Executives who think that the dot-com collapse, channel conflict, and consumer fears of identity theft have combined to make E-commerce strategy a low priority should think again. Ten years after Amazon.com and eBay made “E-tail” a household word, companies in many industries are taking a second look at E-commerce, and finding ways to overcome old problems and tap new opportunities.
Last year, E-commerce sales hit $69.2 billion, and while that equates to less than 2 percent of all retail sales, it is a startling 23.5 percent jump from the previous year. Analysts believe the online channel may account for 7 percent of all retail sales by 2010. That’s a potential increase of nearly $200 billion, which means companies that were turned off or got burned the first time around have plenty of incentive to try again.
And many are. No longer seen as a separate entity (with its own dreams of IPO glory), today’s E-commerce effort is framed as an integral part of a multi-channel sales-and-marketing strategy predicated on giving customers what they want the way they want it. That means company strategies vary widely. One retailer’s Website may sell a fraction of the inventory displayed at its stores, while another may sell quite a bit more. Some see their E-commerce platforms as the carrot enticing customers into their shops — or, if they are manufacturers, into the shops of their channel partners. Others see E-commerce as a way to reach customers who can’t, or won’t, shop any other way. Rather than build dot-coms because their competitors have them — often the motivation 10 years ago — companies today think deeply about the purpose of their E-commerce effort before giving it life.
They are also thinking about how to give it life, and again the lessons of the past are proving invaluable. Many companies have learned that they don’t need to build their own Websites or conduct postsale order fulfillment, inventory management, or customer service. If a business is built around shipping palettes to Nordstrom stores rather than shipping individual products to customers’ homes, why should it restructure its entire operation to accommodate the E-tail channel? There are a host of companies that will provide everything from Website software to logistical support to customer service — and some even provide it all. The upshot is that, far from worrying about being “disintermediated” by new Web companies, old-line firms can partner with these service providers and maintain their dominant positions.
“What’s really startling is that E-commerce is being dominated by traditional retailers, and not by entrepreneurial companies and travel Websites,” notes Bart Weitz, a professor and director of the Miller Center for Retailing Education and Research at the University of Florida. “During the last ten years, traditional retailers have learned how to use the Internet as a tool to develop better relations with their customers, to really know their [buying] preferences. When I walk into a store, nobody knows who I am. But when I venture into a company’s virtual store, I am a known entity with specific preferences. This information now carries over into all my interactions with that company.”