E-Commerce Allows Companies to Easily Reach Customers While Also Increasing Sales

As the field of electronic commerce grows and advances, the business world uncovers more and more ways to use its benefits to generate sales, increase productivity, and communicate more effectively with consumers. Below is an interview with a leading expert in the field of electronic commerce, whose research sheds much light on the extremely significant impact of e-commerce on today's society.

Dr. Mahesh S. Raisinghani, faculty member at the University of Dallas, Graduate School of Management and director of research for the university's Center for Applied Information Technology, shares his expertise in the area of e-commerce.

---

Q: What is the state of electronic commerce today?

A: The 21st century projections suggest order-of-magnitude increases in both business-to-business and business-to-consumer e-commerce. The U.S. e-commerce industry ranks as the world's 18th largest economy, behind Switzerland and ahead of Argentina, according to the study conducted by the University of Texas' Center for Research in Electronic Commerce. The U.S. Department of Commerce predicts the volume of business-to-business e-commerce will increase from $8 billion in 1997 to $300 billion in 2002, and Jupiter Communications predicts the growth on the consumer side (including travel and tangible goods sold, but not financial services) to be from the current $7 billion to $41 billion by 2002. By the year 2003 worldwide e-commerce will approach $3.2 trillion and represent nearly 5 percent of all global sales.

Q: How is e-commerce evolving?

A: In stage one, companies digitize internal data. It is a publishing model without a significant impact on business processes. At the second stage, companies start thinking about reengineering a part of their business process. Integration with back-end systems begins and flow-through is the goal with a hands-off approach to particular processes. In stage three, companies move into original content, which may be highly interactive. With the goal of one-to-one marketing, a company seeks to develop profiles of the users accessing its sites so that they can be treated uniquely. In the fourth stage, companies that are fully enabled seek to achieve dynamic segmentation, in addition to developing basic user profiles.

Specifically, segmentation of site visitors is done in real time, based on user activity. For example, Infoseek targets ads on its Web search engine to users' interests based on their search tendencies by keeping track of every search made by the user. The Internet's ability to function as a micro marketing channel is also used by other sites that use customizing software to track user behavior and predict future user interests in order to boost sales of goods and services online.

Q: What are the various forms of electronic commerce?

A: B2C (business-to-consumer), B2B (business-to-business), B2E (business-to-exchange), B2G (business-to-government) and E2E (exchange-to-exchange).

Q: What are some of the opportunities of electronic commerce?

A: The Web offers unparalleled opportunities for customer-centric interaction. From data mining the behavioral information to using infomediaries, incentives and loyalty programs to provide mass customization in a high tech-high touch approach on a more personal level. Websites provide not only a direct contact between the organization and its customers but also present an opportunity for innovation in both the delivery and selling of the products. Neural networks and collaborating filtering are two of the newer systems used by companies to achieve one-to-one relationship.

The amount and content of information on the websites greatly depends the information intensity of the product/service of the company. For instance, low information-intensive products/services such as cigarettes, food and utilities, can be sold on-line without providing too much information for the customers since the customers are already aware of these products. Thus, the Web content does not require excessive information and hyperlinks to the related information on these products. On the other hand, customers like to have as much as information they can for high information-intensive products/services such as cars and insurance policies. Hence, websites of companies providing such products/services should include internal links and hyperlinks to all kinds of related information.

Q: What are some of the challenges?

A: Some of the primary challenges are adjusting to the competition in electronic markets, re-engineering distribution channels, addressing the security and privacy issues on the Internet, and applying strategic management to corporate alliance systems.

Q: What are the various systems of payment?

A: Electronic checks, credit cards, credit transfers, direct debits, electronic money-network money or digital cash, smart cards, and e-tokens.

Q: How are corporations being impacted by e-commerce?

A: Companies' decision to implement e-commerce mainly depends on the cost-benefit analysis. Yet, it is widely known that most companies can reach their customers easily through the Internet and thus increase their sales. There are numerous companies in the United States and outside United States that have been greatly benefiting from e-commerce.

Boise Cascade Office Products, which has subsidiaries in five countries has recently allowed one of its subsidiary to implement e-commerce so that all of its multinational clients can centralize their purchasing through the website. Trump Hotel & Casino Resorts Inc. is another company that has been utilizing e-commerce to take hotel reservation, sell tickets, and market merchandise. General Nutrition Center Inc. has been extensively employing its website to let its 2,500 franchisees to not only find out about the availability of products, but also reserve them in real time.

Financial service companies are the ones that are expanding sales through the Web faster than any other industries. Charles Schwab & Co. states that its active online accounts were 617,000 in 1996, 1.2 million in 1997 and 1.9 million on July 31, 1998. Its assets have increased by a total of $90 billion from $42 billion to $132 billion since 1996.

Q: How are corporations adjusting to competition in the electronic markets?

A: Being successful at e-commerce requires quick and comprehensive realigning of an enterprise's key elements; not just technology, but also processes, strategies and people. Successful e-commerce players streamline the customer's entire experience-from researching options, to customization, to ordering, from checking order status, to order fulfillment and delivery, through to payment, billing and after sale customer service, as well as input into new product development.

Q: What do you see for the future of electronic commerce?

A: Very bright! The Internet is still really in its formative stages and despite its early and dramatic impact on commerce, its final form is yet to be seen. The technology already developed assures that this dynamism will continue unabated for at least another decade. Although the effect will be revolutionary, the emergence of e-commerce will be evolutionary.

Dr. Raisinghani is a faculty member at the University of Dallas Graduate School of Management. He is the founder and CEO of Raisinghani and Associates, a diversified global software consulting and technology options trading firm. He has published in numerous scholarly and practitioner journals and served as a panelist on the Information Technology Research Panel and the E-Commerce Research Panel.