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The Advantages of ECommerce to the Small Business Owner

The Advantages of ECommerce to the Small Business Owner The Advantages of E-Commerce to the Small Business Owner Executives used to imagine their companies as the center of a solar system orbited by suppliers and customers. The Internet is changing that dramatically. Now the customer is becoming the center of the entire business universe. E-commerce relates to that part of e-business that includes transactions that involve money. The larger concept of e-business, however, goes well beyond buying and selling items on the Internet. E-business is about using information, technology, and resources to conduct business online. The processes of marketing your goods and services to your members, e-tailing, can be compared to a store front where you display products and solicit business from others. Local, national, and international organizations can utilize your products or services just as easily as the person next door. And because the Internet is not constrained by space or time, your competition can come from nontraditional sources. Having and online store means that a small company can look big without having to spend big bucks. Steve Solazo, Vice President of small and growing businesses for IBM Corp.’s software division in Somers, NY says, “The Internet can really help small companies improve their competitive posture. If they can move more quickly to make information available to their suppliers and buyers, they can get an advantage over their competitors” (McCollum, 34). With the emergence of the public Internet, small firms that can arrange to do business on the Internet stand to win big, since the Internet is supposed to eliminate the middleman by allowing companies to deal Recent surveys of small businesses and their owners reveal some intriguing facts. Bill Schumer, national small business banking marketing manager with BANK ONE says, “Small business with fewer than 10 employees account for nearly 80 percent of all U.S. companies (Providence Business News, 19B). According to the United States Small Business Administration, only 30 percent of the nation’s 24 million small businesses accept orders on the Web, and far fewer can process credit card transactions (Tedeschi, C12). Half of small businesses now have Internet access, and about 20 percent have established their own website, according to results of a national survey commissioned by the Small Business Banking Group of BANK ONE CORPORATION (Providence Business News, 19B). A study conducted by the University of Texas reports that the Internet economy generated more than $300 billion in U.S. revenue in 1998. A company may expect to receive more than 50 percent of all revenues via e-commerce in the next two to three years (Richter, 48). The core of e- commerce is between businesses, and this segment is thriving. Business-to-business e-commerce makes up the largest portion of Internet commerce, with sales totaling $8 billion in 1997, according to Forrester Research, a market-research firm in Cambridge, Small business owners identified their websites as one of the most effective tools for generating interest in their small businesses (13%), better than direct mail, radio, television and telemarketing. Only word of mouth (25%) and newspapers (15%) were considered more effective (Providence Business News, 19B). One increasingly popular approach is to offer “all-in-one” e-commerce packages, in which merchants pay a nominal monthly fee for software that enables them to build a site that is then hosted by a third party (website hosts) – sparing the client the cost of Web servers and fast Internet connections. For $100 a month, digital entrepreneurs can post their store on Yahoo’s site and offer as many as 50 products for sale. The more products offered for sale, the higher Yahoo’s monthly fee. Yahoo offers a host of additional features. It aggregates orders and sends them via fax to the store owner for processing, encrypts credit card numbers during processing and offers a shopping cart feature, so customers can pay for multiple products at once (Tedeschi, C12). If you want to launch a website for your company, you can hire a website hosting company like Yahoo to house and maintain server equipment, or you can start from scratch. If you choose the do-it- yourself route, there are several kinds of servers available that are geared toward small businesses. These include Microsoft’s Internet Information Server 4.0, IBM’s new Netfinity 3000, and Hewlett-Packard’s NetServer E 50. All three servers are priced between $2,000 and $3,500. But buying the server equipment is only the beginning. You’ll also need to choose a network infrastructure; the type you select will depend on the size of your business, how tech-savvy you are and how often you plan to modify your catalogs. Some good midrange packages are Catalog Builder from The Vision Factory, iCat Electronic Commerce Professional Suite 3.0 from iCat, and Microsoft Site Server 3.0 Commerce Edition. These packages cost between $1,495 and $9,995 and include features such as indexing, searching, and a virtual shopping cart (Campanelli, Perhaps the most overlooked aspect of e-business is the potential for decreasing expenses. Companies are finding that developing a full-featured website has the potential to decrease phone calls, shorten transaction time, reduce publishing and mailing costs, and more. Owners report they spend as much time on trips to the bank (18%), inventory (18%) and payroll (9%) as they do on customer service (44%). Time spent on these administrative activities translates to lost productivity. The survey offered clues to what small business owners will be doing to gain more time. Currently, almost six percent