   him a box containing one bag of M&M candies, along with a bill for
   $1.05.
  
   "Everyone was shocked. It was really quite funny," he recalls. His
   stunt turned into a lesson on marketing strategies.
  
   "I asked him how they can stay in business if people order M&M's
   10 times a day. He told me their model is trying to please a customer
   as fast as possible, and relying on word of mouth to get new
   business," Mr. Rafii says. Even if someone takes advantage of the
   system, most customers will be impressed with the prompt service, and
   will spread the word, he explains.
  
   Kozmo.com officials would not release information about the company's
   financial performance, but Mr. Weinberg says it is not making a
   profit. "I have no doubt it's going to become a big-time player, and
   eventually be profitable," he adds.
  
   Even before the World Wide Web was invented, Mr. Weinberg was
   experimenting with a precursor of the electronic marketplace.
  
   While pursuing a Ph.D. in management at the Massachusetts Institute of
   Technology in the late 1980's, he developed a computer-based,
   multimedia shopping system for automobiles. "You could get inside the
   car and talk to the salesperson--it was very realistic," he says.
  
   NO NOSTALGIA FOR "REAL' STORES
  
   Mr. Weinberg has focused recently on how cars are bought and sold over
   the Internet. His interest was piqued by a Web site, CarsDirect.com,
   that allows customers to buy cars online and have them delivered to
   their door. "Initially, I thought that this concept was crazy, because
   it excludes visiting a dealer for the time-honored traditions of
   tire-kicking and test-driving," he says. "Later, I realized that
   tire-kicking in this day and age is absurd; and a five-minute spin on
   a smooth-surfaced highway doesn't provide much value."
  
   That got him thinking about whether customers could buy just about
   anything over the Internet. Mr. Weinberg says he's in no hurry to go
   back into a "real" store, but might be forced to this summer.
  
   "Our third child is due in June, so it might get tricky," he says.
   When the diapers have run out, even a one-hour wait can seem like an
   eternity.

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