E-commerce effecting all business operations<\/p>\n
By Scott Desmarais<\/p>\n
JAKARTA (JP): E-commerce is redefining businesses across the
\nglobe. It is revolutionizing existing business models and calling
\nfor new strategies appealing to Internet-ready businesses and
\nonline consumers.<\/p>\n
Emerging new online retailers, such as amazon.com and CDnow
\nhave already established themselves as significant competitive
\nthreats to traditional brick-and-mortar retailers. Dot.com stocks
\ncontinue to defy reality. The market valuation of amazon.com is
\nnow six times larger than that of Barnes & Noble and Borders
\ncombined. And amazon.com is barely three years old.<\/p>\n
While e-commerce is still in its very early stages of
\ndevelopment, it appears almost certain that it will dramatically
\nalter the way nearly every corporation does business. Even in
\nIndonesia where e-commerce does not appear to be right around the
\ncorner, companies, such as Indosat and Telkom, are developing
\ntheir own e-commerce strategies, while leading banks such as Bank
\nBali are rolling out new online consumer retail services.<\/p>\n
The critical question for Indonesian businesses is not whether
\nthe Internet will effect your business. Rather, it is what you
\nshould do now to position your business to take full advantage of
\nthe opportunities e-commerce will offer.<\/p>\n
In our extensive recent survey and analysis of the online
\nbusiness-to-consumer market, The Boston Consulting Group (BCG),
\ntogether with the leading online retailer trade association
\nshop.org, found that online revenues generated by North American
\nretailers for the first six months of 1998 amounted to nearly
\nUS$4.4 billion. Given current annual growth rates of about 200%
\nand the explosive surge in sales over the Christmas holiday
\nperiod, online U.S. retail revenues for all of 1998 will surpass
\n$13 billion, far above earlier predictions.<\/p>\n
Although the breadth of products and services offered by
\nonline retailers continues to expand rapidly, revenues are
\ncurrently concentrated in a few categories. Sales of computer
\ngoods, consumer electronics, books, music and videos account for
\napproximately 42 percent of online retail revenues in North
\nAmerica, with discount brokerages accounting for another 32
\npercent (see Chart I). BCG's e-commerce work in Asia and other
\nmarkets has revealed similar high concentrations in a few key
\ncategories.<\/p>\n
First mover advantage among online retailers is significant.
\nThe 10 largest U.S. sites currently account for over 50 percent
\nof revenues. Moreover, the top three sites in each category
\nusually account for more than 50 percent of volume. Leading
\nonline retailers such as amazon.com control 80 percent of their
\ncategory revenues, despite the frantic efforts of the world's
\nleading traditional booksellers to catch-up. Time-to-market,
\nword-of-mouth, and a convincing online shopping experience count
\nin today's Internet world. Size does not.<\/p>\n
While the online consumer market dominates today's news, it's
\nthe enormous potential of the far larger business-to-business e-
\ncommerce market that will dominate tomorrow's news. Forrester
\nResearch estimates that some $43 billion in business-to-business
\ne-commerce was done in 1998 and expects that number to soar to
\n$1.3 trillion by 2003 as businesses move rapidly online.<\/p>\n
One example of how the Internet is redefining industry value
\nchains is VerticalNet, a collection of 33 industrial trading
\ncommunities providing leading industry editorial content, online
\nbuyers guide, product search engine and sales-lead generation for
\nsuppliers in its vertical markets. By moving these trading
\ncommunities online, VerticalNet has tapped into the significant
\ninformation, time and cost efficiencies of the Internet. Buyers
\ncan more effectively issue RFPs\/RFQs, suppliers can establish
\ntheir own online storefronts and advertise directly to a highly
\ntargeted audience, and transactions that used to take weeks or
\ndays to close can be completed in a matter of minutes.
\nVerticalNet's stock shot-up 184 percent on its first day of
\ntrading last month, ranking it among the top IPOs in history and
\nconfirming the potential of business-to-business e-commerce to
\ncreate value.<\/p>\n
The e-commerce revolution is not limited to North America or
\nto Europe. Indeed, several markets in Asia are quickly moving up
\nthe e-commerce evolution curve away from emerging technology
\nmarket status to a focus on enhanced services (see Chart II).<\/p>\n
This acceleration will continue as convergence between
\ncomputer and media\/television technologies provides increasingly
\ncheaper and easier access to the worldwide web. So while
\nIndonesia may not be the Internet hot spot today, there can be no
\nquestion that e-commerce will become a major factor in Indonesian
\nbusiness in the future. E-commerce will effect your business. The
\nonly questions are how soon and what you should do now to prepare
\nyour company to take full advantage of the opportunities e-
\ncommerce will present.<\/p>\n
The writer is a staffer of the Boston Consulting Group who is
\nbased in Jakarta<\/p>",
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