Subject: Who will do Fulfillment? (was: Re: Kudos to our moderator) From: bobwyman@medio.com (Bob Wyman) Date: Fri, 21 Apr 1995 14:41:12 -0700

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At 06:15 PM 4/20/95, Richard Layman wrote:
>I just read the Tuesday 4/18 Financial Times piece that Steve was in,
> ...
>I was especially intrigued by the 2nd point on where online publications
>will make money, by taking a cut of the transactions initiated through the
>interaction between the reader-customer, the publication, and the
>advertiser-seller.

I must admit that I haven't read the FT piece, however, I'm hoping that 
Steve pointed out that for the newspapers to get the transactional revenues 
it is going to take much more than simply getting the papers online with the 
appropriate software. The problem here is a systems problem that includes 
the various vendors of goods on whose behalf the transactions might be 
collected.

If you look around your local area, you'll realize that most of the 
commercial establishments that advertise in the local paper are making a 
very important technological assumption about their customers... i.e. they 
assume that the customer will be able to come to their store to pick up 
goods. Very few organizations have the facilities and processes in place 
that will be required for them to respond to fulfillment demands generated 
by online transactions. The tiny minority that have mail order businesses 
will, of course, be able to convert quickly.

It has been suggested by some that the fulfillment demand that will be 
generated by the online transactions will actually be responsible for 
spawning a new companion business to the online world. This would be the 
business of local fulfillment vendors who provide wharehousing and order 
fulfillment services as an out-sourced function. Vendors would set up 
accounts with these folk, provide them with inventory and then have them 
take the orders, ship them, bill for them, etc. as a service.

The technological assumption that makes most vendors assume that customers 
have cars and will pick up goods themselves has a number other consequences. 
One is that many businesses are viable simply because of their physical 
proximity to the homes or workplaces of their customers. (i.e. they are easy 
to drive to.) Online systems know no distance and no time of day. If online 
ordering begins to take even a small portion of the volume in any one 
business, there may be some drastic changes to the viability of some 
companies that still provide physical storefronts. 

When I was a kid, if I wanted a ticket to a concert, I went to any number of 
local music stores in town to pick one up. But today, music stores don't 
sell tickets anymore. In many areas, you buy them over the phone from 
Ticketmaster and they mail the things to you. Thus, while it used to be 
assumed that I would pick my tickets up, today it is assumed that I won't. 
Many music stores in town used to get revenue from the ticket sales since 
they were providing the service of offering the tickets close to where I 
lived. Today, I don't care if the people on the other end of the phone are 
in town or in Fiji. I only care if they answer the phone and if they have 
access to a mailing service. Thus, in the past, it was inconceivable that 
anyone could monopolize ticket sales in any area. Today, it seems like a 
natural thing to do...

There are probably other businesses that will find that an increase in 
online ordering will shift the sands just a bit. We will probably also see a 
number of businesses created that compete with walk-in stores without 
actually offering any walk-in service themselves. These new businesses would 
be operating with much lower fixed costs of course. (i.e. cheaper buildings 
in cheaper locations, many actually remote from the customers they serve.)

The point here is really just to say that we must all remember that 
technological changes are almost always followed by systemic changes -- many 
of which cannot be anticipated. It is not sufficient for newspapers to 
provide access to online transaction processing systems. They will also have 
to be involved in training vendors to deal with a new business model -- one 
which is based on new technologies and assumptions about customer service. 
Newspapers may even find that to make the transaction business work, they 
will have to partner with or even help create the required fulfillment 
houses. (How is that for convergence? Not just telphone and television... 
Now, we've got newspapers, online services, and mail-order all in the same 
business plan!)

                bob wyman
--------------------------------------------------------
bobwyman@medio.com                  FAX: +(206) 883-8412
Bob Wyman, V.P. New Technologies, Medio Multimedia, Inc.
2643 151st Place, N.E., Redmond, WA 98052-5562
            
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