ilers,”
https://ccs.mit.edu/erik, May 1999Pricing and Branding on the Internet EC-8 p. 2posted on the Internet differ by an average of 33% for books and 25% for CDs (Exhibit 1). At thesame time, the dispersion of prices weighted by retailer popularity reveals that Internet marketsare highly concentrated, but the retailers with the lowest prices do not receive the most sales.”4Bizrate.com’s survey of online buyers also suggests that product price is the attribute leastcorrelated with a repeat online purchase. Instead, customer service, fulfillment, and trust appear
to be more important drivers of online loyalty.The issue of brand evolution is as controversial as pricing. Some experts argue that brands willbe even more important in the online world. Their view of increased brand significance is an allyto the Internet efforts of established “brick and mortar” brands. Others believe that increased
information will make brands, at least the way they are defined today, less important in the faceof increased information availability. John Hagel and Marc Singer, for example, argue thatproduct-centric brands are a proxy for imperfect information and limited shelf space.5 As the
Internet lifts these constraints, information-centric brands that focus on understanding andsatisfying consumer needs will replace them. The Internet will therefore give rise to new types ofintermediaries, companies that advocate consumers’ needs and facilitate transactions by
efficiently matching buyers and sellers. Intelligent agents are one example of such intermediaries.Intermediaries and other retailers are experimenting with different efforts to grow: regular
auctions, reverse auctions, group buying, aggressive marketing campaigns and price leadership,for example. Which models will be sustainable as more products are sold on the Internet andmore people go online is unclear.
AMAZON.COM
Amazon.com has grown from a small online bookseller in 1995 into the Internet’s most powerfulmerchant. Few doubt that Amazon.com has accelerated, if not caused, the rapid adoption of theInternet as a medium of commerce. Besides books, Amazon offers videos, music, auctions, gifts,electronic greeting cards, consumer electronics, toys, software, video games, and homeimprovement and gift ideas. In September 1999 Amazon introduced zShops, a storefront-hostingproduct. Amazon has also invested in other e-commerce merchants such as Drugstore.com,
HomeGrocer.com, and Pets.com. In the third quarter of 1999, revenue rose to $355.8 millionfrom $153.6 million, for the corresponding quarter of 1998 and Amazon’s registered user baseexceeded 13 million. More than 70% of sales were to repeat users. This repeat purchase rate wasnearly double the industry average (Exhibit 2).So far, no one has duplicated Amazon’s success. According to Amazon CEO Jeff Bezos, “Themost important thing we have that’s hard to duplicate is our culture ofcustomer obsession. Itpervades customer service,
logistics, software and marketing. Companies’ cultures areimpossible to copy. They’re like little starter pieces of sourdough. Either you’ve got them or youdon’t. Once a company has a culture, it’s like quick-drying cement. You can’t just send someoneto a customer-focus class for six weeks and expect results.”6 Bezos also explained why thisculture of customer obsession is vital in the online environment: “Customer, customer, customer.I think everything falls out of that. It’s especially true online, becau
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