E-Commerce is Total Commerce
by Garry Betty
One hundred years ago, industrialization turned America from a rural society into a world economic power that set the standard for innovation and technology in the steel, retail, automotive and petroleum industries. It also gave rise to an educated and burgeoning middle class that consumed
the goods of this new society.
As we enter a new century, America is once again leading the revolution in technology that is remaking the way companies conduct business and sell and buy goods. We are in an era where, as Andrew Grove, chairman of Intel Corporation has written, strategic inflection points are changing the fundamentals of business.
For example, when the Internet exploded into the consumer market just a
few years ago, many in the high technology field were taken by surprise.
Corporate giants such as Intel and Microsoft raced to catch up to a growing
field of new entrepreneurs focusing on the Internet.
Today, E-commerce, or electronic commerce, is changing the way companies
and consumers are doing business. Intermediaries in past transactions are
being eliminated in favor of direct buying and selling.
For the past two years, electronic commerce, or the selling and purchasing
of goods and services through the World Wide Web, has begun penetrating the
entrepreneurial market and the consumer imagination. When consumers talk of
E-commerce, they mean consumer buying and accessing financial services
transactions. When businesses talk of E-commerce, they are reasonably
optimistic that the Web will bolster profits in the booming
business-to-business arena.
Growth
I think the single most important thing to keep in mind is that access to
the Internet will be the key driver of E-commerce growth. That may seem
obvious, but there must be continued progress toward making the Internet a
ubiquitous mass medium. It all starts with giving people a connection —
an onramp — to the Net, and that’s EarthLink’s main mission. When
60 or 70 percent of the country is online, e-commerce will truly come into
its own.
In the meantime, current research into electronic commerce shows that
consumer confidence is growing daily, as evidenced by the significant climb
in online transactions (over 200 percent) between Christmas 1997 and
Christmas 1999. Amazon.com, to cite one example, exceeded $250 million in
sales for the fourth quarter of 1998, up from $66 million the previous
year. According to Yankee Group research, electronic commerce transactions
are projected to grow by 1,767 percent by the year 2001; that’s less than
two years from now.
Forrester Research Inc. estimates that business-to-business transactions
over the Internet are five times greater than consumer Web sales. With a
rise in consumers’ level of comfort using the Internet to buy goods and
services, electronic commerce will become the new paradigm and consumer
sales will begin to dominate.
A shop.org study recently concluded that while still in an emerging state,
the online retail market is experiencing exponential growth, noting that
the “top-10 publicly traded online retailers have experienced
year-over-year growth in excess of 160 percent.”
A separate survey by ActivMedia research reports that a quarter of the top
100 E-commerce operations had annual revenues of more than $100 million
last year. Researchers extrapolated these numbers to show that consumers
are flocking to order-based, on-site navigation, product section and price.
Every day, we seem to read in the business pages about yet another company
entering the e-commerce fray, and see rapid rises in Internet stocks by
people who are buying for both short-term and long-term profit potential.
E-commerce as Equalizer
E-commerce significantly extends the sales reach of a business beyond the
segments it could typically target through traditional marketing efforts.
Companies can now reach customers, vendors and partners — across the
country and across the world — with a few quick mouse clicks. It is also
getting rid of the intermediary, which helps lower costs and services to
the business buyer and consumer.
This is the great business equalizer of our era because it allows small
companies to compete with larger ones on a more equal basis. And partnering
with companies interested in similar customer demographics can offset sales
and marketing expenses even further.
These types of Web site linking arrangements are also a good source of new
sales leads or referrals. Small businesses have rarely had the opportunity
to market their goods and services on a playing field as level as the
Internet. Search engines have difficulty distinguishing between Fortune
500 sites and a well designed mom-and-pop E-commerce store. Creating a
presence on the Net and partnering with other sites will be a very
cost-effective way to increase sales over the Internet.
Next Five Years Forecast Significant Opportunity
While the number of business-to-business transactions are booming in
comparison to consumer volume, revenue growth from both will be significant
over the next five years, although precise estimates vary widely. It seems
companies benefiting the most from Web sales appear to be reinvesting much
of their profits into marketing. The shop.org survey, for example, notes
that 65 percent of revenues from a sampling of its retailers are being put
back into advertising, compared to four percent for most traditional stores.
A recently released International Data Corporation report noted business
spending on Internet-related technology is expected to top $85 billion by
the end of this year, and more than 2 1/2 times that by the year 2002.
