E-commerce effecting all business operations

E-commerce effecting all business operations

By Scott Desmarais

JAKARTA (JP): E-commerce is redefining businesses across the
globe. It is revolutionizing existing business models and calling
for new strategies appealing to Internet-ready businesses and
online consumers.

Emerging new online retailers, such as amazon.com and CDnow
have already established themselves as significant competitive
threats to traditional brick-and-mortar retailers. Dot.com stocks
continue to defy reality. The market valuation of amazon.com is
now six times larger than that of Barnes & Noble and Borders
combined. And amazon.com is barely three years old.

While e-commerce is still in its very early stages of
development, it appears almost certain that it will dramatically
alter the way nearly every corporation does business. Even in
Indonesia where e-commerce does not appear to be right around the
corner, companies, such as Indosat and Telkom, are developing
their own e-commerce strategies, while leading banks such as Bank
Bali are rolling out new online consumer retail services.

The critical question for Indonesian businesses is not whether
the Internet will effect your business. Rather, it is what you
should do now to position your business to take full advantage of
the opportunities e-commerce will offer.

In our extensive recent survey and analysis of the online
business-to-consumer market, The Boston Consulting Group (BCG),
together with the leading online retailer trade association
shop.org, found that online revenues generated by North American
retailers for the first six months of 1998 amounted to nearly
US$4.4 billion. Given current annual growth rates of about 200%
and the explosive surge in sales over the Christmas holiday
period, online U.S. retail revenues for all of 1998 will surpass
$13 billion, far above earlier predictions.

Although the breadth of products and services offered by
online retailers continues to expand rapidly, revenues are
currently concentrated in a few categories. Sales of computer
goods, consumer electronics, books, music and videos account for
approximately 42 percent of online retail revenues in North
America, with discount brokerages accounting for another 32
percent (see Chart I). BCG's e-commerce work in Asia and other
markets has revealed similar high concentrations in a few key
categories.

First mover advantage among online retailers is significant.
The 10 largest U.S. sites currently account for over 50 percent
of revenues. Moreover, the top three sites in each category
usually account for more than 50 percent of volume. Leading
online retailers such as amazon.com control 80 percent of their
category revenues, despite the frantic efforts of the world's
leading traditional booksellers to catch-up. Time-to-market,
word-of-mouth, and a convincing online shopping experience count
in today's Internet world. Size does not.

While the online consumer market dominates today's news, it's
the enormous potential of the far larger business-to-business e-
commerce market that will dominate tomorrow's news. Forrester
Research estimates that some $43 billion in business-to-business
e-commerce was done in 1998 and expects that number to soar to
$1.3 trillion by 2003 as businesses move rapidly online.

One example of how the Internet is redefining industry value
chains is VerticalNet, a collection of 33 industrial trading
communities providing leading industry editorial content, online
buyers guide, product search engine and sales-lead generation for
suppliers in its vertical markets. By moving these trading
communities online, VerticalNet has tapped into the significant
information, time and cost efficiencies of the Internet. Buyers
can more effectively issue RFPs/RFQs, suppliers can establish
their own online storefronts and advertise directly to a highly
targeted audience, and transactions that used to take weeks or
days to close can be completed in a matter of minutes.
VerticalNet's stock shot-up 184 percent on its first day of
trading last month, ranking it among the top IPOs in history and
confirming the potential of business-to-business e-commerce to
create value.

The e-commerce revolution is not limited to North America or
to Europe. Indeed, several markets in Asia are quickly moving up
the e-commerce evolution curve away from emerging technology
market status to a focus on enhanced services (see Chart II).

This acceleration will continue as convergence between
computer and media/television technologies provides increasingly
cheaper and easier access to the worldwide web. So while
Indonesia may not be the Internet hot spot today, there can be no
question that e-commerce will become a major factor in Indonesian
business in the future. E-commerce will effect your business. The
only questions are how soon and what you should do now to prepare
your company to take full advantage of the opportunities e-
commerce will present.

The writer is a staffer of the Boston Consulting Group who is
based in Jakarta