The eVolution of eCommerce

The second major expansion of the Internet, in the latter half of the 1990’s, was a heady and exciting time. The ‘net itself transited from an almost impenetrable text-only galaxy occupied by geeks and researchers sharing code, data and results, to a graphical hyper-linked universe with non-technical users sharing, well, just about everything.

Internet growth was, and continues to be, exponential, with the number of users on-line doubling every 18 months or so. With a potential market like that, it didn’t take long for people to think they could make a fortune selling things over the Internet.

It started with the small companies — the large ones were too big and slow moving to realize the advantages of Internet based transactions (eCommerce, as it came to be known). Flowers, gifts, books, porn — on-line retailers popped all over the world. And for a few, the business worked.

But rarely was it easy. Retail never is, and electronic selling introduces many additional issues which must be appropriately managed. The need for extremely strong network and computer security, reliable networking services, and a credit-card company which understands the issues of accepting Internet payments (a rarity in Canada) are only the start.

Now that the bubble has burst, many of the early players have closed up shop, realizing there just wasn’t a business to be made. This is a bit ironic, when you consider that the percentage of Americans who are now on-line has just passed 50%, and consumers are finally becoming comfortable giving their credit card number over the Internet.

Not that eCommerce is dead. Far from it — it’s just being carried out by, generally, bigger and more serious players. And to a large degree, the exchange is not with end consumers (so called B2C), but instead between businesses (B2B). This carries less risk for the businesses involved, as each side will have the technical and legal expertise available to ensure the transactions are secure and binding.

GE is a good example of this, with their Global eXchange B2B system. Using the Internet as a cheap networking infrastructure, business can buy and sell products and services through the eXchange in a fully secure and legally enforcible manner. Walmart is another, who in addition to selling to consumers at their web-site, also keep in constant touch with their suppliers through the ‘net.

And thus trend is emerging: the Internet is no longer seen as a potential gold-mine with millions of consumers dying to buy online, but instead is being viewed as a cost-effective way for existing businesses to stay in contact with their partners. Instead of using expensive leased lines to exchange Electronic Data Interchange (EDI) messages, the ‘net is used to pass encrypted XML data packets or simple HTML pages.

For individuals and small businesses, this all has major upside — as consumers. It means our suppliers work more efficiently, and we can get details on our banking transactions and shipping status (for example) without dealing with an overworked human, or waiting for the paperwork to show up weeks later.

On the other hand, those who still want to make their fortune selling products or services over the Internet should seriously consider if they or their organization have the resources required. Small businesses who already have a product line may be able to increase their sales online, but again, it’s not easy.

And it’s important to remember than consumers don’t just want to buy online — they want to know everything about the product they’re buying. A short description and a “Buy Now!” button doesn’t cut it; detailed information, reviews, and customer feedback all help convert browsers to sales, not to mention easy and secure credit-card handling. If a site doesn’t offer all this, most people will find somewhere that does — like a physical retail store.

For those chasing this holy grail, online book-seller Amazon.com’s forth-quarter results, where they actually made their first net profit, should be encouraging — it is actually possible to make money online. On the other hand, considering how many hundreds of millions of dollars they’ve spent on their infrastructure and marketing, no one should believe success can be achieved online without serious effort.

Published in the Victoria Business Examiner.