SALES REVENUES TIP THE E-COMMERCE ICEBERG
According to Giga Information Group, an independent research firm which delivers technology and management advice to IT decision-makers, U.S. electronic commerce sales revenues will grow to between $580 billion and $970 billion by the year 2002. However, total economic impact from other types of Internet interaction, such as Web-based marketing, customer service, procurement and other operational improvements will be even greater sources of profitability for companies. Giga’s forecast also should serve as a wake-up call to medium-sized businesses. The broad range of predicted revenues reflects two scenarios, one in which medium-sized companies match the Internet commerce adoption rate of large and small businesses and one in which they don’t. Giga Information Group defines e-commerce revenue as income that results from sales transactions that occur directly online or directly and immediately because information from the Internet influenced a customer, regardless of how a product or service was ordered and delivered."While e-commerce sales are undoubtedly important, for most companies, they just scratch the surface in terms of what Giga calls TEI, or total economic impact," said Andrew Bartels, a Giga Information Group vice president specializing in electronic commerce. "Sales figures are the easiest to track and do provide a good indication of growth, but we believe that Internet-influenced revenue will comprise a significant segment of the U.S. economy. For example, customer research on the Internet is a factor in 25-30 percent of all new car sales in the U.S., but this revenue is not included in e-commerce forecasts."According to Bartels, medium-sized companies (organizations with 100-999 employees) face the greatest challenges in adapting to an Internet economy. To date, large companies (more than 1,000 employees) have dominated the business-to-business e-commerce market, while large businesses and small companies (companies with less than 100 employees, mostly startups) have divided the business-to-consumer market. According to Giga’s prediction, large companies will continue to dominate the business-to-business space,where scale and the trend toward reducing the number of suppliers will remain an influence. They also will be major players in the business-to-consumer space, due to strong brand awareness. Smaller businesses will provide niche and local services and will command significant market share.In one growth scenario, medium-sized businesses face the risk of feeling competitive pressure from larger companies or being beaten by more nimble small companies. Their e-commerce revenue will grow at a 75 percent compound annual growth rate, compared to small companies (117 percent) and large businesses (87 percent), resulting in Giga’s $580 billion revenue prediction for 2002.However, the brightest e-commerce future for medium-sized companies lies in their ability to become key players in larger niche markets. In this scenario, medium-sized businesses will grow much faster, 111 percent versus 124 percent for small businesses and 113 for large companies, resulting in Giga’s $970 billion revenue prediction for 2002."While our market figures show continued rapid growth in e-commerce sales overall, and our research shows the Internet will have significant total economic impact, the numbers also should sound the alarm for medium-sized businesses," said Bartels. "These companies must plan now for rapid e-commerce adoption by finding their niche markets and building their infrastructure and brand recognition accordingly."The Giga Information Group’s Web site can be accessed at www.gigaweb.com.