E-Commerce: From E-Commerce to E-Business

The cash registers are still ringing up the e-commerce results from the fourth quarter. But even before the final nickel is counted, one bottom line is already in view: Many people are taking too narrow a view of e-commerce. The term e-commerce aims attention on the process of matching the buyer and seller and, even more specifically, on the transaction itself.

According to the folks at IBM, while e-commerce is important, the real focus of corporate attention should be on the wider concept – e-business. Last fall, IBM launched a $30 million marketing campaign to convince American businesses that the next wave of e-business is business intelligence. I talked to Ben Barnes, the General Manager of IBM’s Global Business Intelligence group to understand the logic behind the campaign.

According to Barnes, while the growth of e-commerce is exciting, in the final analysis, it primarily represents just one more sales channel for most companies. As companies have scrambled to broaden their sales nets over the past year, three significant trends have emerged. The first trend, of course, is the tidal wave of ".com" commerce sites coming online. The second major development is the scramble by companies – who have been in business longer than the World Wide Web has been around – to set up e-commerce operations of their own. While some major retailers may have been relatively slow to react, many business-to-business companies have been on the cutting edge.

The third trend, which is just now getting underway, is the move by ".com" companies to begin establishing non-Internet-based retail channels.

The reasons some ".com" operations are moving beyond the Web are fairly simple. With new technology like Vstore (www.vstore.com) and programs from Amazon.com and Yahoo!, anybody can now be an online retailer. Non-online selling channels are a way to differentiate companies with larger aspirations from true "Mom-and-Pop" set-ups.

Moreover, as the whole entrepreneurial world plunges into the Web, it has become very difficult for companies to draw attention to their offerings. Some have concluded that print catalogues and selected retail locations are effective ways of marketing, perhaps more effective for many businesses than pouring big bucks into television air time.

Essentially, Barnes believes that the winners and losers in e-commerce will not be decided by the company who sets up a Web-based sales channel first (or even best), but by who can effectively manage customer information from all contact points, including the toll-free call service center, the voice response system and all sales channels. E-commerce should not simply be viewed as a new way to buy and sell. It is best understood as a new flow of information between companies and their customers.

Seen from this technological point of view, e-commerce is much more complicated than setting up a Web site, plugging in a secure transaction server and promoting your presence in cyberspace. Success in e-commerce is going to rely on two elements. First, companies are going to have to build robust views of their customers. Then, the challenge will be to guide the customer to the optimal sales channel for that individual.

Building a robust view of the customer, of course, is a code phrase for building a data warehouse and applying business intelligence tools to the information in the warehouse. The thrust of the IBM marketing campaign is to demonstrate that success in e-commerce depends on setting up a successful e-business infrastructure and that, in turn, relies on building a data warehouse infrastructure. Building a data warehouse involves server and storage hardware, underlying database software, analysis tools and consulting services. There are no single "soup-to-nuts" data warehousing vendors. IBM, for example, incorporates products from 350 partners in its data warehousing effort.

Within the context of e-commerce, the payoff for data warehousing and business intelligence should be guiding customers to the most effective sales channel for their needs and to use each sales channel to cross-promote the other. As Barnes notes, some customers will only use automatic teller machines to do their banking, others will only use a branch office, a percentage will use the Web and many will use all three, depending on the particular transaction at hand.

Ideally, Barnes argues, customer contact personnel should also be aware of the interaction the customer has had via every sales channel. For example, he says, when a customer checks out at a department store, the point-of-sale terminal should let the cashier know if the customer purchased an item through the catalogue or the Web the day before.

Integrating e-commerce into an e-business environment is arduous and the IT challenge is monumental. But, in many industries, over time, robust knowledge of the customer and the level of customer service that knowledge will enable will be the only way companies can truly differentiate themselves.

The companies that face the greatest challenges are those with multiple product lines and numerous customers who conduct business in many different geographic areas – companies like IBM itself. "We are eating our own cooking," says Barnes. "I have 1,000 consultants and one of our clients is IBM."

About the Author: Elliot King is an Associate Professor of Communications at Loyola College in Baltimore, Maryland. He can be reached at (410) 365-3943, or via e-mail at eking2@prodigy.net.