Some Factors That Influence the Success or Failure of Digital Businesses

Some Factors That Influence The Success or Failure of Digital Businesses| | CI226 Socio-technical Approaches to Information Systems| | Radha Shah| 10818217 | | Introduction: “The impact of the internet on the society has been described as being as significant as some of the greatest technological innovations in history, such as the telephone and the motor car. ”( Jobber, D. and Fahy, J. 2009) The internet has become a vast part of everyone’s everyday life. People use the internet via their PCs, mobile devices, televisions and any other digital devices.

Businesses would have done research on the population that uses internet via different devices and therefore would make a decision to become digital. “Digital business or e-commerce has been defined as a wide range of technologies used to facilitate business interactions such as the internet, Electronic Data Interchange (EDI), email, electronic payment systems, and hand held digital devices, interactive television, self service kiosks and smart cards”. ( Jobber, D. and Fahy, J. 2009) Failures and Successful: There are many factors that influence the success or failure of digital businesses.

There is clear difference between the digital business that do well and those that don’t. From reading through articles, some state ‘building an digital business is not hard yet so many businesses seem to be getting it wrong. ’ (Limeshap, 2012). To have a successful digital business, the business person would have to think what a consumer would like and what would they want if they were in the other position. A few things that need to be pointed down for a great digital business are: * Great photos. Having images in your digital business will increase the number of visitors every time.

They draw visitors in and are one of the biggest selling points for an online website. An example given is Zappos. They do all their own photography of products for sale on the site. * Unique Content. The business should differentiate from other web sites. Having a unique page will give more value to the users and enable to rank better in search engines. * Search Engine Optimization. Search engines are the biggest source of traffic for most digital businesses. Digital businesses should optimize their product pages based on keyword research using unique titles, headers and content. User generated content. These consist of having user reviews. Having good reviews from customers will increase the business chance of being viewed more. People always read reviews first then they make the decision on the review they read which means user generated content can be strong component on your business. Thinking about customers is a crucial part of a successful digital business. You have to make life easy for the customers and think why they are visiting your online business. The top websites all have simple, consistent navigation with excellent customer account facilities.

It should be easy to use, allow customers to find business details easily and navigate easily through the application. Examples of few successful dot-coms are Google, Amazon, eBay & Wikipedia. However, there are various reasons and examples of why digital businesses have failed. Internet business companies began in the late 1990s. They were also known as dot-com companies. Comparing to all of them, some of them have survived till date and some companies are closed or bankrupt. Dot- com is companies which were set up to use the Internet as their prime trading platform.

There were high expectations from investors to their online business. Different people with different ages and with little or no business experience but with an interesting idea made it possible by the existence of the Internet. Politicians and media were involved and stated that this “was the future for business”. They encouraged more people to join the dot. com sensation. “The main purpose of these dot-com companies was to raise the capital from the venture capitalists, develop a successful web business, growing it exponentially high and later on exit from it by taking that dot-com company to public. (Lukman, A 2010). The reason why some dot-coms might have failed is due to having poor business plan, poor company promotion, poor financial management, errors in the company’s web site and many more. Dot com businesses also failed due to lack of research. There are many factors to include before starting a new business and research was one of them. Research is used to research about the product that is going to be sold and the price of the product too. As there is many competitors out there, businesses need to be competitive with their price and in order to do that they need to compare to their competitors.

To advertise your product is one of the main critical factors that lead businesses to fail. If a business decided to promote their product the cheapest way which includes banners, ads, radio then it is highly likely they would not get the amount of consumers they would have if they advertised through popular means. Examples of Successful Digital Businesses: “The dotcom era was a speculative bubble formed by the rapid rise and interest in internets companies” (Investopedia, 2011). As there was an surprising rise and subsequent crash of dotcom companies, there were still a few standing and still are standing.

