This section covers two case studies that try to bring to the fore the main issues in starting to use the web.
Three years ago a good friend of mine (Bernard) worked for Scottish Widows (SW) in their computing department, but due to difficulties with his marriage and pressure at work and various other problems he had a nervous breakdown. He was paid for six months by SW but decided that he could not face going back. The main problem now was that he was on his own and he could not work with people for the foreseeable future. Bernard had always enjoyed playing and designing computer games, so he decided that he would try to become a free-lance games developer and wrote to Core, Rage and various other games developers. Unfortunately none of the companies replied even though Bernard sent samples of his work to them. At this stage Bernard was at a loss as to what direction to take until one evening he had a few friends to his house and one suggested that he make use of the web to sell and distribute his games. This did seem a good idea as many of the people who play games had web access and it would enable the games to be sold at a good price compared to the high street shops as there would be no middle men involved. The first game was given away for free to encourage consumers to see what standard the games were and so Bernard could get some idea of the likely demand. The second game was sold online for £12 and sold 3,000 copies in the first month. Bernard had over 10,000 regular “hits” per month.
Ways to get people to your site
Bernard and friends went to any games based news groups and made contributions with the aim of attracting people to the site. Each time someone downloaded a game they were asked to fill in a form with their details, which Bernard put into a database. Each web page had metadata in the header so that search engines would put the site in the correct category. All search engines were notified each month of the site details and new developments. Bernard put quite a number of links to other sites on his links page and in turn these other sites put a link to Bernard.
At this stage it was decided that more than just a games site was required and Bernard started a newsletter reviewing new games, as he usually reviewed new games anyway to enable him to determine trends in the industry the newsletter was not too onerous.At the time he created a bulletin board on his site (perhaps now a chat room or white board would be appropriate), which gave him a good idea of what others thought of his games and other games. Through the newsletter Bernard advertised for staff to help develop new games and use the net to send the games to Bernard. Bernard sold the web site, database of gamers and the rights to all games in 1999 for £450,000 to the largest games developer in the UK and now runs a small web hosting company.
Case 2 Books online
Amazon is currently the largest online book retailer with monthly growth of 30%, but there are a number of large competitors (e.g. Barnes & Noble). Many other online retailers are selling to various niche markets i.e. Scottish books; scientific books and magazines; antiquarian books and children’s books. It is estimated that the online book market will be worth $1.2bn in 2000 and perhaps $3.5bn by 2005. Amazon currently has almost 50% of the market and keeps only 1% of all the catalogue titles in its warehouse, using book wholesaler Ingram for the majority of the 4.8 million titles in the catalogue.
Why is Amazon number one in this market? This is a very difficult question but there would seem to be four main reasons:
• First in market so first mover advantage
• Quality service – book tracking and customer notification by email; special offers to customers
• Easy to manoeuvre web site with extra information about the books e.g. people who bought this book also bought these; book reviews etc.
• Building a relationship with customers – database of customers; customer surveys; special offers.
Amazon has seen that competition will intensify as more businesses come to the Internet and has started offering other products that can be sold online e.g. music. Amazon has a database of customers who have purchased goods online so they willbe confident enough to buy other items from Amazon (assuming that they thought the service was good).
The Future for Amazon
Amazon has to ask itself what other products could it sell online and what are going to be the major areas of growth. Predicted sales by category in order for 2003:
1. Travel $10bn
2. PC Hardware $6bn
3. Grocery $3bn
4. Software $3bn
5. Books $3bn
6. Apparel $3bn
7. Gifts $1.5bn
8. Ticketing $1.3bn
9. Music, Videos $0.6bn
10. Toys $0.6bn
Which areas could Amazon break into?
How will it get into these areas?
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