Transforming Online Marketplaces

Bob Smithers is vice president/general manager at MossWarner Communications, Mission Viejo, CA. His e-mail address is

E-commerce has moved swiftly from fad to fixture. As it continues to evolve, it will mean different things to different businesses. For all business it will mean change. The companies that embrace the change and plan strategically for their foray into cyberspace will be the winners. Those who take a more casual attitude toward e-commerce soon will be left behind.

Lately, there has been much talk about the rise and growth of the Internet, and for good reason, if you consider what has happened in a year:

• The number of U.S. Web users is 83 million, up 26 percent, according to IntelliQuest.

• Globally, Web users total 154 million, up 55 percent, according to International Data Corp.

• Worldwide e-commerce revenue is $21.1 billion, up 154 percent, according to IDC.

• Representing 40 percent of all new jobs, 1.2 million Internet-related jobs were created, according to the University of Texas.

Today, manufacturers not only sell their products directly to consumers, but they also can create an avenue of communications and interactivity that previously had been the domain of brick-and-mortar retailers. Online, they have the connection that has been missing. This connection provides valuable data about consumers’ purchase behaviors, data that can be used to better serve existing customers and target new ones.

For the first time, manufacturers need permission to market to consumers. Online marketing involves getting consumers to buy the online value proposition before they will buy the products. Savvy online marketers are doing this by fostering online communities around areas of consumer interests as well as offering products. These communities allow consumers to interact with one another as well as with the company. There is a sharing of ideas, likes, dislikes and concerns. The more a marketer can address the topics raised by the community, the stronger the community’s development will be.

Community features within the Web sites help build relationships between marketers and end-users. As these relationships are developed, the marketer can really get to know the user. What’s more, communities help promote commerce.

Consider “infomediaries” like Yahoo that aggregate online content and become online destination points, or online communities. They are actively building new online “market spaces.”

Lessons learned the hard way by others have shown that a clear, well-thought-out strategy is essential before going online. You cannot simply put up a Web site with a storefront and think you will succeed. E-commerce is not just about online revenues; it’s about a new way of doing business.

For many companies entering the online marketplace, there are two key areas of transformation:

• Developing seamless digital integration of all business functions.

• Learning how to think and behave like an online retailer.

Seamless digital integration. For e-commerce to be feasible, companies must use technology to gain the efficiencies necessary to compete economically. E-tailers like that offer prices below cost have had the advantage of a lower cost of doing business.

Seamless digital integration of the supply-chain functions with the front-end transactional functions creates efficiencies unobtainable in the brick-and-mortar space. One way to do this is to wire together all aspects of the customer transaction and have a single stream of accurate and up-to-date information flowing from the order entry page to the accounts receivable ledger. All customer contact points in between also must be seamless.

For example, Web customer care should interface with a call center, and all data about a customer’s order should be in a database that even the customer can access.

The potential gains of this digital integration are significant. A report by the Organization for E-Commerce Cooperation and Development said customer service costs – usually 10 percent or more of a company’s operating expenses – can be reduced 10 percent to 50 percent by using a Web customer service interface.

Thinking like an e-tailer. The consumer is gaining a lot of power when it comes to price shopping on the Net. Consumers also are adapting to naming their own price for goods and services.

Consumers are demanding more out of the price: value dynamic online. Value can come in different forms, such as availability, convenience and custom offerings. Sometimes increased value can translate into expanded brand offerings and an evolved product/services mix. Whatever it is, it had better be there, or the consumer could switch loyalties as quickly as clicking a mouse.

Consider Once simply the “World’s Biggest Bookstore,” the mega e-tailer is now the “World’s Biggest Book, Music, Video, Drug and Pet Store.” Amazon’s recent acquisition of Sotheby’s, the 250-year-old auction house, makes Amazon a major force in online auctions as well.

What does all this marketplace transition mean for manufacturers that want to develop e-commerce capabilities? It means they have to start thinking about the individual consumer and product offerings in a more symbiotic fashion. Producers have to view the end-consumer as the start of all business decisions – product design, total product-line offerings, pricing, customer care and online merchandising.

Traditional retailers will have to become more unique, value-added and entertaining to compete with the convenience and other value-added options consumers derive from shopping online.

What’s needed to succeed with e-commerce? Establishing e-commerce capabilities can be related to that adage, “If it’s worth doing, then it’s worth doing right.” Successful companies take great care in developing a full strategy for their Internet presence and their e-commerce business. Statistics show that it can cost five times as much to rebuild an ineffective site than it does to do it right the first time. The only way to ensure that you get it right and that all business components mesh is to spend the time creating a clear and comprehensive strategy.

Conducting business on the Internet requires the same type of planning as any other new business venture. n

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