Innovation

As a relatively new way of conducting business, e-commerce itself is a technological innovation. Within the e-commerce industry are also multiple and varied examples of businesses using innovative ideas to attract new customers and increase sales. For example, the decision by Lands' End Inc. to add to its World Wide Web site "Your Personal Model," an application that allows users to create a 3-D model of their body shape and then suggests appropriate clothing, was an innovation that attracted new customers. In many cases, the simple act of creating an Internet-based company—such as eBay, Amazon.com, or Yahoo!—is also an innovation.

The world's largest online retailer, Amazon.com, is the result of an innovative idea aggressively pursued by 30-year-old founder Jeff Bezos. In 1994, Bezos moved to Seattle, Washington, to take advantage of the anticipated surge in Internet use many analysts were predicting for the mid-1990s. Bezos perused roughly 20 different products, including magazines, CDs, and computer software, that he deemed appropriate for sale on the Internet. Eventually, Bezos decided to pursue books, believing that the electronic searching and organizing capabilities of an online site could help to organized the industry's sizable and varied offerings. At the same time, the small size of most books would simplify distribution efforts. Bezos also believed that customers would be more likely to make their first online purchase if the risk was minimal; an inexpensive object like a book might prove less intimidating than something more costly, like computer equipment.

After building one of the first viable online retail operations, Bezos continued to use innovative ideas to build his customer base. His "associates" program, established in July 1996, permitted individual Web site owners and operators to offer links to Amazon from their site. In return, the associate earned a commission any time a user clicked on the link to Amazon and purchased a book. Within two years, this associates program secured 30,000 members. Another major innovation was the one-click shopping technology developed by Amazon in 1997. According to Electronic Business writer Marc Brown, Amazon.com developed the technology in an effort to reduce the number of sales lost to customers frustrated with online checkout processes that included completing lengthy personal information forms. "Amazon.com captures the buying impulse immediately by storing this information in a database, assigning the customer a unique I.D., and storing the I.D. in a cookie on the customer's computer. The next time the customer visits, the I.D. is automatically read and used to locate the customer's record." Thanks to the one-click innovation, for which Amazon secured a patent in October of 1999, any returning Amazon.com customer is able to make a purchase simply by clicking on the "Buy Now" icon located next to each product.

Another key e-commerce innovator is Pierre Omidyar, founder of eBay.com. When Omidyar's girlfriend, a Pez candy dispenser aficionado, expressed her desire to interact with other nearby collectors, the 31-year-old Omidyar created Auction Web, a basic online auction site that permitted sellers to post items for sale by describing the object, setting a minimum bid, and selecting the auction's length, which could extend from three to ten days. Buyers were able to bid on an object at any time during the auction, and the highest bidder won the right to purchase the object for the bid price. Omidyar stipulated that payment and delivery were to be handled by the buyer and seller. Despite the fact that the site offered no search engine, no guarantees of any type regarding the merchandise sold, and no dispute resolution services, it attracted an immediate following. Eventually, Auction Web evolved into eBay, which became the world's largest online auction site, with more than 22 million registered users and roughly 8,000 product categories.

Leading Internet portal Yahoo! also has at its roots a single, innovative idea. After finding it difficult to keep track of his growing list of favorite sites with the new Mosaic software that allowed users to browse the fledgling World Wide Web, David Filo sought the help of his friend, Jerry Yang. Together, Yang and Filo created a program that would allow sites to be grouped together by subject. The partners then posted their categorized site list, dubbed "Jerry's Guide to the World Wide Web," on the Web. After receiving email from Web users across the globe about the usefulness of the list, Filo and Yang decided to catalog the entire Web, using several layers of categories and subcategories. What was initially an organizational tool for Web site classification eventually grew into a top Internet destination, with more than 100 million monthly visitors, by the year 2000.