Our leaders have spoken. Stephen Byers, secretary of state for Trade & Industry, has taken up the baton from the gone-but-not-forgotten e-vangelist Peter Mandelson by committing our great nation to forging global leadership in an e-commerce revolution.
According to Byers, talking to the Confederation of British Industry recently: “Our vision is clear. One in which the UK is the leading digital economy in Europe with London as its digital capital. Making Britain a leader in the Information Age is central to the economic modernisation of this country.”
More than pontificating, at least the Government is attempting to do its bit in translating the hype into reality. As the UK’s biggest business, it has announced targets of procuring 90 per cent by volume of routine goods electronically by the year 2000 to 2001, and making 25 per cent of government services available online by 2001.
If the Government’s actions actually match its rhetoric, they may prove a stimulus for both business-to-business and consumer electronic commerce in the UK which, despite the coveted global-leader status, is lagging behind the US and some key European competitors.
Research company Forrester Research reports that major UK companies (and many of their European peers) are falling into the old pattern of me-too responses to technological change, by setting up underfunded and reactive Websites unable to reap the full benefits of the e-commerce era. Forrester is predicting that anything between $1.8tn (1.08tn) and $3.2tn (1.9tn) of business may be transacted globally in the e-commerce arena by 2003 – depending on how effectively big business and governments can co-ordinate the move online.
According to Joe Sawyer, an Amsterdam-based analyst with Forrester, the average budget for a major e-commerce Website project is running at about 1.2m. A significant amount – but well behind the estimated 4.5m for business-to-business and 8m for retail projects which Sawyer believes is necessary to gain market leadership.
Lower down the business scale, small- to medium-sized companies are attempting to grapple with the rhetoric-reality gap in order to shift their transactions online.
London-based wine merchant Bibendum, which has a turnover of about 20m – largely through business rather than retail clients – is attempting to revamp its Website.
Stephen Harrison, director of operations at Bibendum, is hoping the revamped site, which currently features a crude e-mail-based ordering facility, will result in full integration with the company’s stock control and billing systems.
“The reality is that moving through this barrier is far more problematic than many suppliers of e-commerce packages will initially admit,” Harrison says.
Yet the rationale for moving businesses fully to the Web is obvious. “Business-to-business is the most economically successful section of the Web, and so it makes sense to immerse yourself in the medium now, before a competitor eats away your market share,” says Lowland Hill, art director at FFwd Precision Marketing, whose clients include Bang & Olufsen, Sun Valley Foods and House of Fraser.
James Robertson, advertising team manager for Wilson Associates, says business-to-business Websites have traditionally been uncreative. “The tendency has been for them to act as the company’s corporate brochure transferred on the Web. This only proves that the company just has a site for the sake of it.”
Robertson believes the aim should be to provide extra services. “Customers are looking for something more lively and interactive. Some customers might want to make enquiries or purchases, while others might just want to understand more about the company. The ideal site should act as an all-encompassing marketing tool – advertisement, company brochure and a one-to-one presentation with a call to action.”
The problem with the “digitalisation” of business – particularly within the business-to-business sector – is that initiatives often try to face both ways. On the one hand, companies attempt to reap the cost benefits involved in saving transaction time and money in dealing with existing clients for largely routine, repeat-order business. On the other hand, they are also attempting to use the Web to broaden their net of potential customers and make new sales.
“The instant response available with e-commerce enables companies to shorten the time to market and gain immediate feedback and payment for their ideas, products and services,” says Michael Sharples, managing director of Stratum Media. “Those which can manage their supply chain to achieve competitive advantage in this way will be well placed to make the most of merging business-to-business opportunities.”
But the emergence of the Web as a credible business tool has also coincided with the acceleration of globalisation and deregulation in a number of key industries and markets, which has created new competitive pressures, adds Sharples. “In short, the Web offers the prospect of selling more products to more people in more places, but with lower costs, faster response and better flexibility than conventional channels.”
Chad Wollen, editor of Media Futures at The Henley Centre, agrees that in the short term, the business-to-business sector has the best opportunity, and faces the most acute competitive dangers from the digitalisation of its transactions. “Clearly the business sector is far more developed than the consumer market, because penetration of technologies into business is much higher. Of course, this means the market is developing more quickly,” says Wollen.
But as usual, the lead is being taken in the US, where companies such as Cisco and Dell Computers are trumpeting the cost-saving and marketing advantages of exploiting the e-commerce route.
“The big question facing those involved in business-to-business e-commerce is whether they see it as a way of generating new business, or just gaining the cost-saving advantage when dealing with existing business. Both are valuable, but perhaps the first strategy should not be focused on generating new business, but transferring existing processes onto the Net. That step-by-step approach will be more constructive,” says Wollen.
Businesses committed to exploiting the electronic channel should not, however, take their eye off the ball in the management of their existing marketing activities, says Wollen. “We shouldn’t see the Internet as a replacement technology,” he says. “You have to invest in all sorts of sales channels and you can’t ignore phone, fax, and face-to-face contact. Putting all your eggs in one basket is a risky strategy.”
Tom Vassos, senior e-commerce advisor at IBM Global Services, suggests various strategies for getting suppliers or customers dealing with your business electronically to ensure that cost-savings and marketing benefits flow from digitalisation.
“The obvious way is to incentivise your business partners, by offering price savings for dealing with your company electronically,” he says. It is a strategy which IBM pursues with its business partners, and which business stationery and office supplier Viking Direct is also implementing to help build sales though its transactional Website (www.viking-direct.co.uk). “Once you begin ordering online, you are more likely to continue doing so – you get customer lock-in,” adds Vassos.
He advocates avoiding the development of an e-commerce strategy in a vacuum. “In the business-to-business arena in particular, a large percentage of a company’s sales may come from a relatively small number of clients. So it should be easy to establish exactly who is ready and willing to take advantage of any electronic transaction facility you are able to offer,” he says.
“Meeting your business partners and finding out the stage they’ve reached should be a key part in the planning, launching and maintenance of any e-commerce strategies. If partners are likely to experience teething problems finding their way through an e-commerce interface, then why not offer a support line to take customers through what you are offering online?” suggests Vassos.
The urgency with which businesses should be transferring their activities online in the business-to-business sector may be more intense than for those in the consumer retail market. But a strategy, if not immediate action, is essential.
“We are going to see many relationships in the business-to-business sector turn inside out,” says Vassos. “In the US, we are beginning to see customers bidding prices to a panel of online suppliers.”
Wallon agrees: “We will see more ‘requests for tender’ models online for goods and services, which means businesses can widen the net for suppliers. We are also going to see more auction and online markets for goods. In many sectors, products will become more price sensitive.”
Internet World ’99
Internet World ’99 will take place from May 25 to 27 at Earls Court 2 in London.
The show has strengthened its position this year after a major investment from new owners, Penton Media. The Penton investment aims to improve the focus, promotional investment and logistical infrastructure of the show, which is now in its sixth year. Andy Center, marketing director of Internet World, says: “We doubled the promotional programme and the number of marketing staff for the show.”
Over 200 exhibitors and a wide range of free educational seminars are part of the attraction. Attendance at this year’s Internet World is expected to exceed last year’s figure of 12,342.
The show also includes the launch of NetVisions, a series of debates between industry leaders and pioneers who have implemented e-commerce strategies. The debates aim to educate and advise companies on the power of the Internet as a business tool.