Electronic Commerce

The explosive growth of technology marketing encourages us to look at changes in both the business-to-business and business-to-consumer models for the online world. The best way of starting to present this business revolution in a few words might be for you to read the following quote several times and let it sink in:

"EDI [the standard in electronic commerce] is not a choice. It is the inevitable way business will be done."
-- MIT 1990's Presence Program

The Web is seeing exponential growth, and this is very much due to electronic commerce.

A typical scenario of the new paradigm in Electronic Commerce might be the following. A manager looks for an Italian shoe with a particular design. He will have a file on his computer that contains information about the size of his feet. He goes to the Internet, to look for a particular design he likes. When placing his order, the data will be immediately translated into production data. A manufacturing plant in Italy gets the data and starts production almost without delay. The customer gets his shoes by FedEx within a week.

The goal is to put at much of the business process on auto-pilot as possible. Issues that must be integrated in order to unify the world market and bring one's company onto the Internet are:

Business-to-Business:
Electronic Commerce will fundamentally change and redefine the way we do business, in the following areas for business-to-business sales:

Sales Channels. The business workflow process will be accelerated considerably by the use of electronic commerce. We will have to be able to keep up with this rapid pace in order to stay competitive. Old business channels will feel threatened, and vendors using electronic commerce need to give attention there and help old channels make the transition. From now on, manufacturing and service vendors have to face customers directly, including all the negative feedback that this entails. Prepare yourself to give customer service like never before; customers will become more demanding, and companies will need to manage their expectations.

"Internet Time". Markets will be penetrated much faster, and the first movers will be rewarded. The business process is being speeded up so that responsiveness will be required for the winners in terms of hours, not days. Suppliers will be appreciated by their responsiveness.

Market Transparency. Electronic commerce will create transparent and highly competitive markets, where differentiation will be essential to survive. Companies will have to be able to communicate how they are different than their competitors. Here is a list of how companies can differentiate themselves, as market boundaries are redefined:

Globalization of Business. The lack of geographic limitations for electronic commerce redefines what boundaries are: prepare yourself to go global. Companies will no longer be limited by geography: although they might be local, they will have a global reach, thanks to logistic service providers (FedEx, UPS). Products successful in one market can quickly be sold worldwide.

Re-organizing the business world around the customer. Electronic commerce will turn the business world upside down. From now on, the small and agile companies will be able to beat large and sluggish companies. The business model is also changing, in that marketing is transformed from "push" to "pull": attracting clients and enticing them to make an order. "Push" marketing will be refused, and the marketing model will turn to responsiveness. Customers will really become king, and will have to be treated accordingly if the vendor wants to stay in business. Customers will no longer accept fixed prices: even price negotiation will most likely come into electronic commerce more often than in the physical world in the past. Customers will also become aware quickly of product strengths/weaknesses and pricing, which are well-known in the market, and can be quickly determined by forums and newsgroups. They will demand protection through all-included warranties, valid worldwide. In the near future, a customer can use electronic "agents" to look for competitive products and pricing, and have the results within an hour sitting in his email in-box. The ease of a customer finding other sources will mean that competition will intensify between suppliers: a faster market response will be required.

Re-organize the Workflow. Electronic commerce will impact the way companies work and are organized. There will be another wave of re-organization (parallel to the recent one in the last decade), this time concentrating on the lesser need for full-time employees, using outsourcing on an "as-needed" basis, and re-designing a company's workflow. A different kind of company will come out of this transition, with different employees, outside consultants, sources and banking needs.

Business-to-consumer
However, business-to-business will be the first application of electronic commerce, followed by business-to-consumer. The consumer businesses will need longer to take off, and will most likely have a more profound impact on our lives than business-to-business. Here are some of the issues involved with online consumer marketing:

Studies show the main growth areas of online consumer markets: culture, entertainment and travel. A striking example was shown by Microsoft's implementation of animation and sound for Walmart's online store (a large American department store). On the Walmart Web site, an animated person on the screen helps visitors through the store, talking to them and trying to be helpful in finding things - and encouraging sales, showing how to make online purchases. This is the next generation of Web sites, incorporating animation and audio with interactivity with visitors.

The business world has just gone through a quantum leap, with the implementation of new information technologies. Now we must digest what has happened. We must realize what has just happened. This will be a difficult transition, as companies will be required by market forces to integrate electronic commerce... or sink. The implications for companies that are too slow in adopting the new technology are bitter medicine. The "double whammy" that could occur is the following: if a company does not integrate electronic commerce, they will have to focus on pricing (which is not part of a viable business model), and this will consequently keep their prices higher. Once customers realize how easy it is to find alternative sources (for what they need to buy) and make an informed decision (from whom to buy), a company not using electronic commerce will not be able to stay in business.

The entire business process must be re-engineered to account for this increased pace. The entire structure has to be changed and the old way thrown out, as it was developed and based in the industrial age, which is based on the transfer of atoms. And we are moving to a digital age (the transfer of bits), the Information Age, as Negroponte described so well in "Being Digital".

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Last revised on 24 Dec., 1998
URL: http:/www.euromktg.com/eng/ed/art/ecommerce.html