Competitive Intelligence / Competitive Strategy, by Arik Johnson
by Arik Johnson

E-Commerce Separates Tomorrow's E-Businesses
from Yesterday's Business-As-Usual

Do you remember that little blonde-haired kid in the movie "A Christmas Story" and how sorely he dreamed of a new BB gun? I was that kid. I wanted a BB gun for Christmas when I was little, and my parents weren't reluctant to let me put an eye out, they just couldn't find one. It may've been different if the Net had been around.

Revolution swept through the land this past Christmas season, when American consumers spent over $ 2.5 billion on the Internet finding everything from Tommy's new BB gun and Suzie's new Barbie-Doll to Mommy's new iMac and Daddy's new squash racket. Those numbers may appear to be a 140 percent increase over the 1997 online Christmas spending threshold, but that's nothing compared to what such trends mean for business in the long-run game of competitive advantage.

And that's what e-commerce is all about -- competitive forces and how electronic sales will change industries. If you're not sure about its effects or don't have a plan to participate, then get ready to lose marketshare to competitors. Not just the rivals you wage war with today, but new adversaries that you have yet to discover. So, if you already sell on the Web, you're not safe either -- agile new competitors can spring up overnight and capture your existing market in short order. Likewise, opportunities exist in all industries to substitute or out-compete established players and products.

Since the rise of the Web and the proliferation of media types, the Internet has been used mainly as an advertising billboard for everything from soup to nuts. The past two years have been characterized by a solid effort on the part of software companies and retailers to test and deploy E-Commerce solutions in order to complete the sales cycle for us, the American and global consumer. Get visitors, take orders, get paid and move product! That's the name of the game as we enter a new millenium, characterized by ever-more-sophisticated methods of moving product and competition with a vengeance to win fickle customers that more than ever demand flexibility, choice and speed as part of making a buying decision, or selecting a store.

It's not just retailers and mail order that are getting in on the action of online commerce. Increasingly, manufacturers must make systems available for large retailers to streamline just-in-time delivery and logistics mechanisms to support nimble enterprises, and business-to-business sales of goods and services is today the fastest growing sector of e-commerce globally. And, this isn't just buying books and software online -- the savvy online shopper can locate everything from information services and financial services to antique garden seeds and used cars -- plus, arrange for financing and insurance.

An even more fascinating e-commerce shift is the ability of the consumer to become retailers in their own niche market. Today, we live in a world where perhaps the most unique Christmas phenomenon of 1998 was the elusive Furby and the Web auction sites that had "limited supplies" available to "select customers" albeit at a somewhat less-than-competitive pricetag. But, the auction site trend on the Net has provided a new challenge to traditional retailers in the endless competition for precious marketshare, and media-driven "mindshare".

The success stories so far are impressive: from the likes of category killers like to traditional computer marketers turned a multi-million-dollar-a-day online sales powerhouse like Dell to pure-play Internet financial services company E-Trade. E-commerce solutions have proliferated from very simple software platforms at $500 that you deploy yourself with your Webmaster, all the way up to full-service product catalogs with pricing that starts at $20,000. Many traditional software companies are beginning to rollout enterprise e-commerce products, like Microsoft Commerce Site Server or solutions from IBM's e-Business group.

So, what does it take to match the success of a fearsome competitor like E-Trade, Dell Computer or Get there first with the best approach, then build brand recognition like crazy. That's how went from an interesting idea to best-of-breed bookseller. Consider that there were already dozens of online bookstores, created a new category by combining its powerful new brand with one of the first "affiliate" marketing programs, where partnering sites took a commission on goods sold and added value through their own topical content. This strategy made it possible for a previously unheard of start-up to beat up top, established competitors Barnes and Noble and Border's by as much as 100 to one in gross sales revenue.

Dell Computer, longtime favorite of corporate network managers and CIOs due to their solid support and aggressive direct channel marketing campaigns, has forced competing PC makers to adopt a more direct approach themselves, often to the disadvantage of their channel distributors. But, the fat margins of end-user selling aren't all that will define this new business landscape. Middlemen are reshaping themselves too, adding value to their offerings by aggregating products and services and offering choice in rock-bottom deals to attract a loyal following.

There are a few basics to keep in mind when considering an e-commerce conversion of your product catalog to the Web. First, the competition -- if you're in a market where competitors are already using the Internet not only to market but also sell and service their products and services, then it may already be too late. Pray it's not and get in now, because someday soon it will be.

Second, select your best products and figure out a migration strategy for Web-appeal to potential customers. You'll want to build a database to manage the graphics, descriptions and transactions, and it'll be worth it in the long run when you'll be connecting the e-commerce system to your supply-chain management mechanism to deliver real-time statistics of inventory.

Finally, when the entire system has been planned and built, install the hardware and software that'll be necessary to securely accept credit card transactions and batch them to your merchant account. Then connect the product catalog and database to it to light it up. There you have it, done.

Well, not quite. Because every business, product line and set of customers are different, you'll need to keep an eye on the real e-work behind running your e-business, just like in the "dirt" world of storefronts and cash. And, most importantly, get user feedback to tweak your site and the sales cycle of getting people to take the leap and make the buying decision. Studies have shown that biggest part of that decision is trust. Like Sears, Roebuck and Company at the turn of the century offered "send no money" guarantees of reliability in order to win business away from city stores to their mail-order business, you'll need to make sure your prospective customers are confident in buying from you.

Companies don't necessarily need to change the way they've built their existing business in order to do e-business. But it helps to consider how electronic sales of products and services will change the dynamics of your industry sector and competitive forces, and seek out opportunities to get to the top fast and stay there.

Arik R. Johnson is Managing Director of the Competitive Intelligence (CI) outsourcing & support bureau Aurora WDC. Learn more about Arik at his firm's Web site