E-Commerce Seeks Wider Audience
May 17, 1999
By Brian Walsh
For all the media hype and the flood of investment money, e-commerce is still in its infancy. A motivated and technically advanced consumer can buy uncomplicated products online. And though it's possible to purchase sophisticated products that require online configuration or comparison shopping, doing so usually means negotiating a difficult learning curve. Merchants are finding that unless they're wedded to a given portal, establishing an independent e-commerce site is liable to take more time and money than they expected. To succeed, they will not only have to publish a "buy now" button, but also carefully consider the economics, merchandise selection and technology choices associated with e-commerce.
Business to Business
One major development in e-commerce is the ascendancy of business-to-consumer sites. In early 1998, most of the e-commerce leaders were concentrating on the business-to-business side. Since then, the stock market has pointed out--rather dramatically--that the business-to-consumer space is where the money is. That's where companies are creating new revenue; those centered on business-to-business are merely adding a percentage to an existing bottom line, incrementally lowering costs and progressively increasing sales.
Still, the successful companies of the future are aggressively pursuing their business-to-business sites now. The irresistible, combined force of standards, lower costs and decreased complexity is morphing corporate networks into intranets, making intercompany transactions more attainable. But while the barrier into the business-to-business game has dropped, costs for business-to-business sites remain high. Forrester Research points out an average of $1.8 million being spent per site. Until the amount of labor involved in creating a business-to-business site is reduced, we won't see new companies competing in areas beyond their grasp.
The rising star of business-to-business e-commerce is not sales but service. The secret to business-to-business e-commerce success remains the same: Marry your core competence with your customer's internal business processes.
Business to Consumer
For business-to-consumer e-commerce, 1998 was the year the mass culture took notice; large numbers of consumers and merchants are now online. More than using e-commerce just to place orders and exchange payments, most use the Internet as a product-research tool, which accounts for much of the merchant activity. If a company wants to compete, it needs to be online.
But don't take that statement at face value: E-commerce has a track record. In the past two years, it has given companies knowledge about the population of Internet buyers. The Internet has matured; sites now use marketing demographics to judge performance, as well as to make themselves more attractive to their target audience. Just as a successful investor uses market data to choose companies that offer an absolute certainty--at least in the investor's eyes--of increasing in value, the enterprise can use statistics and demographics to increase its chances of success. Electronic marketers use reported traffic to collate demographic data over time, which reveals user preferences and behavior patterns. If a company can accurately predict these preferences, it can alter its site or establish new partner links to bolster desired traffic. Web sites will become dependent on demographic statistics to justify ad rates. If electronic retailers use streaming media to become broadcasters, they will have to accept the judgment of the masses as indicated by statistics.
Although 1999, so far, has been the year of the electronic retailer, there is a dark cloud hovering over the horizon: Companies involved in e-commerce have concentrated on the value of the store as represented by growth in online revenue--not the value of the merchandise sold. However, since you can't touch online products, the merchandise brand becomes more important than the store.
One of the best sources of marketing information on the Internet--and certainly the most accessible--has been www.emarketing.com. Below are a few of the notable tidbits culled from its eStats pages:
· Roughly 40 percent of all medium-to-large-sized businesses have a Web site.
· Only 7 percent to 10 percent of today's business-to-business Web sites are designed for direct sales.
· The Internet user average household income is $59,000.
· The hottest sellers on the Web continue to be catalog and mail-order items, computer products, financial services (especially from online brokerages), smaller companies with unique offerings, information services and travel services.
Because of the growth in e-commerce, proportions seem to remain constant. The most successful e-commerce firms, computer product sellers and financial service firms, recognized the demographics of the online community. They were early adopters of e-marketing and technology, and they are now seeing their investments pay off.
Onward and Upward
With the number of participants and amount of investment dollars growing, what's ahead for e-commerce? More important, what can we do to ensure that e-commerce continues to flourish? As an industry, we must accomplish three goals: Reduce the development cost for merchants; increase the number of lower-income shoppers; and globalize by reaching out to electronic shoppers around the world.
Unfortunately, the factors for drawing more consumers online--inexpensive PCs and Internet access, a more educated public and a concerted public-private partnership for Internet commerce--are essentially out of the enterprise's control. But there are some things organizations establishing or solidifying an e-commerce presence can do. For business-to-business sites, consider integrating sites with back-office systems for economic reasons. Sites should include separate entry points for different demographics: one for small business, one for large customers and another for consumer demographics (country of origin, income or gender, for example).
All e-commerce sites should coordinate online and telemarketing campaigns. This may mean merging Internet, intranet, telephony and legacy clients into one logical order-entry and customer-service system. From the back office, you can amortize all clients across a single set of network, server and database investments. From a consumer point of view, no matter the impetus (printed material or broadcast media) or the channel (online or telemarketing), customers should be accessing a single view of the organization.
Finally, to match customer needs to your solutions, you must switch your mind-set from order-taking to publishing. Whether the products being sold are simple or complex, the hurdle will be the organization's ability to present them to both portals and business partners on an interprocess communication basis. XML represents the best technical solution that's yet to be adopted by most organizations. It's a way to future-proof and partner-proof your products and content as the e-commerce Internet evolves, and tools and partner relationships change.
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