What can a small business do to get started in
electronic commerce without a lot of money to invest?
As the Internet and digital economy continue to shift,
vendors and service providers will continually try to
find unique ways to provide low-cost services to small
businesses. One quick example is the numerous websites
offering free development and hosting. For example, the
sites offer a web development application in a
"wysiwyg" (what-you-see-is-what-you-get) style
that allows each person the ability to create their own
type of website. Other options include participation in
an online marketplace. These mechanisms are roughly
designed to simulate a real marketplace that will attract
customers due to a shop-at-once mentality instead of
surfing the Internet for different goods and services. A
fast developing theme among new and old participants in
the digital economy is the use of ASPs (application
service providers). These service providers allow you to
purchase many of the off-the-shelf operating applications
that you may use to run your business (finances to human
resource management to inventory processing) at a much
lower cost as well as have someone else manage and host
the data. It also reduces the time and labor force
necessary to run such types of operations. A final
recommendation is the notion of partnering. Finding
similar organizations that can share resources and
expenses can help you achieve your goals in the digital
economy. The key role of the digital economy and
electronic commerce is to help streamline your
traditional organizational processes and daily routines
and automate them through the Internet. Sharing the
burden of making that happen can help minimize the
expense and difficulty and stimulate a potential
relationship for furthering business behavior.
What quick advice can you give on marketing a small
business in the digital economy?
First and foremost, put your URL (or website address)
on all of your organization's correspondence. That
includes business cards, stationery, posters, flyers,
e-mail headers, or footers and any other advertisement
activity. Remember, you never know who may read or run
across information about your company. Make sure they
have the ability to reach you. Second, you have to do
your research. No matter what location you're in, most
likely your local government has some sort of economic
development office as well as a Chamber of Commerce. Both
are great resources to ask about events, promotions, and
other activities that will allow you to get your name
out. Another great resource is the U.S. Small Business
Administration's national resources. From regional
offices to local business development centers,
the SBA is ready to help you out by providing
contact information or counseling you on a particular
business endeavor. Third, work on all of your vendor and
partner relationships. The best marketing technique still
remains word-of-mouth. And who is better at telling
potential customers about your organization that those
who already do business with you. In today's digital
economy, that can also mean other types of help. For
example, many business partners work with one another on
listing each other's URL (website address), know that the
other person's site is another avenue to attract
customers otherwise foregone. Be cautious, though, in
working with linking agreements. You don't want to water
down your site with too many links. The goal should
always be to link to another site if it builds or
provides value to your clients.
How often should a website be updated?
This question refers to the Internet term of
versioning, or the reformatting of an organization's
website. Similar to a company's advertising strategy, new
ideas built on customer response and organizational
direction must be put in place or an organization can be
viewed as aging. There is no standard time related to how
often a new version of a website should be established.
However, the market indicates that most companies are
making substantial changes every two to three months on
average. Most of these changes reflect better service to
the customer and the roll out of a new product or
service. Others are based on keeping the customer
interested or entertained enough to come back to the
site. One particularly interesting piece of advice is
that organizations can use an advisory board or group to
provide feedback on their site. This group is open to
suggest changes to the current structure based upon
personal use as well as by comparison to competitors'
sites.
What is Electronic Commerce (the ‘EC’ part
of EC/EDI)?
Electronic Commerce (EC) is the paperless exchange of
business information using Electronic Data Interchange
(EDI) and related technologies. You are probably familiar
with Electronic Mail (E-Mail), computer bulletin boards,
facsimile machines (faxes), Electronic Funds Transfer
(EFT), and the like. These are all forms of EC. All EC
systems replace all or key parts of paper-based workflow
with faster, cheaper, more efficient, and more reliable
communications between machines. In today's Defense
Department procurement arena, however the most important
EC technology to know about is Electronic Data
Interchange, or EDI.
When did the age of electronic commerce begin?
Business-centered electronic commerce began more than
two decades ago with the introduction of electronic data
interchange (EDI) between firms (sending and receiving
order, delivery and payment information, etc.) Even
consumer-oriented electronic commerce has a rather long
history: each time you use automatic teller machines or
present your credit cards, you transact business
electronically. These EDI and ATM, however, operate in a
closed system; they are of a more convenient
communications medium, strictly between the parties
allowed in. The World Wide Web (WWW), the Internet's
client-server, opened up a new age by combining the open
Internet and the easy user interface. WWW was created at
the CERN Lab for Particle Physics in Geneva in 1991 (with
its Mosaic, the predecessor of Netscape). It took two
years for Mosaic to penetrate the Internet, and another
two years before businesses and the general public took
notice of its potential.
Is EC here to stay? Will it be here but gone
tomorrow?
EC and the Internet, are not fads because
of their widespread effects. Some may find it
useless to open a web store, but web stores do not make
electronic commerce or the digital economy. There will be
new types of interfaces (browsers and protocols) and new
(privatized) networks, but what the WWW represents is our
march toward the digital economy and knowledge-based
society. Technologies, the Web and other processes are
but a means of achieving that goal.
Will EC be limited because not many people can afford
PCs and/or access to the Internet?
Today's EC processes are based on personal computers
because of their origin within the Internet, a network of
computers. First stage of EC expansion is that within the
installed base of computer users (more connected users).
The second wave will come when more people get access to
computers (via lowered computer prices or cheaper
devices). The third and more important, expansion is
predicted to be from those with non-computer access to
the global network: through broadcast TVs, cable TVs,
telephone networks and new appliances. A widespread use
of these cheaper access media represents the phase of
bringing workplace computers into the living room.
However, the affordability of these devices, the easiness
of use or the mode we access the network is less of an
issue than how we will use these devices. Turning the
computer into a convenient device like a TV is a goal in
itself. For example, the speech-to-text technology will
eventually make manual inputting unnecessary. In terms of
productivity, it is hard to convince that computer
hardware and software have met our expectation for making
our work and life easier or more productive during the
last decade. But what will we do with new gadgets when we
get them? Delivering the same information but more
conveniently? Selling the same entertainment and TV
programs but with more pizzazz? The limiting factor will
be our limited vision about the electronic future.
Why should one care about electronic commerce?
Participants in the electronic marketplace are not
limited to so-called digital product companies such as
those in publishing, software, entertainment, and
information industries. The Digital Age and the digital
revolution affect all of us by virtue of their process
innovations. At the least, through WebTV and digital
television, the way we watch TV news and entertainment
programs will change. Changes in telecommunication will
affect the way we receive information, product
announcements, orders, etc. As phones, fax machines,
copiers, PCs and printers have become essential
ingredients in doing business, so will be emails,
websites, and integrated digital communications and
computing. While today's office business machines are not
integrated (e.g. faxed orders have to be typed in on
computers), the much talked about convergence will drive
all these equipment into one digital platform, whether it
be a computer connected to the Internet and intranets, or
a new kind of device capable of interacting with other
devices, because that device will prove to be mo re
efficient and productive. (Although, will it be easier to
use? That depends on how developers and industry leaders
promote interoperability and standardization.) Even
seemingly mundane bookstores face different challenges in
the electronic marketplace by virtue of having digital
processes in their business operations. The case of
Amazon.com vs. Barnes & Noble shows that the very
definition of stores has to be re-evaluated. This also
touches upon the issue of taxable nexus and sales tax
collection on the Internet. Distributing books require
numerous local outlets (local bookstores) to provide
convenient access to customers. At the same time, mail
order distribution has been used for many decades through
various book clubs. Taking this direction into the
Internet, Amazon.com has become the leading online
bookstore, billing itself as the "largest
bookstore" on earth not by opening numerous branch
stores but via the Internet. The "biggest
bookstore," Barnes & Noble with a towering share
of revenues and physical book stores, has been forced to
respond to Amazon.com's challenge by opening its own Web
store as well as by bringing a law suit against its
challenger. (See insert: The Fight Between the Biggest
and the Largest) What are competitive strategies of these
two bookstores? Will any business selling physical
products be facing a similar competition?
What Buzzwords Do I Need to Know?
eCommerce is rife with buzzwords and catchphrases.
Here are some of the current terms people like to throw
around: Digital or electronic cash: Also called e-cash,
these terms refer to any of several schemes that allow a
person to pay for goods or services by transmitting a
number from one computer to another. The numbers, just
like those on a dollar bill, are issued by a bank and
represent specified sums of real money. One of the key
features of digital cash is that it's anonymous and
reusable, just like real cash. This is a key difference
between e-cash and credit card transactions over the
Internet. For more information, see PC Webopaedia.
Digital money: This is a grab-bag term for the various
e-cash and electronic payment schemes on the Internet.
Yahoo lists 21 companies offering a form of digital
money. Disintermediation: Disintermediation is the
process of cutting out the middleman. When Web-based
companies bypass traditional retail channels and sell
directly to the customer, traditional intermediaries
(such as retail stores and mail-order houses) may find
themselves out of a job. Electronic checks: Currently
being tested by CyberCash, electronic checking systems
such as PayNow take money from users' checking accounts
to pay utility and phone bills. Electronic wallet: This
is a payment scheme, such as CyberCash's Internet Wallet,
that stores your credit card numbers on your hard drive
in an encrypted form. You can then make purchases at Web
sites that support that particular electronic wallet.
When you go to a participating online store, you click a
Pay button to initiate a credit card payment via a secure
transaction enabled by the electronic wallet company's
server. The major browser vendors have struck deals to
include electronic wallet technology in their products.
Extranet: This extension of a corporate intranet connects
the internal network of one company with the intranets of
its customers and suppliers. This makes it possible to
create eCommerce applications that link all aspects of a
business relationship, from ordering to payment.
Micropayments: transactions in amounts between 25 cents
and $10, typically made in order to download or access
graphics, games, and information, are known as
micropayments. Pay-as-you-go micropayments were supposed
to revolutionize the world of eCommerce. One early
scheme, for example, let visitors to ESPN SportsZone use
their CyberCash CyberCoin accounts to buy a $1 day pass
to the site's premium content, without having to spring
for a full month's subscription, but many potential
customers have been unwilling to play along with
micropayments.
How Can Small Businesses Take Advantage of eCommerce?
Large companies pour millions into fancy ecommerce
sites, but even mom-and-pop shops can make money on the
Web with a simple, no-frills site. Sometimes, all it
takes to succeed is the promotional savvy to get noticed
by customers. Word of mouth, postings in newsgroups, and
registration with search engines may be enough to get the
customers rolling into your site. Kevin Donlin is a
writer and Web developer who opened Guaranteed Résumés
on the Internet back in 1994. Now, he gets about 100
visitors each day and draws half his income from his
resume-writing business. Donlin succeeds by keeping his
costs down: the site sits on the server of his local ISP,
and customers, who come from Japan and Europe as well as
the United States, pay with a credit card via phone, fax,
and even email. Instead of subscribing to an expensive,
third party payment system to handle the credit card
transactions online, he enters all the purchases into a
swipe terminal that he leases for $30 per month. Although
most businesses can benefit from a home page on the Web,
eCommerce isn't for everyone. Firms likely to profit most
are those offering unique products or services that are
not readily available locally. A small bookstore such as
Moe's Books in Berkeley might want to advertise readings
by authors and tell its customers about specials, but it
would not want to compete with Amazon.com. But
onlyGourmet -a Web-based business that sells premium
coffee, chocolate, and specialty foods--might find new
customers in small towns around the country, where people
can't find lemongrass or Swiss bitter chocolate at the
corner store.
What Are the Biggest Barriers to eCommerce?
According to a survey conducted by CommerceNet,
shoppers don't trust eCommerce, they can't find what
they're looking for, and there's no easy way to pay for
things. Other than that, it's smooth sailing. Customers
are worried about credit card theft, the privacy of their
personal information, and unacceptable network
performance. Most shoppers still aren't convinced that
it's worthwhile to hook up to the Internet, search for
shopping sites, wait for the images to download, try to
figure out the ordering process, and then worry about
whether their credit card numbers will be filched by a
hacker. To convince consumers, e-merchants will have to
do a lot of educating. However, Gail Grant, the head of
CommerceNet's financial research arm, predicts that most
buyers will be won over in just a few years. Grant says
that if Web pages were labeled with tags giving product
and pricing information, it would be easier for search
engines to find stuff to buy online. That hasn't happened
yet, she adds, because merchants want people to find
their products but not their competitors'--especially if
another company's goods are cheaper. As for
business-to-business systems, the issues are less
emotional but still serious. Businesses do not yet have
good models for setting up their eCommerce sites, and
they have trouble sharing the orders and information
collected online with the rest of their business
applications. Many companies continue to grapple with the
idea of sharing proprietary business information with
customers and suppliers--an important component of many
business-to-business eCommerce systems. The key to
solving the business model is for merchants to stop
relying on fancy Java applets and to restructure their
operations to take advantage of eCommerce, says Grant.
"eCommerce is just like any automation—it
amplifies problems with their operation they already
had."
Who Stands to Lose From Businesses Moving Online?
The companies most directly threatened by eCommerce
include travel agencies, entertainment ticket operations,
mail-order catalogs, and retail stores--particularly
software stores. eCommerce is already successfully
invading their territories. A recent Forrester Research
report predicts that sales of entertainment and travel
tickets on the Internet will climb from $475 million in
1997 to more than $10 billion by the year 2001. Forrester
says that figure represents 8 percent of all travel
tickets. As Bill Gates puts it, eCommerce is about to
eliminate the middleman. The buzzword of the day is
disintermediation, a way of saying that anyone between
the seller and the buyer is in big trouble. But a closer
look reveals that eCommerce may be creating of a new kind
of middleman. Some of the most talked-about eCommerce
success stories, such as Amazon.com and Virtual
Vineyards, are really a new kind of intermediary.
Amazon.com doesn't publish books, after all, and Virtual
Vineyards doesn't make wine. They are simply online
distributors. But these e-middlemen must demonstrate that
they add value to the buying process, through marketing,
customer service, or some other method. If they don't,
customers will vote with their modems and cut them out of
the loop.
What Is the Future of eCommerce?
What Is the Future of eCommerce? Rest assured, there
is a bright future for eCommerce. Once the details of
online commerce are worked out, it and the Internet in
general could reshape the structure of the business
world. The huge growth of virtual communities--people
getting together in ad hoc interest groups online -
promises to shift the balance of economic power from the
manufacturer to the consumer. At least, that's the view
of John Hagel and Arthur Armstrong, a pair of analysts at
McKinsey & Company, an international management
consulting firm. These virtual communities are already
making their presence felt. Investment site Motley Fool
lets members exchange investment advice without the
benefit of a stockbroker. ParentsPlace is a meeting
ground for parents that gives smaller vendors an avenue
to reach potential customers for products such as baby
food and shampoo. Virtual communities erode the marketing
and sales advantages of large companies. A small company
with a better product and better customer service can use
these communities to challenge larger
competitors--something it probably couldn't do in the
real world. In Net Gain: Expanding Markets Through
Virtual Communities, published by Harvard Business School
Press, Hagel and Armstrong argue that rather than fight
the trend, smart companies will help build such
communities and use them to reach customers.
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