This is due to a growing confidence among businesses that E-commerce is no
longer a short- term curiosity, but a long- term competitive necessity.
Current estimates by the leading market research companies show steadily
increasing demand for E-commerce services through the year 2005, though
exact financial estimates vary widely. I expect that when the majority of
small- to medium-sized businesses have E-commerce-enabled Web sites, and
those Web sites account for 40 percent or more of the merchants’ overall
sales, we will have reached a point where E-commerce transactions play a
vital role in the U.S. economy.
Business Benefits
The advantage of conducting commerce on the Web will be substantial.
Today’s order-acceptance capabilities will be enhanced with order tracking
and provisioning, product warehousing, accounting system integration, and
many other features that will allow small business to stay competitive. I
expect that 30-40 percent of business sales will be generated using online
transactions within 10 years.
With growing consumer acceptance of E-commerce comes a change in thinking
by businesses, large and small, opting to bolster their bottom lines via
the Web. But companies face common concerns and challenges that all of us
who provide access to the Net are addressing as online usage increases and
is woven into the very fabric of our lives and our businesses.
The magnitude of demand for affordable, easy-to-use E-commerce services
has been overwhelming. It is interesting to note that over 60 percent of
our current business Web site members tell us they would configure their
sites for E-commerce within the next six to twelve months.
The market is growing daily. However, EarthLink and iMall are the only
two providers that I know of providing what we believe is a complete
solution. Most of the pioneering e-commerce software developers including
OpenMarket, Mercantec, and Intershop have moved to server-based site
development tools, which are now being used by Internet service providers
and Web hosting companies.
These providers have focused primarily on the large and medium-sized
businesses that have a dedicated IT person or department with the expertise
to wade through all the complications and details of setting up an
electronic storefront. Smaller businesses don’t have those resources, so
they need turn-key, packaged access, hosting, merchant account setup, and
gateway services to take the technical and logistical headaches out of the
picture. To this point, providers have been slow to offer this kind of
integration into their E-commerce products, but soon you’ll see more and
more moving in that direction.
Our company, for instance, was one of the first to provide small- to
medium-sized businesses a one-stop shop for their Internet access, hosting,
and commerce requirements. By incorporating all these components into a
single package, our “TotalCommerce” solution provides the businessperson
the ability to go from no presence on the Web to a full E-commerce store
with a Web site and email in a matter of days, all with only one phone call
to EarthLink. It also includes a merchant account from Cardservice
International (CSI) good for up to $10,000 a month in transactions.
Challenges Ahead
Simply stated, when fully deployed, world-wide E-commerce will eliminate
the need for businesses to maintain large product inventories. Customers
will be able to configure their purchases online and merchants will build
and fulfill orders electronically with suppliers. But full deployment is a
ways off.
Secretary of Commerce William M. Daley, in a recent speech, commented:
“When I came into this job, who ever heard of buying a shirt at a dot.com
address? Now everything is E-commerce.” The technically challenged
Secretary, went on to quip that, “we are becoming the E-commerce
department.” With that said, he added that Washington has invested some
$250 million in hundreds of technology-oriented projects in the past five
years. That’s a good start, but only a start.
One of the main challenges faced by businesses has been, and continues to
be, adjusting in-house procurement procedures to better facilitate Internet
sales. To this end, $5 million in federal funds were awarded to several new
Silicon Valley companies to established a better standard for procurement
services beyond the Electronic Data Interchange (EDA) used by big companies
for several decades.
The other big consideration with E-commerce is a lingering concern by
online buyers that unwanted third parties could access their credit card
numbers or other purchasing code information. There is a great deal of
work being done industry-wide on Secure Electronic Transaction (SET)
protocol.
Our own internal survey of current EarthLink Web hosting members
indicates that security is still a concern for both consumers and
businesses. We have been able to educate our consumer and business
subscribers about the secure E-commerce environment we’ve built, and we’ve
made the point that submitting credit card info over encrypted lines is
much safer than giving your card to a restaurant waiter or gas station
attendant. Other companies providing Internet access are educating their
subscribers as well, because destroying those kinds of myths and wives
tales is good for everyone.
As we head into the 21st Century, America’s economy is booming, while the
rest of the world recovers from devastating economic conditions. We are
again poised to lead the economic and technological revolution as we did
one hundred years ago, this time electronic commerce will be the engine
that drives that growth. It should be exciting times.
——————–
Garry Betty is President and Chief Executive Officer of EarthLink Network, Inc. For more information on EarthLink, contact their public relations department at 626-296-5737.
