Tangled Webs

    An E-business Success Story
Issue 5.3
May 3, 2000

New Media Vision

Despite the recent stock market hiccups, dot-com optimism continues unabated, companies like Amazon.com continue to increase sales at more than 150% annually, and pundits continue to tell us that the fundamental economic rules have changed. It would seem that all we knew about the old economy no longer applies, and that the new economy is about market share, not earnings. I do not subscribe to this, but I thought it might be interesting to take a close look at the rise to power of what is perhaps the most successful new-economy company and see what can be learned.

In '93 an American entrepreneur began using a new communications medium to change the face of retailing. Technically, the medium was not new. It had been around for decades, but up until that time it had been used primarily for communications rather than commercial purposes. This new company was based on cutting out the middleman and selling direct to the consumers.

They were not even the first to market in this new medium, others had been in business for years. Some with the same business model and selling exactly the same products. The key to this start-up's success was that they were the first to really understand the power of this new medium, and their revolutionary approach to marketing has permanently changed the face of retailing.

Cutting Edge Technology

Since they had no direct physical contact with the consumer, they focused on strong branding and the development of consumer trust. They became an educational resource by providing far more in-depth product information than their brick-and-mortar competition could ever hope to. But perhaps the true stroke of brilliance and innovation was the building of virtual communities. The company became not only the focus of their customers' shopping experiences, but they gave customers a way to feel connected to others like themselves. This filled a very real need in an increasingly decentralized America and helped to build an almost unassailable brand.

The degree to which they monitored and analyzed their customers purchasing habits and tailored their presentation and product selection was unheard of at the time, but has now become commonplace.

They also offered a no-questions-asked money back guarantee. Old-school managers claimed that such a policy would be abused, but the company understood relationship marketing. The policy may have caused some minor losses, but they knew it was developing trust and relationships that would lead to steadily increasing sales and loyal customers.

They were right. In only a few years, their brand became a household name, their product selection was much larger than a brick-and-mortar store could hope to carry, and much of their physical competition found themselves being driven out of business. The speed at which the business was built and market share captured from more established firms was completely without president, and the brand has become a household name.


The entrepreneur in question was Richard Sears, and the year was 1893. The communications medium in question was the decades old postal service which allowed him to pioneer catalog marketing. Although Montgomery Ward had beat Sears to market by years, Richard Sears' use of marketing techniques that Amazon.com would be credited with developing a century later allowed him to quickly dominate the market and build a brand that at the time was considered unassailable.

Everything Old is New Again

A little historical research showed how central the Sears catalog became to life in small American towns. It was not only viewed as an informational resource, but really did provide a sense of community. The new Sears Catalog was often the only thing that people from different rural areas of America really felt they had in common and was often the focus of conversation.

Actually, the parallels between catalog marketing and e-commerce are quite remarkable, but that exploration will have to be saved for another day. A new communications medium has enabled new business models and will continue to generate wealth for those companies that exploit them, but I cannot see any way it has fundamentally changed the rules that underlie economics anymore than it has fundamentally changed human nature. The fact is that there is very little that is truly new about our new economy.

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© Copyright 2000, Tim Romero, t3@t3.org
This article fist appeared in the May 3rd edition of The Japan Times.
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