Full Sterne Ahead

by Jim Sterne

 January, 1999

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Welcome to the Full Sterne Ahead newsletter for January, 1999.

This month's issue points to Junkbusters.com as the
Resource of Note, contemplates disintermediation and the
death of margins in While I Was Out *and* The Big Idea,
spies aggregated data in The Crystal Ball, and offers
up a cut-and-paste special directly from My In-Box. We
start by taking exception with my bank in:
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WHEN WILL THEY EVER LEARN?
--------------------------
I balance my checkbook whenever I get my statement. When
my checkbook wouldn't balance this time I realized I hadn't
received my statement the month before. It was 10 at night -
so I went to the Web. Of course.

There was my account. There were my transactions. I smiled
at the fact that once again, the Web came to the rescue.

My smile faded when I got to the bottom of the page showing
last month's activity, and there was no "Previous Month"
button. That was it. The information I needed was one
screen away and it was simply not there.

When I inquired, I received an e-mail reply (within 24
hours - thank you) that said, "Currently, only the past
45 days or 120 transactions, which ever comes first,
is available for viewing via the Online account history.
If you need information prior to this allotted time , you
will need to refer to your paper statements."

Yes, but...

"You can order copies of previous statements online,"
and I was invited to incur the cost of $5 to have it
mailed to me. I was asked to choose if I wanted the
November or October statement. My statements are dated
in the middle of the month - how would I know which one
I should order? Ten dollars, please. Oh - and it'll
take 3 to 5 *weeks* to get it to me.

So close. We were soooo close.

Here's a hint: disk space is cheap. Customer good will
is priceless.
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RESOURCE OF NOTE
----------------
This month's Web site resource belongs to Jason Catlett
and is located at www.junkbusters.com.

Jason decided some time ago that he didn't like Spam. I mean,
*really* didn't like it. When he offered to debate Sanford
Wallace at Internet World for the second time, Spamford
would only appear via telephone.

But Junkbusters is not a rail against spam so much as it
is a compendium of information about and pointers to all
current legislation about e-mail and privacy on the Web.

If nothing else, go to this site and read Jason's Senate
testimony about Internet privacy and the phone call with his
mother at www.junkbusters.com It's well worth
a click.
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WHILE I WAS OUT
---------------
I didn't get out much this month, but when I did, I
tripped over another Big Idea. The manufacturer of a
line of computer peripherals had asked me to give a
talk to their distributors.

The conversation kept coming around to the issue of
disintermediation. What happens to the distribution
chain in a wired world? This wasn't experts explaining
or journalists jawing or pundits pontificating. This
was a room full of men and women in charge of medium
sized companies desperate to understand if there was
a future in their future.

What was the big answer? Service, of course. In the past,
part of the service they offered was stocking the finished
goods for quick delivery. That ended a while ago. Now
everybody drop-ships. The manufacturer manages the
inventory instead of pushing it out into the distribution
chain. Distributors still provide installation, program-
ming support, network support and maintenance. They will
always be needed on the front lines.

What was the big problem? Pricing. One guy in Chicago
posts a discounted price for a specific product and
Shazam! the street price has been set. Doesn't matter
that the guy in Chicago doesn't pay a team of service
people to install the product, repair the product, and
train the customer. He's just taking orders and passing
them along to the manufacturer for drop-shipping.

The distributor in Duluth has a dilemma. He has based
his business on eking out a certain margin. Without it,
he's in a death spiral of price cuts. Commoditization
on the Web strikes again.

So what's the solution? The Big Idea.

THE BIG IDEA - The Death of Margins
-----------------------------------
If I need a quart of milk and it's late and it's raining
and it's cold, I'm not going all the way to the supermarket
where I can get it at the usual price. I'm going to the
neighborhood gas station/flowerstand/foodmart and pay
thirty cents more for the convenience. That store is
providing a service.

But if I'm buying several thousand dollars worth of
gear to be installed in my company chances are it's
not an impulse buy. I'll do y research and I'll choose
from one of various manufacturers and order from one of
various vendors.

But what if there were no distribution chain? What if
the manufacturer quoted a price - *the* price - the
*global* price? Then the former distributor gets to focus
on what they know best: service.

The first service on the menu? Consulting. Which one of
these products is best for my company? The local service
rep is going to steer me toward the product he services.
His competition is going to sell me on the models she
supports. Selling the product is no longer something you
do for the margin, it's something you do to build your
base of service customers.

This breaks the chain of distribution dependency.
Instead of the service provider contracting to sell
one manufacturer's products, they are free to choose
from whomever offers the best training, the fastest
parts delivery, the best factory support, and the
largest installed base into which they can sell...
services.

The Net takes the price war out of the hands of the
dealers and puts it in the hands of the customer. Sites
like www.compare.net and www.bookcompare.com
are going to pop up in every category. Service companies
will no longer be able to subsidize their services
with product mark-ups.

Is it the best way to run a distribution chain? Probably
not. Is it avoidable? Probably not. But the manufacturer
who sees this as an inevitability sooner will have the
best shot at coming up with creative new ways to win.
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THE CRYSTAL BALL
----------------
The world will belong to those who exploit aggregated
data.

A recent article in ComputerWorld www.computerworld.com/ described MovieFone this way: "In 1997, MovieFone started to construct a data warehouse so that it could follow the historical calling patterns of people who phoned it to its free movie listing service.... Data from MovieFone and its sister Web site MovieLink (www.movielink.com) could help them quickly advise theater owners on how many screens a blockbuster movie should play on..."

What sort of information are you or could you be
collecting that could be of use to others? To yourself?
Start buying bigger disk drives today.
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MY IN-BOX
---------
Be careful what you say in an e-mail. Never write anything
you wouldn't want to show up in front of the DoJ.

When asking for consulting help, one very recognizable,
very large company put their statement of need this way:

     >My conservative (its email - you can quote me here)
     >opinion of our internet site  - online at www.***.com -
     >is that it presents an opportunity for vast improvement
     >in terms of the value that it delivers to our firm's
     >current and potential clients, customers, partners
     >and employees.

I hereby bestow an award for Most Carefully Worded Way
of Saying 'Our Site Sucks' in a Corporate Environment.

Here's a special cut-and-paste-to-the-outside-or-your-
cubicle-wall-next-to-Dilbert, exclusively from Full Sterne
Ahead: