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The number of American households shopping on the Internet is increasing every month. In the month of February, 13. 5 million households shopped online compared to 13. 3 million in January. Per person spending increased from $ 228 in January to $ 308 in February (Enos, 2001). Old Economy companies have taken notice and are moving quickly to embrace this new sales channel. These companies realize that the use of the Web will help to cut costs, find new customers and keep the ones they have (Schoen, 2001).
A recent survey by InformationWeek Research found that 65 % of respondents say the percentage of their companies total revenue being generated by E-business grew in the past twelve months (Murphy & He, 2001). Developing a company web site can be expensive. A small site with 25 pages can cost more than $ 200, 000 and larger sites with hundreds of pages can easily exceed a total of $ 1 million (Jarvis, 2001). This does not even include costs to handle customer service, product fulfillment, marketing, transaction security, payment services, and site maintenance. To save money, many of these companies are outsourcing their E-business activities to New Economy companies called Commerce Service Providers (CSP). One particular CSP that I feel is the leader at helping companies grow online sales is called Digital River based in Eden Prairie, Minnesota.
This term paper will show how Digital River is so effective in helping Old Economy companies market and sell their products over the Internet. DIGITAL RIVER SERVICES Defining what a CSP does is becoming more difficult as these companies continue to add to their offerings and change their scope. A general definition of a CSP is a vendor that supplies the system and services to establish the infrastructure for E-businesses. This can include processing secure transactions; collecting payments and issuing e-mail receipts; managing customer relationships; and fulfillment processes (Nesdore, 2001). Digital River is one of the best examples of a CSP who has extended its reach.
To gain an understanding of what services Digital River offers, I have included the following paragraph from Digital Rivers web site. Digital River, Inc. is a Commerce Service Provider, providing over 8, 000 companies with e-commerce solutions. The Companys front-to-back E-commerce services include site development and hosting, order and transaction management, system integration, fraud screening, product fulfillment, e-marketing and customer service The Company was incorporated in 1994 and conducted its first online sale through a clients Web store in August 1996. Digital Rivers proprietary commerce network server (CNS) technology serves as the platform for the Companys solutions.
The CNS incorporates custom software applications that enable Web store authoring, electronic software delivery, fraud prevention, export control, merchandising programs, and online registration, and features a database of more than 100, 000 software and digital products (Digital River. com, 2001). As one can see, Digital River offers many E-business services. I will discuss two specific Digital River services that help grow a companys online sales: digital and physical fulfillment services; and merchandising and analytical marketing services. I will also discuss how Digital River is handling increased public concerns about privacy issues with online shopping. DIGITAL AND PHYSICAL FULFILLMENT Online product fulfillment costs tend to be large and will create major cash flow headaches to those companies who have not already built the infrastructure nor have a core competency in this area (Mahoney, 2001).
Digital River has spent millions of dollars over the past few years building such an infrastructure. Digital River simply rents out the use of and the expertise in operating this advanced infrastructure for a fee much lower than what a company would spend using an internal IT department. The burden and cost of constantly upgrading the system is on Digital River. If the company decides to end its E-commerce activities, they can walk away without having spent a large amount of up front money.
PRODUCT FULFILLMENT Digital River handles the entire product fulfillment cycle. They streamline the interaction among a companys manufacturers, distributors, resellers, dealers, and retailers into entirely online processes and will manage any third party fulfillment providers. They also have the ability to meet all customers unique needs with pick, pack and ship functionality or bulk shipping if desired. This whole process adds to the quality of service that companies must offer their customers.
PRODUCT RETURNS Synonymous with product fulfillment is the handling of returned products. A key to customer retention is customer service (Mahoney, 2001). The ability to easily return an unwanted product is part of the entire customer service experience. In my own personal experience of online shopping, I find it difficult to understand the return policies of Web sites. For the return policies I do understand, I find the procedures complex.
On the other end, companies find it difficult to manage product returns. Digital River simplifies this process by a system that provides a returns information sheet to customers via a server based Java servlet, which approves or rejects returns based on manufacturer information. The system can provide a shipping label and bar code to ship materials back to a receiving port, which scans the code to log the return (Nelson, 2000). As one can see, this managed returns system is a value-added service that companies desire to identify to their products. DIGITAL DOWNLOADS Digital River has made its name on being the largest provider of software downloads over the Internet. Digital delivery eliminates many of the costs that exist in the physical distribution chain, such as manufacturing, packaging, shipping, warehousing, and inventory costs.
These reduced costs increase margins for the software publishers and online retailers. Digital downloads also solves the shelf space problem which can constrain product availability and sales. The adoption of broadband technologies such as fiber optics, cable, DSL, T 1 lines, satellite and wireless will increase the market size of users of digital downloads. Today ten percent of all Internet users utilize broadband technology and this number is growing at a robust rate (Gosselin, 2001). The cost savings of digital downloads is one most companies will look to use in the future as broadband usage reaches critical mass. E-MARKETING The rise of the Internet has resulted in the largest paradigm shift in marketing since direct marketing one-upped mass marketing in the 1970 s and 1980 s (Wilson, 2001).
The Internet shifts control from the marketer to the consumer. Internet users choose what they want to see and how long they will see it. New technologies capture data on consumer preferences and habits in order to build profiles of individuals. That allows marketers to serve up the right product at the right time to the right person, instead of forcing the consumer to surf through a site to find items of interest (Wilson, 2001). This results in marketers moving from push marketing to pull marketing.
Digital River offers an expertise in Internet marketing that helps companies address this problem. DIGITAL RIVERS E-MARKETING SERVICES The E-Marketing service of Digital River helps their clients manage the risks associated with E-commerce. Manufacturers are good at making products but are lousy at most forms of E-commerce (Less, 2000). Digital River helps manufacturers and software developers to develop online sales plans, then build, and execute programs that meet agreed upon growth objectives. Typically, clients using Digital Rivers E-Marketing Services show increases in revenue up to four times over non-users of the services (Business Wire, 2001). To get the best results, Digital River recommends that companies combine offline-marketing tactics with a variety of online tactics.
Some of the online tactics Digital River has an expertise in and how they help companys online businesses will be discussed...
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