An example of an E-Commerce failure and its causes

MCI’s short lived 1-800-Music Now for example, is a music store that permits both telephone and online ordering of music CD’s. The telephone service is a toll-free service where users can hear the free samples of the music first and then make selection whether to purchase the music to an operator. On the other hand, the online order will be without human assistance. The business was introduced as one of the first ever serious attempts at an e-commerce music store. The money-losing ventures started in 1995 and cost MCI about $40 million investment in the project. Only one year after it was launched, it has already cost a total lost close to $50 million on that project and finally shut down in December 1996. The failure of MCI’s investment in the e-commerce business, 1-800-Music Now was recognized in the press to a variety of factors. This includes:

1) Weaknesses in music industry in that year, leading to deep discounting by retailers.
2) Many called the toll-free service just to listen for free music sampling, and finally not signing up to make any purchases.
3) Compared to the traditional ways of purchasing music CD’s in the music store, the price were higher due to expensive advertisement to be played on MTV.
4) At those times, online ordering was not sufficiently popular among peoples, the site were seemed not easy to use compared to ordering through traditional stores.
5) Managers of the Internet group for MCI responsible for the project was not dedicated and reported they were just hanging around while stock was sinking into a deep discount.