E Commerce ~ Doing Business on the Internet

written by: Janice Eddington; article published: year 2006, month 08;


In: Root » Internet » Affiliates and Ecommerce » E Commerce ~ Doing Business on the Internet

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Businesses communicate with customers and partners through channels. The Internet is one of the newest and, for many purposes, best business communications channels. It is fast, reasonably reliable, inexpensive, and universally accessible—it reaches virtually every business and more than 200 million consumers. Doing business online is electronic commerce, and there are four main areas in which companies conduct business online today: direct marketing, selling, and service; online banking and billing; secure distribution of information; and value chain trading and corporate purchasing.

Direct Marketing, Selling, and Service

Today, more Web sites focus on direct marketing, selling, and service than on any other type of electronic commerce. Direct selling was the earliest type of electronic commerce, and has proven to be a stepping-stone to more complex commerce operations for many companies. Successes such as Amazon.com, Barnes & Noble, Dell Computer, and the introduction of e-tickets by major airlines, have catalyzed the growth of this segment, proving the reach and customer acceptance of the Internet. Across consumer-targeted commerce sites, there are several keys to success:

  • Marketing that creates site visibility and demand, targets customer segments with personalized offers, and generates qualified sales leads through observation and analysis of customer behavior.

  • Sales-enhancing site design that allows personalized content and adaptive selling processes that do more than just list catalog items.

  • Integrated sales-processing capabilities that provide secure credit card authorization and payment, automated tax calculation, flexible fulfillment, and tight integration with existing backend systems, such as inventory, billing, and distribution.

  • Automated customer service features that generate responsive feedback to consumer inquiries, capture and track information about consumer requests, and automatically provide customized services based on personal needs and interests

  • This business-to-consumer (B2C) electronic commerce increases revenue by reaching the right customers more often. Targeted and automated up-selling and cross-selling are the new fundamentals of online retailing. Sites that most frequently provide the best and most appropriate products and services are rewarded with stronger customer relationships, resulting in improved loyalty and increased value.

Financial and Information Services

A broad range of financial and information services are performed over the Internet today, and sites that offer them are enjoying rapid growth. These sites are popular because they help consumers, businesses of all sizes, and financial institutions distribute some of their most important information over the Internet with greater convenience and richness than is available using other channels. For example, you have:

  • Online banking

  • Online billing

  • Secure information distribution

Online Banking

Consumers and small businesses can save time and money by doing their banking on the Internet. Paying bills, making transfers between accounts, and trading stocks, bonds, and mutual funds can all be performed electronically by using the Internet to connect consumers and small businesses with their financial institutions.

Online Billing

Companies that bill can achieve significant cost savings and marketing benefits through the use of Internet-based bill-delivery and receiving systems. Today, consumers receive an average of 23 bills per month by mail from retailers, credit card companies, and utilities.

Secure Information Distribution

To many businesses, information is their most valuable asset. Although the Internet can enable businesses to reach huge new markets for that information, businesses must also safeguard that information to protect their assets. Digital Rights Management provides protection for intellectual and information property, and is a key technology for secure information distribution.

Maintenance, Repair, and Operations (MRO)

The Internet also offers tremendous time and cost savings for corporate purchasing of low-cost, high-volume goods for maintenance, repair, and operations (MRO) activities. Typical MRO goods include office supplies (such as pens and paper), office equipment and furniture, computers, and replacement parts. The Internet can transform corporate purchasing from a labor- and paperwork-intensive process into a self-service application. Company employees can order equipment on Web sites, company officials can automatically enforce purchase approval and policies through automated business rules, and suppliers can keep their catalog information centralized and up-to-date. Purchase order applications can then use the Internet to transfer the order to suppliers. In response, suppliers can ship the requested goods and invoice the company over the Internet. In addition to reduced administrative costs, Internet-based corporate purchasing can improve order-tracking accuracy, better enforce purchasing policies, provide better customer and supplier service, reduce inventories, and give companies more power in negotiating exclusive or volume-discount contracts. In other words, the Internet and e-business have changed the way enterprises serve customers and compete with each other, and have heightened awareness for competing supply chains.

Value Chain Integration

No other business model highlights the need for tight integration across suppliers, manufacturers, and distributors quite like the value chain. Delays in inventory tracking and management can ripple from the cash register all the way back to raw material production, creating inventory shortages at any stage of the value chain. The resulting out-of-stock events can mean lost business. The Internet promises to increase business efficiency by reducing reporting delays and increasing reporting accuracy. Speed is clearly the business imperative for the value chain.

Unfortunately, speed can be costly. Today, approximately 60,000 businesses exchange business documents such as orders and invoices with their trading partners through a standard communication and content protocol called Electronic Data Interchange (EDI). Most EDI implementations use leased lines or value added networks (VANs) that require significant integration for each trading partner. Network design, installation, and administration can be costly in terms of hardware, software, and staff. In fact, these costs are the key reason that EDI is most widely deployed only in larger companies.

Moving forward, all companies will be able to take advantage of value chain integration through the low cost of the Internet. Open standards for electronic document exchange will allow all companies to become Internet trading partners and function as suppliers, consumers, or both in this business-to-business electronic commerce. This integrated trading will tighten relationships between businesses while offering them greater choices in supplier selection.

Issues in Implementing Electronic Commerce

Although it is simple to describe their benefits, it is not nearly as easy to develop and deploy commerce systems. Companies can face significant implementation issues:

  • Cost

  • Value

  • Security

  • Leveraging existing systems

  • Interoperability

Cost

Electronic commerce requires significant investments in new technologies that can touch many of a company’s core business processes. As with all major business systems, electronic commerce systems require significant investments in hardware, software, staffing, and training. Businesses need comprehensive solutions with greater ease-of-use to help foster cost-effective deployment.

Value

Businesses want to know that their investments in electronic commerce systems will produce a return. Business objectives such as lead generation, business-process automation, and cost reduction must be met. Systems used to reach these goals need to be flexible enough to change when the business changes.

Security

The Internet provides universal access, but companies must protect their assets against accidental or malicious misuse. System security, however, must not create prohibitive complexity or reduce flexibility. Customer information also needs to be protected from internal and external misuse. Privacy systems should safeguard the personal information critical to building sites that satisfy customer and business needs

Leveraging Existing Systems

Most companies already use information technology (IT) to conduct business in non-Internet environments, such as marketing, order management, billing, inventory, distribution, and customer service. The Internet represents an alternative and complementary way to do business, but it is imperative that electronic commerce systems integrate existing systems in a manner that avoids duplicating functionality and maintains usability, performance, and reliability.

Interoperability

When systems from two or more businesses are able to exchange documents without manual intervention, businesses achieve cost reduction, improved performance, and more dynamic value chains. Failing to address any of these issues can spell failure for a system’s implementation effort. Therefore, your company’s commerce strategy should be designed to address all of these issues to help customers achieve the benefits of electronic commerce.

Your company’s vision for electronic commerce should also be to help businesses establish stronger relationships with customers and industry partners. For example, a successful strategy for delivering this vision is described by three workflow elements (platform, portal, and industry partners), each backed by comprehensive technology, product, and service offerings.

From self-service portals to transaction processing, a successful workflow strategy can be the underlying engine delivering state-based, processed-focused control services for e-business applications. Human labor is expensive, and workflow technology allows e-businesses to supplement, and in some cases eliminate, reliance on human supervision and intervention.

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