The first essential to setting out into the world of e-commerce is sorting out where you’re going; conceiving a vision of your final — or interim — destination, says consultant Phil Royal at KPMG.
You must have agreement within the company as to “what you want to do and how you will take your offering to market”, he says. This is a decision for the business. Once you have a clear vision “the technology is easy — you just have to throw enough people and money at it and it’ll work”.
If you’re selling products through your site, Royal says, you have to make sure all the entities all the way down your supply chain are prepared to act to fulfil orders with the instant speed people expect from the Internet.
“A trading community is only as strong as its weakest link,” he says.
You have to prioritise, deciding what are the most critical factors to the success of the electronically assisted business, be it the logistics of moving merchandise, marketing or some other aspect and ensure that works first.
The aspiring e-commerce operator must “make sure the Web site is in all the right phone books”, says Royal. This means not only getting on the search engines, but a good measure of traditional marketing and advertising. You have to consider how you’ll attract people to your site, maybe by something as traditional as a “two for the price of one offer” — and what is going to make them stay.
An increasing element of e-commerce sites is the ability to personalise the environment for the customers who have visited before —or to have them enter their own personal profile.
“If I’m selling wine and I know you’re interested in red wines from the south of France, then I can present you with wines of that kind first. Telecom is one company that does this well internally,” he says. “If you use [Telecom’s] library, the intranet automatically presents you with the kind of material you have expressed a specific interest in.”
Pool the cost
An under-exploited marketing tool, Royal says, is the ability the Web presents for several companies in the same industry to set up a common Web site and pool the cost of development. In many industries the various players are not head-to-head competitors — he refers again to wines, where every winery will have its distinct offerings.
The industry bodies exist to pursue such collaborative ventures, he says. “It’s a question of whether they have the awareness of e-commerce’s potential.”
A challenge for New Zealand businesses, small on a world scale, is “just getting enough time in the day to think about these things”. This is where super-industry bodies like Trade New Zealand could contribute a little more by giving businesses advice so they are not trying to solve problems others have solved before them.
“There are challenges with the technology,” he says, because it’s changing so fast. “A lot of the tools are new, so how can you know you’re choosing the right ones?
“Here’s where I can put in a plug and say seek the advice of a consultant — just as you would for marketing. We don’t always know about the latest,” he says, but a consultancy can at least identify some “best-of-breed” products and help an e-commerce company “avoid going up dead ends”.
Print specialist Norcross took two-and-a-half years to plan an e-commerce face enabling customers to rationalise their ordering of stationery and related supplies. Selection of technology was a relatively minor part of this process, says director Philip Norcross.
“At the same time as building the [Web-oriented] front end we had to redefine our back-office system totally,” he says.
“That’s where the intelligence comes in. Otherwise it would just be a Web site.”
Norcross needed to “build trust” in the e-commerce system, to convince the customers who had been used to the reassurance of a material piece of paper that online ordering would work as reliably and add to efficiency by allowing all their divisions or branches to place orders for all lines through the same single point.
One of the chief misgivings among CEOs of customers was that an electronic medium, accessible from any PC in the company, would give their employees a new and undesirable freedom to order items on a whim. Norcross had to put the controls and authorisation levels in place to ensure this would not happen.
Any user company can set up its own workflow for purchase approvals on the Norcross system.
After evaluating the needs of its customers, Norcross appointed a consultancy to do a full scoping exercise. This was a rewarding phase, says Norcross. “We gave them a list of our perceived requirements and they had a dialogue with our mana-gers. They challenged us in areas where they thought we had too high, or in some cases too low, expectations.”
An example of the latter was the company’s original intention to take the customer’s order and issue a paper invoice. “[The consultants] said: ‘why don’t you do all that online through the system?’ We’d not realised that was feasible.”
Once the list of requirements was finalised, Norcross selected a provider — Madison Systems, using an IBM NetCommerce solution on Netfinity servers. Madison and IBM were willing to commit to a firm timetable of deliverables, Norcross says. This is a sig-nifi-cant positive when planning an e-commerce development.
Lack of confidence
On initial exploration of the available solutions, Norcross found a surprising lack of confidence among potential providers. Nor-cross itself was learning, but it seemed some providers were still on a learning curve themselves. There was a good deal of “smoke and mirrors”, Norcross says — bland assertions that the provider could achieve objectives with little firm evidence to back it up.
It may well be that the position has improved in the two years since Norcross was looking, he says. The system was designed purely as a business-to-business facility, but since its completion, Norcross has seen unanticipated benefits of extending into the business-to-consumer arena. The company is now getting approaches from other suppliers who have the same customers and the site seems destined to become more of a portal to various non-competing services from several providers.
A company contemplating an e-commerce presence should not underestimate its effect on “surrounding aspects”, he says — from the changes necessary in back-office systems to the hardware required. “The software supplied was according to contract, but we found we needed an additional firewall and bigger servers. In retrospect, we could have spent a bit more time detailing the hardware requirements.”
Think outside the square
Planning an e-commerce venture requires a lot of “thinking outside the square”, Nor-cross says — imagining, for example, all the possible ways a transaction might come in and equipping the system to deal with it.
The sheer demand on people’s time was another underestimated factor. The necessary changes to business processes took “thousands and thousands of man-hours”.
Electronic auction house Trade Me has taken almost a diametrically opposed position to Norcross, starting the Web site with no market research beyond a perception that auction houses were doing well in the US.
Detailed market research is hard to do on a purely e-commerce venture, says Trade Me founder Sam Morgan. Research that can be bought relates to the US, which is an altogether more successful economy and there were very few sites in New Zealand in the same business. “And if you think about it too much, you may be too late”, in the fast-moving Internet world, Morgan says.
Trade Me started in March this year, but until August had not marketed itself beyond getting on listings and search engines, “the normal way that Web sites grow in the early stages”.
At that point it attracted funding from Wellington company AMR Software, which took an undisclosed shareholding. Morgan says he is still the majority shareholder.
The consumer-to-consumer auctions are free of charge, but following the US model, Trade Me began in August a “merchant” service, where businesses could sell “end-of-line, ex-demo goods” and perishables quickly by auction to individuals.
It intends in due course to offer added-value services such as escrow, where the buyer’s money is kept secure until they get the goods, then it is released to the seller.
As a pure Internet service, TradeMe has an advantage over the conventional hard-copy publications, Morgan says.
Some of these have gone on to the Internet but imposed a time lag on the publication of advertisements there so it does not cannibalise their existing business.
So what happens when another venture starts up locally and begins to take market share? Morgan puts his faith in growth, currently running at 2% a week, with 2500 users at latest count.
By the time competition shows up, he suggests, Trade Me would have grown to the point where it is the preferred option for people and companies seeking to auction goods, because of the sheer number of people regularly looking at it.
Beyond that, Trade Me will compete on usability and functionality, he says. Latest innovation is a message board for visitors to the site to communicate with one another. “We will keep up good customer service by responding to emails and other enquiries quickly.”
Stephen Bell and Malcolm Hutchinson are both Wellington-based freelance IT writers