ANALYSIS

The advantages of putting your business on the Internet

Can-Thai Consulting

People speak glibly about e-commerce, using sentences liberally interspersed with acronyms and often incomprehensible jargon. E-commerce is a great buzzword, but what is it? Why should you care?

In this brief report, we hope to simplify the answers to these questions, and explain just why e-commerce is a hot topic, and not just flavour of the month.

WHAT IS E-COMMERCE?

Quite simply, e-commerce is commerce with an e. Commerce has been around virtually since the dawn of civilisation. The "e" represents electronic. In other words, whenever commerce takes place over the Internet, adding to the speed, convenience, and accessibility of transactions, it is referred to as e-commerce.

WHY E-COMMERCE?

Richard Rosenblatt perhaps answers this question best through the following comment: "The great thing about [e-commerce] is that is can take you to Fifth Avenue, Rodeo Drive, anywhere you want in an instant. Its not a religion, or the ultimate in high-tech, it's simply the best way ever to sell stuff."

In recorded history, there has never been a medium that has grown as fast as the World Wide Web. Internet usage has exploded from only 9 million users in 1995 to anywhere between 150 and 300 million users that are predicted by 2001, depending on the source.

Despite this phenomenal growth, less than six percent of the world will be connected to the Internet by 2001, meaning that current usage is only the tip of the iceberg, and future global connections should remain strong.

Given such numbers, you might wonder why e-commerce is such a hot issue if only six percent of the globe is connected to the Internet. Even in the United States, only 25 percent of the population is on-line. In light of this, for large retail companies, e-commerce only accounts for a fraction of total sales.Yet in the last six months of 1998, e-business grew 200 percent, and is expected to grow by 200 percent on an annual basis for the next few years. Total transactions were expected to reach US$13 billion in 1998. An impressive number to be sure, but only a fraction of total retail sales. So, what are the attractions to the retailer? To the consumer?

ADVANTAGES FOR RETAILERS

_ Attract new customers

_ Penetrate new markets

_ Boost sales

_ Cut costs of transactions and overheads

_ Cut advertising expenses

_ Ability to open 24 hours

DISADVANTAGES FOR RETAILERS

_ Conflict with investment in physical stores

_ Some products not appropriate for online sales

_ Lack of technology

_ Lack of distribution network

ADVANTAGES FOR CONSUMERS

_ Variety of products over the Internet

_ Ability to do comparative shopping with little effort

_ Lower prices

_ Convenience, lack of need to travel

_ Security of using credit card over the Internet

_ 24-hour shopping

DISADVANTAGES FOR CONSUMERS

_ Can't see the product before purchasing

_ Perceived risk of sending credit card information over the Internet

_ Not enough product information

Shopping outside of the traditional retail store is a growing trend. In 1996 over 20 percent of retail sales consisted of mail order through the TV, catalogues and other means. Over the next 10 years, non-traditional shopping, such as e-commerce, is expected to comprise more than 55 percent of total retail sales. Although e-commerce activities only account for a very small portion of current retail sales, it is a fast-growing trend, and one companies cannot afford to ignore.

The Internet is rapidly becoming a vibrant marketplace for buyers and sellers of a fast-growing pool of consumer goods and services. Though still a small slice of the total shipping pie, the World Wide Web in just four years has become a viable outlet for manufacturers and retailers of everything from clothes, food, and books to computers, toys, and travel arrangements.

Before getting involved with e-commerce, the first logical step is a web site. It is estimated that by 2002, 98 percent of very large companies, 85 percent of medium-sized companies, and 45 percent of small companies will be represented through web sites. Very briefly, the obvious benefits of a web site are: An increased awareness of the company; reduction of certain costs such as advertising; generation of new business; and a stronger relationships with clients.

The World Wide Web, whether through e-commerce or a simple web site, has opened a far-reaching portal to a host of businesses looking for a cost-effective means to reach an increasingly global marketplace. Not only do web sites and Internet exposure allow companies of differing sizes to compete on a relatively level playing field, they are a tremendous resource for businesses to capitalise on individual expertise and/or services.