of small business owners report they bank through the Internet, with nearly all of these businesses listing “convenience” and “ease” as the reasons they bank online. Jane Applegate, noted small business expert, newspaper columnist and author of 201 Great Ideas for Your Small Business, comments that moving to online banking is an easy way for small businesses to increase productivity. “Online banking is a time- saving convenience. With online banking, you can track accounts, transfer funds and pay bills at any hour you choose without ever leaving your office,” she states (Providence Business News, 19B). Some companies hope to reduce costs by eliminating the need to hire workers for data entry. They also expect to spend less per transaction than they currently spend sending documents by regular mail. Alternative uses of the Internet in e-business are found frequently. Johnson Diversified Products Inc., a St. Paul, MN company uses a digital camera to document equipment trouble at customer locations. Currently, they transmit those images to the customers via a direct- dial modem link or by posting them on the company’s online business center at InterTrade’s website (Callaway, 90). There are many examples of companies using the Internet to boost revenue and customer satisfaction while decreasing workload and expenses. Here are a few: 1. Ford and Microsoft – leaders in their respective industries – forged an alliance that may have a big impact on the future of online car buying. By early 2000, customers will be able to configure the car of their dreams on Microsoft’s CarPoint website. For now, the majority of car buyers are still using the Internet as a place to research rather than buy. General Motors’ BuyPower site provides access to a vast inventory of cars, though shoppers still have to go to a dealer to close the sale (Fortune, 42). 2. The Internet is bringing on a pivotal change in manufacturing economics: Custom manufacturing can be cheaper than mass production. Cisco Systems Inc. out sources most production to contract manufacturers that operate 37 factories, all linked via the Internet. Suppliers not only make all the components and perform 90% of the subassembly work but even do 55% of the final assembly. So suppliers regularly ship finished Cisco computers to Cisco customers without a Cisco employee ever touching the gear. The result is “savings of between $500 million and $800 million this year” (Business Week, 103). In addition, roughly 80% of Cisco’s sales are generated on its website. Customers use a program that walks them through the task of configuring a system to fit their specific needs. Cisco needs fewer salespeople, technicians, and paper-shufflers. “We can go from quote to cash without ever touching a physical asset or a piece of paper,” boasts executive vice-president Donald J. Listwin (Business Week, 3. David Lord, CFO and CIO of Holt Educational Outlet, said, “Because we wanted to compete with the big guys and grow nationally, and because we knew we didn’t have the kind of money to invest in our own stores across the nation, we believed if we put the proper e-commerce plan in place, we might just be fast and aggressive enough to grow quickly.” Their website, which Lord says cost about $50,000, took about nine months to take off. Paul Holt, CEO, says all the hard work has been worth it: His company is now considered a major player in its industry, with projected sales of $2 million this year. And it recently entered into an agreement with Playmobil USA, which provides Holt with the exclusive first rights of distribution to sell some of its toys online Browning Rockwell, CEO at Trade Compass, believes “that the Internet has made it possible for small companies to have global aspirations” (McCollum, 34). One of the greatest challenges facing newcomers to the e-commerce arena is setting themselves apart from the pack. Trading online requires companies to do more than simply set up a site to promote their goods and provide information about their businesses. The real go-getters are using the World Wide Web to take orders and payments. Here are some basic steps to take in setting up a competitive website: 1. Recognize that the longer you wait, the more difficult the task is likely to become. While you’re waiting, more competitors are likely to get farther ahead of you. So get moving. 2. Determine what your customers want. The most important thing is to know what your customers want and deliver more value than they expect. 3. Add e-commerce features at the outset. Many websites fail because they aren’t equipped to handle financial transactions. Third-party services enable small firms to trade with other companies through secure websites using a web browser. Companies including IBM Corp., Microsoft Corp., Netscape Communications Corp., Oracle Corp., and Sterling Commerce Inc. sell e-commerce software that lets businesses set up online catalogs, process orders, take credit-card payments, and download transaction data into their Bibliography: Works Cited Callaway, Erin. “Playing with the big boys.” PC Week 15 Sept. 1997: 90. Campanelli, Melissa. “Setting up shop: e-commerce is booming. Here’s how you can get in the game.” Entrepreneur Aug. 1998: 43+. “Customers Move into the Driver’s Seat.” Business Week 4 Oct. 1999: 103+. “E-Commerce Cars: Online auto sales climb the next hill.” Fortune 1 Dec. 1999: 42. McCollum, Tim. “E-Commerce Takes Off.” Nation’s Business Oct. 1998: 34. Richter, Randy. “Minding your own e-business” Association Management Sept. 1999: 48+. “Small businesses find value on Internet, Website.” Providence Business News 23 Aug. 1999: 19B Tedeschi, Bob. “Turning small businesses’ Internet dreams into reality.” New York Times 11 Oct. 1999: C12.

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