September 2001

BY TRACEY E. SCHELMETIC, MANAGING EDITOR, CUSTOMER INTER@CTION SOLUTIONS

Recently, e-commerce has been associated with some fairly humiliating phrases..."dot gone" and "dot bomb" being just two of them. At times, e-commerce has become almost worthy of a snicker when the term comes up in conversation, and lately it's hard to open a newspaper without reading about "pink slip parties," which former dot com employees attend to network, write resumes (which they didn't need during the venture capital boom), learn that flip-flops and cut-off jeans are not appropriate work attire in the real world and finally, come to accept that the fairy-tale employment they have experienced in recent years has disappeared as spectacularly as Cinderella's royal ball accessories at midnight.

From the sounds of the media, you would think that e-commerce was a landscape of post-Armageddon. That must be why e-Bay is experiencing 150 percent growth this year.

Want to know a secret? Total e-commerce sales have been predicted to grow somewhere in the area of 40 percent this year. Jupiter Research discovered that, from April 2000 to April 2001, the growth of the adult online population increased 18 percent. A study by the National Association of Purchasing Management and Forrester Research indicates that business-to-business e-commerce is still in its infancy, with nearly unlimited potential to grow. A survey conducted by both organizations revealed that 84 percent of companies polled indicated they would be moving forward to implement e-procurement sometime in the next 12 months. This growth is modest compared to what's happening off-shore. Boston Consulting Group has reported that Asian e-commerce continues to double annually.

Don't get me wrong...I understand that this industry has taken a major hit to the collective solar plexus. Amazon seems to be hanging on moderately well, though probably not flourishing, despite a company spokesperson's recent affirmation that, "We've got piles of moolah." It is generally acknowledged that the implosion of many players on the e-commerce stage, most notably the ones headed by 23-year-old CEOs, has enabled the companies left standing to reap more profits due to Web-enabled natural selection. Travelocity is doing fairly well, though rumor has it that Expedia is in trouble. This is a no-brainer to me...in my view, Travelocity is the better company.

Old Dogs Have Learned New Tricks
Research firm McKinsey & Company recently unearthed a fascinating statistic: three-fourths of the most successful e-tailers are online channels of existing, established brick-and-mortar companies. Someone a long time ago put forth the radical theory that a company needs a business plan to survive in the long-term. Web-based companies slapped together on a Saturday afternoon in someone's home office are not likely to have as sound business plans as a company like Eddie Bauer that has been around for generations. Three years ago, the retail giants were laughed at for their hesitant and puny efforts to join the e-commerce party. Today, they are the ones left standing. Methinks there's a lesson to be learned in that.

Here's another interesting trend. In the days of yore (one or two years ago), many Internet-savvy consumers indicated that when it came to shopping for larger ticket items such as audio, video and computers, they would do their research online before heading down to a large electronics superstore such as Circuit City to make a purchase. Today, many people have taken to wandering the aisles of the large electronics stores to see and touch items, and then return home to make their purchases from online electronics e-tailers. Why not? Online returns policies have improved about a thousand percent since the early days of e-commerce and in many instances, there is no sales tax on items purchased from e-tailers. Not to mention the fact that buying online enables you to spend the time you would have dedicated to getting to the mall on some vital task such as sleeping late or reminding yourself what your family looks like.

Trying Not To Antagonize Your Customers Helps Immensely
E-commerce companies that continue to grow seem to be the ones that better understand CRM and what it means to their firms. There's no question...purchasing over the Internet is as popular as ever and will continue to grow. What many e-tailers didn't foresee is that the Internet business model enables customers to be fantastically fickle, and all it takes is one misstep to lose a customer forever. Good self-service is worth its weight in rubies, but it should never entirely replace human interaction. As a result, it becomes fairly safe to conclude that the e-businesses still standing today are the ones that screwed up CRM the least.

The survivors have another thing in common: easily navigable Web sites. Remember some of the disastrous Web sites that first appeared three or four years ago? The designers sacrificed ease-of-use for art and profundity, with the result that many potential buyers arrived on the site, admiringly commented, "Ooooh, pretty" and logged off to find a site that was easier to use. Part and parcel of ease of use is a friendly and comprehensive search engine, and this is another element you will find on the sites of the little e-tailers who could. Search engines driven by natural language processing are rapidly gaining in popularity as they allow shoppers to pose questions in much the same manner they would to a live store representative. For instance, "I would like to compare brands of digital cameras in the mid-price range." Not only do searches conducted with natural language processing help the customer, the technology can also help the e-tailer understand what its customers want and how they want it.

Privacy, Please
Yet another element that has helped some e-tailers remain strong is the issue of privacy. Many companies with Web channels have had some decisions to make in the last year: collect customer data and e-mail addresses and sell the information for a price to boost sagging profits, or prominently reassure customers that their information is private and will remain so in the future? The former choice represents a short-term fix and the latter choice is the ticket to the long-term payoff. Many companies that sold customer data from the get-go or made a decision later to sell information seemed to think that their activities would not be noticed, or that the average consumer wouldn't care if they received a few extra spams brought on by the sale of their personal information. This was a serious miscalculation...in a crowded information age of little free time and space to breathe, most consumers are becoming rabidly protective of the little privacy they have. More importantly, e-tailers and Web marketers that chose to collect information from children not only earned the ire of parents, they began to draw fire from federal and state regulators.

The way I see it, the vast majority of companies that made a go at succeeding in e-commerce only to fail a year or two later are like kids who begin playing with a complex toy and give up in a huff when they can't operate the toy based on the fact that they didn't read the instructions. All's well and it ends well...the toy becomes available to the kid who values it and knows how to use it.

The author may be contacted at tschelmetic@tmcnet.com.

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