These are: Amazon: The entrepreneur behind Amazon was Jeff Bezos. This was founded in 1994. Amazon is the largest online retailer in the world. As amazon started in 1994, within a year it was selling different variety of books and then eventually adding movies, music, electronic, computer software and many other consumer goods. “Like other dotcoms, Amazon’s business plan focused more on brand recognition and less on income and it did not turn a profit until the fourth quarter of 2001. ” (Investopedia, 2011). Amazon employs more than 37,000 people with the net sales of $9. 6 billion and trades over $200. (Figures are from Investopedia, 2011) eBay: In 1995, eBay was created by Pierre Omidyar. eBay is a popular online auction and retail business. When eBay first started, it showed amazing growth early on. In 1996, the hosted auctions figures were 250,000 but within the first month of 1997, it shot up to 2 million. As eBay got more popular over the years, the company expanded its product categories which included that sells can sell anything from antiques to gold coins to mobiles to real estate. They also had different types of auctions.

As of date, eBay employs more than 17,000 employees with the revenue topping $9 billion. Shutterfly: This business was founded in 1999. This company is an internet based personal publishing service which allows users to print, create calendars, photo books, cards, stationery and photo sharing websites. There are so many companies that are like these and it faces competition with Snapfish and Kodak. According to Investopedia, (2011), the three companies together control approximately 85% of the online photo and merchandise market. As of date, Shutterfly trades above $60 per share.

Examples of Failure of Digital Businesses: As stated above that in 1990s many businesses were interested in starting a business on the internet so they would be able to expand their market. However, in 2000s (decade) it all went downhill, there were many companies that did not plan properly which cost them their business. The businesses were more interested in attracting visitors instead of winning them over to customers. Initially e-commerce thought that having more customers visit the website would increase in profits but this was not the case and businesses started to fail.

There are many companies that failed from the dot com bubble and here are a few of them: Boo. com A fashion retailers which $135 million of venture capital in just 18 months and was later placed into receivership and liquidated. (Wikipedia, 2012). This company was from United Kingdom and founded by Ernst Malmsten, Kajsa Leander and Patrik Hedelin. In May 18th 2000, the company flopped and was liquidated and placed into receivership. Boo. com’s had the intention to sell various branded fashion items over the internet. For the company to go global, the founders had spent ? 25 million within 6 months. As they wanted to go global, they had to think about the different languages, pricing and tax structures. So what happened? Why did they go into liquidity? With the company, there were problems and mismanagement from the start. This site relied totally on JavaScript and Flash technology but back in the days, it was very slow to load the page up as it was dial up internet usage. Because of this, it took majority of the visitors to wait for a long time for the page to load up. When they had designed the website, it had to be fixed to a certain type window which gave boo. om a limited space available to display product information to customers. The actual launch was delayed by 6 months and from reading many sources it was due to technological problems. According to the Financial Times, there was a huge spending on consultancy fees in order for the website to be launched as early as possible. As soon as the site was launched, the user experience found it difficult to use and frustrating. Boo. com had an online virtual shopping assistant to help users with the purchasing experience however the visitors had to deal with slow browsing, poor navigation and poor technology.

All of this leads to Boo getting a bad reputation. Not only their user experience was poorly, but their web design, usability, marketing strategy, planning and many more factors lead the company to fail. Pets. com Pets. com is one of many online businesses that failed as a business-to-consumer e-commerce entity. This website was created in San Francisco which allowed consumers to buy pet products, information and resources. This website was launched in 1998 amongst other pet sites. Pets. com competitions were Petstore. com, Petopia. com, Petsmart. om and PetPlant. com however pets. com had a benefit as it was the first site that entered the market. In 1999, the website was being successful at its beginning stages until in 2000, the doors sadly closed for Pets. com, just two years after its launch. Whilst the website was online, the business offered the customers a variety selection of products, large scale inventory; it had competitive prices amongst their competitors and having staff which had knowledge on pet industry. It also had an efficient, well designed websites which lead attracting more customers.

