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Becoming the second Amazon.com

– a Case Study ofkalahari.net

Shaun Pather, Faculty of Business Informatics, Cape Peninsula University of Technology

Cape TownSouth Africa

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E-Business in South Africa

• South Africa was not immune to the e-Commerce hype.

• Some examples of failures:– Broadcast Interactive Group – backed by

radio stations– Woza: independent online content– Shoppingmatrix.com, music retail – Banking ventures Blue Bean & Twenty20

• Monitoring of dot co.za registry indicates a larger number of discontinued sites.

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E-Business in South Africa

• Failure rate 35% (2000-2002) • Predicted to grow to 40%. • Online retail in South Africa is “at a

very early stage of its market penetration, and remains deeply immature in its implementation.”

(Goldstuck, 2002)

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Failure factors?

• Many factors contributed to the demise of the online retail market during this period

• Technological and IS management?• General business incompetence?• Cash flow problems or lack of

understanding of electronic business?

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Background -Research Problem

• Hype over speculation of E.C. benefits has passed - Vast expenditures on E.C. & a large number of failures

• Managers require more concrete evidence of benefits. • Lack of measures “one of top five” barriers to e-

business development.• Instruments developed for brick & mortar

environments not applicable in E.C. environment.• A lack of instruments for use by managers for ISE

measurement of e-business.• Business managers are not able to comprehend the

impact of IS i.r.o. achieving business objectives.

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Research Problem

• Many studies focus on how to achieve quality e-service, web-site design.

• Focus on customer perceptions mainly.• However, how is the IS function

managed to achieve quality service?• Evaluation of IS success must begin

deeper in the organisation.• A framework for IS and business

managers - multi-disciplinary approach.

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Research Question

• What are the dimensions of Information Systems Success of e-Businesses?

• What are the relationships between these dimensions of success?

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Data Collection

• Qualitative data through– Interviews (business & IT

stakeholders); +– Public documents; +– Observation through “customer”

registration, and making a purchase, complaint etc.

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Overview of Kalahari.net

• Regarded as an e-Tailer• Product range: Books, CDs, DVDs,

Video, Wine, Health + online partners.

• Regarded as South African equivalent of Amazon.

Kalahari

Amazon

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Business Startup

• Holding company Naspers – launched in ’98.• Period of “internet hype” e.g. get rich quick.• Very little planning:

– No business case– No risk analysis– No marketing plan– No fulfillment processes– Launched within one month.– IT team of 10 new inexperienced graduates.

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A recipe for success??

• What are your views?• Would you have done it any

differently?

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Rethinking the business… a year later

• A more knowledgeable and experienced team was put in place + GM with direct marketing experience .

• Reorganization of back office systems • Redesigned fulfilment processes.• Overhaul of web-site.• Improved supplier relationship -

accurate product data.• Diversification of product base.

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Insider’s views of success

• Positive year on year growth;• Regarded as biggest B2C e-Commerce

business;• It has 200,000 registered customers;• Accolades in the press;• No equivalent domestic competition;• First e-Business to be fully compliant with the

Electronic Communications and Transactions (ECT) Act;

• Is close to breakeven.• Success though no break – even??

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kalahari.net turnover

0

10

20

30

40

50

1999 2000 2001 2002 2003

YEAR

ZAR (million)

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4 major IS identified

Business Operations

Product loading to site +++Product loading to site +++

Ordering & FulfillmentOrdering & Fulfillment

Strategic & Operational Strategic & Operational PlanningPlanning

IT maintenanceIT maintenance

Information System

Data base systemData base system

kalahari.net Management kalahari.net Management SystemSystem

Business Intelligence Business Intelligence SystemSystem

IT Management SystemIT Management System

kalahari.net operating environment

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Meeting the IS management challenge

• The following were found to be important:– Alignment of IT & Business stakeholders.– Maintenance of the partnership.– Database management.– Ordering & fulfillment.– Efficient delivery systems.– The web-site.– Business Intelligence– Trust & Privacy

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Alignment of IT & Business stakeholders.

• Very poor relationship during startup.• Outsourcing of IS function – improved

“business” management.• Weekly meetings – all inclusive

task team.• Friendly systems development

methodologies.• Involvement of IT in ALL decision making.

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Database is key.

• 400 + suppliers.• Product database is crucial.• Accuracy of update processes.

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CustomerCustomerServiceService

Su

pp

liers

Su

pp

liers

Supply Chain Manager• Stock Planner• Local Books• International Books• Catalogue• KN Music• Club Music• DVD/Video & other• Admin Clerk

One-on-One Relationship

A Customer Focused Approach

Telephone callsEmail

Delivery tracking

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Business Intelligence

Operational PlanningBusiness

Intelligence System

Business Intelligence

System

Per hour sales reports

Turnover Analysis

Strategic Planning

Monitoring Gross profit

Monitoring Buying patterns

Marketing campaign

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Key elements of the Business Model

• Traditional business rules apply.• Major difference in e-Tailing is

delivery.• Direct marketing strategies.• Demand on speed.• Product availability.• Relationship with suppliers.

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Critical Success Factors

VirtualVirtualDistributionDistribution

SpaceSpace

VirtualVirtualDistributionDistribution

SpaceSpace

VirtualVirtualTransactionTransaction

SpaceSpace

VirtualVirtualTransactionTransaction

SpaceSpace

Virtual Virtual CommunicationCommunication

SpaceSpace

Virtual Virtual CommunicationCommunication

SpaceSpace

VirtualVirtualInformationInformation

SpaceSpace

VirtualVirtualInformationInformation

SpaceSpace

TraditionalMarket Space

TraditionalMarket Space

ICDT Model adapted from Angehrn, 1997

•Search facility•Download time•Customer feedback•Database accuracy•Trust & Privacy

Electronic & traditional Channels for•Customers •Suppliers •Payment agencies

•Database•CRM•Payment gateway•Trust & privacy•Fulfillment

•CRM•Delivery Logistics•Packaging•Supplier relationship

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Success Dimensions

Website

Database

Trust & Security

Agility of IS

Open 24/7/365

Supplier Relationship

Business/ITRelationship

Kalahari Success

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Some lessons from the Case Study…

• Relationship between IS & Business.• Use of a modern IT management

tool.• Profit watch - Use IS to monitor T/O

& GP.• Spend on the database.• Think “Business” not “IT”.

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• Tracking how much you sell isn’t the issue- you do that as a matter of course. The question is: What should you measure in order to sell more ?”

Sterne: 2002

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The Business Task Team

D atabase M anager

P ro jec t M anager 1

P ro jec t M anager 2

B us iness A na lys t 1

B us iness A na lys t 2

IT M anager C om m erc ia l M anager

F inanc ia l m anager

M arke t ing M anager

W eb-s ite m anager

C O O /C IOC h ief O pera tional M anager & C h ie f Info rm ation O ff icer

Key IT team members also report directly to CIO

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Database Update

ProductProductDatabaseDatabase2m items2m items

UKUK&&

USUS

SouthSouthAfricaAfrica

Weekly/Weekly/MonthlyMonthly

Daily

Daily

StockFiles

StockFiles

WebWebCatalogueCatalogue

PhysicalPhysicalCatalogueCatalogue

Customer DB

KMS

Customers

Customers