Never since the Industrial Revolution has the world of business undergone such a fundamental change as the electronic commerce revolution now underway. The era of e-commerce is upon us, bringing in its wake a massive shift in emphasis in business operations and consumer expectations.

The impact of this new technology is widely viewed as a total restructuring of the entire business process; the ability to effectively implement such changes will divide the market into winners and losers. "There will be a culling of businesses", says Robert Bloor of Bloor Research. "For large and medium-sized corporations, there is a growing imperative to understand how they can survive and prosper in the next 10 years."

The true facts and implications of electronic commerce are however, somewhat elusive. Technologies are evolving so quickly that companies are struggling to keep up. The growth rate of e-commerce outstrips the telephone and any previous innovations. Moreover, the evolution is organic and anarchic, being continuously re-fashioned by the latest technologies to emerge.

In Europe - unlike the USA - many companies seem reluctant to embrace the medium, investment capital is lagging and there is a notable management wariness and until recently there has been government reluctance to welcome its possibilities. This may be explained by higher costs, a smaller customer base and cross-border issues.

It also points to bewilderment and fear on the part of British business. To what extent is this wariness justified?

While perceptions about electronic security are substantially diminishing as familiarity with the medium grows, the lack of company vision that plagues e-commerce persists: the vast majority of British companies are reacting technically rather than strategically.

Of the UK's biggest 100 companies, 96% use some form of e-commerce - but on-line trade is rare, budgets are surprisingly small and e-commerce is usually poorly integrated with existing systems.

Larger companies are suffering most of all: while only 25% of web businesses with more than 50 employees were successful in 1997, 50% of those with 10 employees or less were prosperous. Initial impulses of excitement and panic have resulted in massive and poorly planned investment of resources which, in many cases, has actually decreased productivity.

The results have been widespread disillusionment amongst top management amongst top management levels and a market place characterised by lack of knowledge and purpose. The absence of high level strategy and vision is the most pervasive challenge being faced.

 

Reaping the Rewards

Some companies however, are succeeding in reaping massive rewards. In Britain, companies such as Ideal Hardware, Blackwell's and Thomas Cook have all seen their commitment to intelligent and integrated on-line trade bring quantifiable business benefits. The financial reward for enterprising companies looks set to increase exponentially.

The key to success, according to numerous industry analysts, lies in a wholesale shift in attitudes towards the medium. Those companies able to intelligently select, implement and creatively use the technologies are already cornering a market which they are likely to keep in the years to come.

Predictably, software and financial and information services have a natural affinity with the medium, as they can be ordered, paid for and delivered electronically. It is in these sectors that most successes are presently found, perhaps explaining why it is business to business (not business to consumer) operations reaping the greatest rewards. By 2002, Forrester Research suggests, business to business trade will be worth $327 billion. In the physical goods business to consumer sector, computer equipment, books and CDs constitute the main success stories.

Internet trade presently tends to cost more than is recouped. The true reward however, is an investment in future success. Amazon (www.amazon.com), the oft-cited American success story - which in 1996 took sales worth less than $16 million and in 1997 $148 million - is still running in the red. It has however, secured a far more valuable prize: an 18 month market lead and a vast customer base, simply by having the vision to break down the elements of traditional book sales and rebuilding a new, electronic model.

 

On-line Business Grows Rapidly

The future of these trailblazers looks bright. Presently, global sales attributed to the Internet (both directly and indirectly) constitute nearly 5% of total sales. In 5 years time, this number is expected to rise to 35%. IMRG forecast that on-line sales in the UK alone will stand at £10 billion by 2001. In May 1997 global electronic commerce generated $750 million, in May 1998 it generated $2.3 billion, by the end of 2002 it will generate over half a trillion dollars.

Throughout the last three years, traffic on the Internet has doubled every 100 days. Presently, 20 million European devices are connected to the Internet. By 2001, this figure is likely to increase to 67 million, of which 12.25 million will be in the UK. The imminent introduction of low cost television set-top boxes into European homes looks set to further increase the use of the Internet as a trading medium. By 2008, it is expected that 1000 million devices around the world will be linked to the Internet.

The automation of commerce heralds massive changes in the shape of the market place. In the future, successful companies will have to be economic, proficient at communicating and customer-centric, providing easier, cheaper, more flexible or niche products. Thomas Cook (www.thomascook.co.uk) has attracted a vast new customer-base by providing comprehensive and customer-friendly travel services online.

Partnerships are likely to proliferate, reducing the costs and risks of e-commerce. Fleet Web (www.fleetweb.co.uk) is a case in point, consisting of a number of companies offering various services and transactions in the acquisition, maintenance and disposal of fleet vehicles.

The Internet has proved to be a great leveller, in which small and medium-sized enterprises can realistically expect to snatch customers from the big players in traditional markets. The Co-operative Bank (www.cooperativebank.co.uk/internet_banking.html), by no means a major player in traditional UK banking, is the first UK clearance bank to offer free, full online banking to all of its current account and credit card customers.

Thus we see a market which is indeed polarising, often unpredictably, into "leaders and laggards", those who embrace the technology and those who do not. A general reluctance at high levels of European business, together with the rash and non-integrated implementation of technologies and an anarchic, technology-led evolution has led to widespread confusion and inertia. And while we sit back and wait to see the results of the risk-takers, they are stealing substantial market-shares from under the noses of bewildered businesses.

Companies may regard electronic commerce as either a threat or an opportunity. The perception of the medium which companies choose to adopt now is likely to determine that company's future in an entirely new and almost unrecognisable market place.

 

Building Trust

For companies engaging in e-commerce, consumers' security concerns are the most critical barrier to market success. A recent study by Cheskin Research reveals consumers are most likely to trust e-commerce sites with the following qualities: