An example of E-commerce failure and its causes.

In 1963, MCI was founded as Microwave Communications, Inc. by John Goeken to offer long-distance telephone service for businesses between Chicago, Illinois and St. Louis, Missouri. When it ran into problems competing with AT&T, which at the time had a government-supported monopoly in telephone service, it moved to Washington, D.C. to be close to federal regulators and lawmakers. The joke is that in its early years, MCI had more lawyers than land lines. The antitrust lawsuit that it filed against AT&T eventually led to the company's breakup by regulators, reshaping the nation's telecommunications.

It grew to be the second largest long-distance provider in the U.S. It was purchased by WorldCom in 1998 and became MCI WorldCom, and afterwards being shortened to WorldCom in 2000. WorldCom's financial scandals and bankruptcy led that company to change its name in 2003 to MCI. The MCI name disappeared in January 2006 after the company was bought by Verizon.

While all this was happening, in 1995, MCI introduced one of the first ever serious attempt at an e-commerce music store by launching the 1-800 MUSIC NOW. It operated through automated telephone prompts. The service allowed United States users who dialed the toll-free number 1-800-687-4266 to enter the name of a performing artist by touch-tone, then select one of that artist's albums from the catalog and hear clips from that album before buying by credit card.

Once users made selections on the automated service, they were transferred to a call center where an operator established an account, collected payment and shipping information, assisted in ordering, and completed the order. Subsequent ordering could be accomplished through the automated system without human assistance.

The online service was located at http://www.1800musicnow.mci.com. It was the first to offer free music sampling for most of its catalog—initially in RealAudio 1.0 and eventually in RealAudio 2.0. Despite heavy investment in its USD$ 40 million promotion (including advertisements in MTV and Simpsons Hamerpalooza episode) and administrative system, top-selling CD stands at a poor 400 copies. After a year, the online store shut down in December 1996.

An obvious symptom of the downfall of MCI's 1-800 MUSIC NOW was the poor development of the music industry on that year. It subsequently led to music retailers into deep discounting that year. Besides that, the site wasn't user friendly enough. It is difficult to use, rendering consumers to purchase rather through traditional stores. To add up to that, the most visible and sensitive disadvantage was the prices were relatively higher than traditional stores.

Furthermore, consumers had to go through cumbersome sequences of registering themselves, choosing the right song, giving shipping information and lastly verifying their credit card. A survey noted that many of them did not make purchases, is not because of the extra shipping fees, but because they doesn't have a credit card.

(Sources:
http://wikipedia.org
http://www.absoluteastronomy.com
http://www.thefreelibrary.com
http://images.google.com)