In-Depth
E-Commerce: Buying Goes 24x7: The Brave New World of E-Commerce
Perhaps you have seen the commercial. A man stands in front of a support group and announces that his name is Bob and that he is stupid. "Nobody in the room is stupid," the facilitator assures him. What had he done that was so terrible?
Well, he says, he aired a television commercial to drive people to his company’s Web site. The commercial was great, generating two million hits. But the Web site crashed. He had forgotten to warn the technical people involved. "That was stupid, Bob," the facilitator ruefully remarks.
Embracing the world of e-commerce is no longer an option for most companies. It is a necessity. According to published reports, e-commerce topped the $50 billion mark last year. By the year 2003, e-commerce might represent $1.5 trillion in business, accounting for close to 10 percent of all U.S. trade.
The driving forces behind the explosion of e-commerce are simple to identify – efficiency and convenience. When Cisco Systems opened its product database directly to valued customers to specify the equipment they needed, the company found that not only was order processing less labor-intensive, but fewer mistakes were made. The result was that Cisco saved tens of millions of dollars and its customers were happier.
Cisco, Dell Computer and others have clearly demonstrated the efficiency of selling electronically. Amazon.com has demonstrated the convenience. Most everybody who has used Amazon or BarnesandNoble.com do so because they have a good idea of the book they want, and they want to buy it now.
While efficiency and convenience are the driving forces for e-commerce, information technology is the enabling factor. Consider two of the earliest, and still most dynamic, implementations of e-commerce – automated teller machines and gasoline pumps. On a trip to London two years ago, I realized that I had not brought much cash with me. Not to worry – I simply went to the nearest ATM machine, inserted my bankcard and was soon thumbing through some crisp new pound notes. Within seconds, the machine had read the card, contacted the approval center and authorized the transaction, all via a network powered by IBM S/390 systems. Wow!
A recent stop at a rest area on the New Jersey Turnpike drove home the advantages of gas pumps that accept credit cards. At this stop there are no self-service islands. There also were not enough people to staff all the gas pumps. It also took 20 minutes to get served. Why weren’t those pumps on a network?
E-commerce is still broadly misunderstood. The non-trade media mainly focuses on online selling to the consumer. But business-to-business e-commerce accounts for five to 10 times the activity as consumer e-commerce. But the fundamental impact of e-commerce will be on business-to-business relationships.
And e-commerce is not just about direct online sales. E-commerce encompasses a cluster of applications, including online procurement and order processing. Look at a company like Chemdex.com. The company is working with purchasing departments of large companies that use chemicals and reagents in the life sciences industries to institute online purchasing throughout the enterprise, without forcing purchasing managers to relinquish control.
E-commerce is about supply chain management. By improving supply chain efficiencies, companies can improve production rates, which should, in turn, increase sales and margins. For example, Mercedes improved the production of its M-class of cars by 20 percent when it installed a supply chain management system.
And e-commerce includes customer relationship management. CRM helps people identify and meet the needs of the customers without ignoring their own needs. In a typical example of CRM at work, let’s say a person is negotiating with a bank for a mortgage. With CRM, the loan officer can know exactly the value of the customer to the bank and use that information in closing the deal.
As with many new technologies, however, e-commerce has a down side. According to a survey in Information Security magazine, companies engaged in e-commerce were 57 percent more likely to have proprietary information leak and 24 percent more likely to be hacked by outsiders.
In this column, I will provide a broad view of e-commerce from the information technology professional’s point of view. I will keep an eye on the future and assess the mistakes of the past, get into the nuts and bolts of implementing e-commerce solutions in large and mid-sized companies, and report on new technology and strategies.
For some mainstream economists, one of the mysteries of the present economic expansion has been even as the economy has grown and the labor market has tightened, inflation has been held in check. For those who believe in what is called the new economic paradigm, the answer to the mystery is increased productivity primarily driven by information technology.
E-commerce represents a fundamental transformation in the exchange of goods and services. This column will help you focus on the central issues for capitalizing on the opportunities it provides. Let me know what you think at [email protected].
About the Author: Elliot King is an Associate Professor of Communications at Loyola College in Maryland. He can be reached at (410) 356-3943, or by e-mail at [email protected].