General Business News for July 2002
The Future of E-Commerce
What is e-commerce? E-commerce, or electronic commerce, is defined as the conduct of financial transactions by electronic means. With the growth of commerce on the Internet and the Web, e-commerce often refers to purchases from online or “virtual stores.” The key in today’s environment is to adjust to the realities of harnessing technology for business. E-commerce represents a fundamental shift in the way business activity takes place. We have all seen that it is a mistake to think of e-commerce as an easy way to enter an unknown business, much less a quick way to riches. Since the stock market euphoria is gone, business and financial success is predicated on mastering the three essentials that are at the heart of success in a free market:
(1) Good solid customer management and service.
(2) Competing effectively in your market.
(3) Being effective at harnessing technology.
All the while, keep in mid that e-commerce continues to set the trend for future business ventures. For example, the growing numbers of businesses that use online auctions as a procurement process. Retailers all over the world are finding they can cut the cost of merchandise by inviting suppliers to bid for their business. The result is better prices, truly global sourcing and better delivery terms. These customers feel empowered, but what they seek has not changed. Sellers, however, need to adapt. How do you bid for business? How do you communicate intangibles such as service and quality of merchandise? Would it help to partner with other sellers to provide unique offerings that are not product-centered?
Because e-commerce generally invests the customer with more information and options than ever before, success in selling increasingly will depend on meeting the customer’s needs not at the product level but at the level of the customer’s business. E-commerce will not replace the brick and mortar world, so e-commerce companies must compete not only with each other but also with the brick and mortar businesses. Both ways of doing business will exist and flourish. For example, in consumer markets we can expect brick and mortar businesses to better satisfy customers’ needs for immediate consumption. The advantage to selling on the Internet will be with products that can be transmitted electronically, but more interestingly, also for items for which consumers can plan for in advance. This largely explains why most on-line grocery stores have failed. It was hard for them to compete without a strategy that paid attention not just to prices or convenience but also to the advantages and disadvantages of competing brick and mortar stores.
For the end user, navigating the net requires fewer skills than driving a car. But what facilitates this is the effort of software and hardware developers to make it so. We can think of this as making it easy for people to get to the store. Far less effort has gone into asking how the store should be designed, what the buyer-seller interaction should be, what consumers should know before they get to the store and how the deal should be completed. All the talk of conversion rates boils down to the fact that businesses are feeling their way around these problems. Part of the reason is that technology in a vacuum cannot address the specific needs of businesses. Going forward, we need inventory managers who understand not only the tech side of e-commerce but also the business side, and in many different industries. Such people who know what the technology has to offer rationally should be its designers. But, even more crucial is the answer to the question “Who knows what it takes to make a satisfied customer?”
So, business executives who want to ensure a bright future for themselves and their company need to accommodate the people with the sensibilities and methods of the new technologies and allow them to bring new ideas into their businesses while mixing them with the old ingredients of success.