On the other hand, the problems they had were that the business model was not unique enough and did not have anything special compare to the other websites. This means not having different products that any other companies would. “Another problem that Pets. com faced was that it entered a market of selling low-margin food and supplies that are extremely costly to ship to consumers”. ( Uky. edu. 1998). Pets. com overestimated the market trend. The company, like any other company would assume that their revenue would grow and hit their target.

However, unlucky for Pets. com they based their estimation on their current market instead of the future trend and risk. This led to Pets. com to be part of dot-com failure. Due to all these problems, the management of Pets. com realised that they would not raise capital any further. PetSmart offered to buy the company and offered less than the net cash value and Pets. com declined the offer, although some assets including the domain were sold to PetSmart. com. eToys. com: This website was the second most known failure of the dot com bubble.

This business was launched in 1997 by Toby Lenk, Frank Han and Bill Gross. The purpose for this online business was to sell educational toys. During Christmas in 1999, the demand for toys increased massively as it was Christmas holidays and parents would buy their children parents. Due to the vast amount of orders, eToys. com couldn’t manage to handle the orders which were ordered via their website. They didn’t manage to deliver the products on time therefore many customers complained that their orders were late or they didn’t receive the right product.

Due to this, this made customers not to visit them and order products of their website anymore. This problem states that the business did not think about holidays such as Christmas. They were not prepare for the holiday an order which needs more workers to handle the orders, purchase the products and ship the product to the customers. Furthermore, the products that were on their site displaying the pictures which are untouchable, therefore it may be unimpressive and unpersuasive. “This causes the consumers to rather shop in the real world than shop online”. Jin, S 2009). This is mainly the common reason of why e-retailers are failing. In 2000, eToys. com was into another crunch as Toys “R” Us and Amazon. com were a partnership. This was a major competitor during the 2000 holiday season. Conclusion: The internet has changed everyone’s life considering how technology has been improving throughout the years. To discuss about digital businesses, the internet has changed the way we purchase online. It has allowed purchasers to access information about products and services and even to buy the products.

In order for the digital business to sell something to the consumer, they would have to think about many factors. These factors include the web application design, usability, efficiency and ability to improve customer satisfaction and easy navigation through the website. Businesses have to consider about the shipping prices, the quality of the customer services and their marketing strategies. From researching, reading many articles and blogs there have been many successful digital businesses with the most popular ones are Google, Amazon and eBay. On the other hand, there are many failures of digital businesses.

If in future, if one had to start a digital businesses, they should consider all points before implementing one otherwise it can go the other direction of what they had predicted and wasting money and time. References: Bazac, D. (2007) Why Dotcom business fail. Pandecta, Iss. n/a p. n/a. Collier, D. (2008) Most famous dotcom failures. Learn E business, n/a (n/a), p. 1-6 Ecommercesite. wordpress. com (2000) The failure of Boo. com & its causes « E-Commerce Site. [online] Available at: http://ecommercesite. wordpress. com/2008/06/13/the-failure-of-boocom-its-causes/ [Accessed: 22/04/2012]. En. wikipedia. rg (2008) Dot-com company – Wikipedia, the free encyclopedia. [online] Available at: http://en. wikipedia. org/wiki/Dot-com_company [Accessed: 22/04/2012]. Fish, L. (2008) The failure of eToys. com in e-commerce and its causes. AGLN, [blog] June 12, Available at: http://aglncom. blogspot. co. uk/2008/06/failure-of-etoyscom-in-e-commerce-and_11. html [Accessed: 22/04/2012]. Investopedia. com (2011) 5 Successful Companies That Survived The Dotcom Bubble. [online] Available at: http://www. investopedia. com/financial-edge/0711/5-Successful-Companies-That-Survived-The-Dotcom-Bubble. aspx#axzz1vYUE9VCb [Accessed: 22/04/2012]

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