E-Files: Making moves into e-commerce

One minute you've got a simple little Web site, the next minute, there's huge growth and the demands on the company, and the resultant strains, are a quantum-sized jump ahead of anything envisaged.

If you were watching television in the run up to Christmas, you might have seen an updated pantomime version of the old fairy tale Jack and the Beanstalk. While there were modern references a-plenty, the basic story remained - some funny little beans get thrown on the ground and the next day there's a huge beanstalk reaching to the heavens.

It's a bit like that for a lot of companies venturing into e-commerce. One minute they've got this funny little Web site, the next, there's a huge growth sprouting forth and what sounds like dangerous thumping noises that could only come from a giant. The demands on the company, and the resultant strains, are a quantum-sized jump ahead of anything envisaged.

"Planning is where most people get into trouble with e-commerce," says Tracey Voyce, a consultant with Wellington-based Comtex.

"And that's not just about planning the offering itself. Even if developing an e-business offering over the Web is only a maybe at this stage, you need to be considering it when you make any technology or process decisions now. If you're buying a big HR or accounting package, you need to think about whether this application is going to work in an e-commerce environment."

The big area for development in e-commerce is business to business, or "B2B", to use the jargon. It's where the big purchases are made - businesses have more to spend and are more able, and, these days, willing, to do business over the Web. And, it is where, internationally, some big players are starting to move.

This year companies like Ford and General Motors will move their entire purchasing operations on to the Internet - "e-business for grown ups" is what some commentators are calling it. And last year US-based Forester Research suggested that e-commerce is about to reach a threshold form whichwill surge into "hyper growth", with B2B trade doubling every year over the next five years internationally. And that figure does not include services exchanged or booked. It's not difficult to see that more than fashion (although that may be part of it) is driving more companies online. A study last year by US consultancy GIGA showed that cost savings globally through business use of e-commerce was $US17 billion (about $NZ33 billion) in 1998, and is projected to rise to $US1.25 trillion ($NZ2.45 trillion) in 2002.

"Most e-business solutions mean such a massive change for a company. It's important that it is planned over a long period of time. And it has to be driven by the top decision makers," says Voyce. "Do not let it be driven by IT. Do not let it be driven by marketing either."

And it has to be connected with the rest of the company. An oft-heard complaint - still - is that something will be ordered on a company's Web site only to be followed by an apologetic phone call to the effect that the company doesn't have the necessary stock on hand.

"You've got to have the front end talking to the back end. You've got to face the fact that it's an instant medium and people expect instant responses."

Another common error is to include a special offer or a new product, but not accompany this with a button to click on.

"And make sure there's at least a phone number. I know of one case where someone found something on a site they liked but couldn't find out how to contact the company, so they went to a competitor's site and spent the money there - even though it was several hundred dollars more expensive."

And there are still some basic design crimes being committed. These range from different styles depending on which part of the company was responsible for that part of the site, which only looks messy and distracts from any brand image; to too much animation or flickering objects. Even if the viewer is not prone to migraines or epilepsy, these are a turn-off, she says.

"Get rid of them - if someone is looking at a body of text, nothing distracts more than something flashing."

And use links to other sites sparingly.

"Look, you've got a potential buyer there, keep them. Don't show them the doorway to someone else."

One of the first New Zealand firms to venture online was Hutt-based Melco, in late 1995. The firm distributes electronic and computer goods to resellers around the country, and the site, Melco Online, has had three major upgrades since its inception.

"Development never stops, it's an evolving thing, and it evolves with the business," says marketing and communications manager Kerry Topp.

"You've got to be prepared to invest - you're kidding yourselves and others if you think you can do it on a shoestring. That isn't going to happen."

The firm now has three people dedicated to the site full time, and, using EVOL, the firm's resellers can now download and manipulate information such as price lists on to their own intranet.

The site allows resellers to log on, be recognised and be presented with a fully customised set of information about prices and products. "It's strategically important for us: as a distributor we need to be promoting our resellers as well, every contact we have with anyone we want to bring them back to our site, get them interacting with us, our product range any information that we have tucked in behind Melco online."

The firm recently installed a 2mb circuit to cope with the volume of traffic.

The service started as essentially another delivery channel, as it does for most businesses that go on line, but it now cuts right across all aspects of the business, he says.

The company has focused on both making the site content rich and also accessible. There is the possibility of tension between those two goals, as some companies do appear to just throw everything they can think of onto a site.

"But I think if you know your market, you can say: 'This is the information they want', and provide it in a timely manner and in the format they want it. Content is not about whiz bangs, it's about keeping it basic."

Another company that has ventured online with some enthusiasm, computer distributor Renaissance, initially did as a way of reducing costs, but found the impact of e-commerce went far beyond that.

"It gets into your business far more deeply than you ever forecast," says the head of the company's e-business division, John Hayson, who has been running the company's e-business operation for a couple of years. "We primarily went into this because we thought it was a way of reducing the costs of transactions. While that's still a factor, its now well down on the list. The main reason we're there now is it allows us to interface with the market and partner with people we would not have thought of before."

From a technical point of view, one of the first things the company learned after it started was that "this is not something you just fire up and then walk away from".

The site is a constantly evolving animal, he says.

"The other mistake we made was to look at all the ways it would help our business, and then we took it out to customers - who couldn't quite see what it would do for them. You need to build a business site based very much on what the customers need."

The whole trend in e-business - especially in the IT industry - is starting to force a shift in power from vendors to the purchasers, although there has been a hiccup in that trend, he says.

"We've moved from the old purchasing model where they have raised a purchase order and faxed it to someone and said it's your job to interpret this and deliver it, to e-commerce. Which, in its initial phase, has meant the purchaser has to check 15 to 20 odd Web sites, and eventually they're going to get tired of that."

Instead, purchasers will demand vendors get behind one portal - "the customer doesn't want to change the way they do business to fit in with a supplier. And if you're a supplier who doesn't have access to that particular community behind a portal, you won't have access to those customers."

That is behind Renaissance's early push on the Web.

"Effectively you're burrowing down from the procurement aspects of the Web site, taking that Web technology to our customers and allowing them to present an Internet/ e-commerce interface to their customers, based on our infrastructure. It gives them a rapid deployment without the need for significant investment themselves."

Another firm that has invested heavily in the Web, for its own processes as well as for others, is Telecom. The company has a range of Web-based services, including an extranet for corporate customers.

"The key starting point is looking at it as a way of simplifying things that can be simplified," says marketing and communications manager Phil Martin. "For example, to run a single complex report for a customer might take six hours to run. For 600 customers it also takes six hours, because it runs through an iterative process of reporting. So we can efficiently make that information available as valuable output to 600 corporate customers. It can also be used to streamline what would otherwise be complex. For example, Telecom has used its extranet to make its various mobile telephone plans much easier to understand for its dealers.

"It's become quite easy to do, using some fairly basic methods of call analysis, which means we can better understand the needs of the customer."

A corporate customer's IT manager will, for example, want access to monthly billing and network information, and the extranet can provide information about that, to a degree of detail determined by the customer's needs.

Complexity is your enemy in any area of business, and the Web presents an opportunity to cut back such difficulties, he says. There are risks to this, however.

"Overidingly, if you take a complex business and try to put that complexity into the Internet environment you're potentially exposing customers to your dirty laundry. The back end has got to be able to handle it. If you're moving on to the Web should take that as opportunity to simplify business. That's what we're doing."

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