World Telecommunication Day 1999 |
A short time ago, three professionals were talking about how the Internet had changed their lives. The first, a Caribbean-born, ethnic Chinese educator, talked about the information available on Web sites, about the extensive use of e-mail to communicate with colleagues abroad and about the collaborative projects developed by students to learn more about technology as well as each other.
The second, a U.S.-born dentist raised in France and Israel, pointed out the ease of access to medical databases, the opportunity to consult with experts in other countries and the personal pleasure of e-mail to friends and family.
The third, a dual-nationality Italian/American, observed that Internet access was now a sine qua non for knowledge workers around the world. This professional then asked the other two what they thought of electronic commerce.
The educator and the dentist smiled politely. ''Yes, we have read a lot about e-commerce in the press,'' they said. ''But . . . can you please tell us what e-commerce really is?''
They are not alone in their perplexity. Many outside the information and communications technologies industry may have bought a book or purchased an airline ticket on-line, but still do not understand what ''e-commerce'' really means.
In order to answer the question, it helps to keep in mind that ''commerce'' means not only the buying and selling of goods, but also intellectual exchange or social interaction.
The ''e'' in e-commerce started out as shorthand for ''electronic'' because bit-based electronic products were the kinds of commercial goods originally offered on the Internet - software, music and information - that could be downloaded to a home computer.
But today, the range of merchandise available on the Internet has gone so far beyond digital goods that the ''e'' might well stand for ''everything.'' Some of the best-known names in Web sales deal in physical products such as books, cars, groceries, clothing and computers.
Other important categories for consumer-oriented Internet commerce are travel, finance, insurance and entertainment - what might be called information-based products. An airline ticket is tangible, but what it really does is provide information about the kind of trip its possessor will take. Banking, brokerage and insurance are the same: Paper money, stock certificates or printed insurance policies are all forms of proof about the nature of a financial agreement, but they are no longer essential.
All business
In recent years, while the buzz mounted over business-to-consumer (BtC) e-commerce, business-to-business (BtB) e-commerce quietly became the tail wagging the Internet economy. BtB encompasses all the electronic relations businesses maintain with their employees, suppliers, subcontractors, resellers and corporate customers through intranets and extranets (dedicated internal or external networks) that use the same protocols as the public Internet and are normally protected to prevent unauthorized access.
Though the forecasts for present and projected e-commerce revenues vary, analysts generally agree that BtB is larger, faster growing and has greater potential than BtC. One market research firm, International Data Corporation (IDC), says that BtB made up almost 80 percent of the estimated $50.4 billion in global e-commerce last year.
This may be a drop in the bucket for the $25 trillion world economy, but if current growth rates continue, e-commerce may represent trillions of dollars within five years.
While government officials and regulators wrestle with the long-term implications of the networked economy, seven new Internet users log on every second, reports Cisco Systems. The world total will top 500 million by 2003, claims IDC. Mediamark Research Inc. has released data suggesting that 64.2 million adults go on-line in the United States alone every month and that more than half of all U.S. companies will sell their products on-line by next year, more than double the 1998 figure. On the World Wide Web, 2.6 million pages are added per day, according to industry executives.
''We are drowning in information but starving for wisdom,'' says Donald Johnston, secretary-general of the Organization for Economic Cooperation and Development. He then wonders: ''Would it be better if e-commerce didn't exist? Definitely not, because it has enormous potential benefits.''
The benefits for individual buyers are well documented. As listed by electronic retail consultant Elaine Rubin in the 1999 book ''Net Success,'' they are convenience (always accessible), detailed information, cost savings, entertainment value, wide selection, unique choices (for hard-to-find items) and personalization.
For enterprises large and small, the benefits can be summarized as increasing revenues, cutting costs and/or building intangible assets.
Last year, 46 percent of Web site managers reported that their businesses were not only revenue generators but also profit producers, reports the International Telecommunication Union in its 1999 report, ''Internet for Development.'' A few are extremely profitable. Cisco Systems, the world's largest Internet commerce site, currently sells more than $28 million worth of its products on-line every day. Dell Computers sells $18 million worth of its products daily, accounting for 30 percent of its revenues.
Yet, according to Andrew Bartels, a vice president of Giga Information Group: ''Companies should consider e-commerce as more than a way to sell products or services. They should focus at least as much attention on the business efficiencies and cost-savings opportunities presented by the Internet and related technologies.'' According to Giga, companies doing business on the Internet can save $1.25 trillion by 2002 through reduced costs.
Dell cut its customer support costs from $8 per call to five cents per on-line contact. An airline call center transaction costs almost $6, compared with less than $1 for its on-line counterpart. The per trade cost for a traditional broker is $80; on-line, it is less than $20
To achieve these kinds of savings, an investment in Web building is required, with current costs ranging from $250,000 or less to $2 million or more, depending on the sophistication of the venture. IDC gives the example of a retail site costing $1 million. It predicts return of 100 percent in the second year, with a payback of 1,000 percent by the fifth year.
Building intangible assets covers a range of activities from brand reinforcement to customer relationship management and pre-empting the competition. The relative importance of these will vary by company, country, culture and commitment to the e-commerce environment.
Lack of commitment to hopping on the e-express may not be the kiss of death for all businesses, but lack of awareness of the potential impact of these changes just may be. The ''e'' in e-commerce is expanding, evolving and exploding everywhere.
Claudia Flisi