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An eCommerce Management Primer (Part 3)

Potential Benefits of eCommerce Solutions
Potential Costs / Limitations of eCommerce solutions:

Benefits and Limitations of eCommerce Solutions

Over the last few years, eCommerce has become the buzzword of the business and the finance communities. As a result, more and more companies are jumping into the Internet and eCommerce for fear of being left behind. Boards are directing CEO's to get eCommerce initiatives going and to get them going fast!

The problem is that in a lot of cases the management does not have a clear understanding of what eCommerce is or can be, and how it is different from the traditional bricks and mortar approach to commerce. This is the third of a series of articles which attempt to provide a basic technical overview of the elements of eCommerce and to detail some of the differences these systems have over traditional commerce.

Part three focuses on benefits and limitations of eCommerce solutions and how these differ from the traditional approaches.

Benefits of eCommerce Solutions

eCommerce solutions have the potential to provide adopters with a set of benefits over and above the ability to sell there products. These benefits can in some cases be the main reasons for choosing an eCommerce solution over or in conjunction with a traditional commerce solution. Some benefits of eCommerce apply to both B2C and B2B solutions, while some apply only to one. Below, the various potential benefits are examined.

Potential Benefits of eCommerce Solutions

· Global Reach

Unlike traditional commerce solutions in which the selling or tendering process is likely limited to the immediate business area or in areas where branch offices are present, eCommerce allows a company to have a branch office everywhere in the world. The result of a good eCommerce solution is that customers from around the world have the opportunity to see and purchase goods or respond to tenders.

· Lower Staffing Costs

eCommerce solutions hold the promise of reducing the staff costs needed to make a sale or sign a contract. As a result of having the selling and tender process online, the amount of interaction with staff is minimized. A well designed eCommerce site will allow users to resolve most issues without the need for intervention by staff.

· Integrated Payments with Banking and Accounting

eCommerce solutions often have either credit card billing, or banking support for electronic funds transfer. As a result, the collection of monies owed can be automated, reducing the need for collections and bounced cheques. Advanced systems may even provide for robust support for accounting systems, reducing the overall book keeping required to successfully run a business.

· Increased Response Times

In traditional commerce, sales and tenders often take a long time to move from the "just looking" to the buying stage. In eCommerce, the interaction with the system takes place in almost real time and therefore allows the customer or bidder to respond more quickly and reduces the lag time between discussion and purchase.

· Decreased Cost to Implement

While technology is often quite expensive, a good eCommerce solution will not only provide a cost effective sales mechanism, but also an accounting, fulfillment and reporting solution that normally requires a significant IT expenditure in traditional commerce activities. As a result of this offset, and because of the gradual reduction in costs as better eCommerce tools develop, the eCommerce solution is often very cost effective to implement when compared to traditional commerce IT requirements.

Costs of eCommerce Solutions

While eCommerce solutions have the potential to provide adopters with a set of benefits over and above the ability to sell there products, there also exists some costs which must be weighed against these benefits when considering and eCommerce solution. Some costs of eCommerce apply to both B2C and B2B solutions, while others are specific to only one type. Below, the various potential costs are examined.

Potential Costs / Limitations of eCommerce solutions:

· Marketing Costs

In traditional commerce solutions, the marketing costs are directly targeted to one tightly focused market. However, in eCommerce solutions, world wide focus can often result in a marketing effort that is too diverse and not keyed to the appropriate market segment. Just because you can sell goods to the entire world does not mean you should!

· Business Process Changes

One major area in which most companies fail to accurately realize the costs of moving to an eCommerce solution is in the staff time and energy needed to revamp the business process used to handle eCommerce transactions. Too many companies assume their existing process will be able to handle efficiently the eCommerce business. This assumption often results in substandard eCommerce solutions or in a situation where all the potential benefits are lost.

· Shipping Versus Staffing

A major area of per unit cost for eCommerce solutions is that of the shipping of goods to the customer. Unlike bulk shipping of goods from a warehouse to a store, the shipping of eCommerce orders can be staff time and cost intensive.

These costs can eat up all the potential savings in sales staff. In a highly competitive hard goods market, these costs can result in losses for a company looking to establish market position (look at any number of big name B2C companies for an example of this problem).

· Loss of Contact w Customers

As a result of the impersonal nature of the Internet, the shopping experience can be one where the customer does not feel they have received sufficient personal attention. Hard to hold someone's hand in cyberspace.

· Development and Setup / Maintenance Costs and Learning Curve

While eCommerce solutions are getting more sophisticated and cost effective, the reality is that a custom solution is still often more expensive than most companies realize up front. In fact, the main problem can be that the appropriate solution is not understood by the company and as a result they get an eCommerce solution that is not necessarily appropriate for their goals.

· Relies on Customers and Suppliers Being Online

The final limitation that eCommerce solutions have is one most people ignore - the customers and suppliers must be online with a connection fast enough and secure enough to effectively shop or respond to tenders. The result could be a limiting of the market potential in the short term. However, with the rate of growth of Internet use in the consumer and business markets over the past five years, it looks as if this limit may be removed sooner rather than later.

The process of evaluating whether or not eCommerce is a cost effective decision for any particular business depends on what that business is trying to accomplish. In other words, what systems they already have in place, what their market is and what level of technical and business knowledge they already posses. While it would be a poor decision to ignore the business potential of eCommerce, it would be just as poor to assume that merely getting online will solve your business problems.

In the next article, we will review some possible types of eCommerce B2C sites and the tools that may be appropriate for building them.

By: Leon Salvail
Global Village Consulting Inc.
lsalvail@global-village.net

© Copyright 2001. Galt Western Personnel Ltd. Unless otherwise specified, you may reprint this article, quote from it, use it in research or projects, duplicate it or distribute it. Credit of authorship and source MUST be given to galtglobalreview.com. Ownership of Copyright remains with Galt Western Personnel Ltd.

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