Electronic Commerce - Is It Hype or Is It Reality?
LaRoyce E. Morgan
LaRoyce E. Morgan, Project Manager, BellSouth Telecommunications, Inc., Atlanta, GA 30375, 404/420-6488,email@example.com
84th Annual International Conference Proceedings - 1999
Abstract. Over the last few years the Internet "Web" transitioned from a source of entertainment to an infinite source of knowledge. The Internet has long left its days of research logs and chat-rooms. An abundance of information at our fingertips allows us to make business decisions and facilitate processes using a common platform.
Electronic business makes it possible to have real-time ordering, shipping and warehouse management, financial reporting and replenishment notification. The Internet is a cost-effective means to eliminate redundancies and automate processes throughout the supply chain from the supplier, to the customer, to the shipper, to the bank.
Electronic Commerce is a modern methodology that addresses the use of information technology as an essential enabler of business. We can now expedite MRO (Maintenance Repair and Operations) transactions that are 80 percent of most corporate purchasing activity.
Objective. This article will provide an update on issues that apply to the reality of the web's presence in the business arena. Early adopters did not realize the growth potential of doing business on the web until 1996. We will see how laws are being applied, how marketing and customer service concepts are changing, and discuss lessons learned from the early adopters. We will examine the creation of standards for an open architecture, and finally evaluate the next generation of implementation tools.
Statistical Data/Demographics. According to the Nielson Media Research/CommerceNet study the growth rate of Internet use increased from 22 million in 1996 to 38 million in 1997. From 1997 to June, 1998 the average rate increased another 36 percent. As of June, 1998, the number of on-line shoppers grew to 48 million, an increase of 37 percent from September, 1997 and 20 million web purchasers, an increase of 100 percent from September, 1997.
1998 survey results show 79 million users of the Internet and 68 million accessed the World Wide Web (WWW). The top five on-line items purchases were: books purchased by 5.6 million people; computer hardware purchased by 4.4 million people; computer software purchased by 4.0 million people; CDs/cassettes/videos purchased by 3.4 million people; travel 2.8 million purchased by people and clothing purchased by 2.7 million people. 71 percent of the purchases were made by men, 29 percent by women. The top item purchased by men was computer hardware and the top item purchased by women were books.
Contracting Issues. The validity of digital versus handwritten signatures has been a contributing factor to the slow down of major expansion of corporate purchasing on-line. Questions arise over electronic acceptance of goods, e.g., e-mail messages.
An agreement under common law prevails when: 1) the offeror has true intention to become bound by the offeree; 2) the terms of the offer are reasonably certain or definite, so that the court can determine the terms of the contract; and 3) the offer is communicated by the offeror to the offeree. Therefore, there must be 1) clear identification of the parties, 2) identification of the object or subject matter of the contract, 3) consideration to be paid, and 4) the time of payment, delivery, or performance. If these four items are stated in the agreement the contract is definite.
Experts feel that since the sale of goods are electronic, there should be little difference in applicable Uniform Commercial Codes (UCCs). Contracts should still be covered by common law. Common law declares a signature as handwritten, typed, or printed; it can be made by a mark, by thumbprint, by machine, or basically any manner. The requirement of a signature binds an agreement and determines whose obligation it represents. Signatures are used as a means to verify a writing. Parol evidence (courts determine what can be permitted as evidence to written contracts) can be used to identify the owner of the mark. When this link is made the signature is valid no matter how it is made.
Common law can rule over the Internet jurisdiction with minor modifications. These laws should be analyzed immediately for their feasibility as businesses can't wait for lengthy deliberations. Care must be taken when developing contract processes to ensure the contract is enforceable.
Standards. Open Buying on the Internet (OBI) is a designed framework for business-to-business Internet commerce opportunities. It provides details for an architecture and technical specifications. The OBI Consortium supports the guidelines. The architecture is based on the premise of process ownership and associated business processes. Organizations with buying power are interested in account data, taxes and profiles of purchasers. On the other hand, companies that are sellers are more interested in electronic catalogs, prices, quantities, shipments and order entry. The OBI allows for buying and selling processes to operate in a seamless environment.
The greatest benefits of the OBI standard will become more apparent as the newly created standard is widely adopted. A trading web will develop as sellers and buyers use the standards with their trading relationships. Using the standard will also provide less limiting factors for electronic commerce.
As we approach the millennium, the information age is creating a business environment undreamed of a few short years ago. Antiquated network infrastructures must give way to new Enterprise Resource Planning Systems (ERPs) that include OBI standards. It has been stated that those companies that move forward quickly to incorporate electronic business early will create competitive marketing opportunities. Those who wait will face entry barriers to the market place.
Marketing on the Internet. Marketing strategies should be driven by:
- business culture
- desired customer demographics
- marketing objectives
- brand loyalty
- customer service
- surfer to customer conversion
- targeted traffic growth, customer service
- brand equity
As we mentioned earlier, there are on-line buyers and sellers. There is some reluctance to give minute on-line product details. The marketing objective is to lure visitors to move to the next step which is contacting the corporation for more information and promotion.
Sellers are more apt to provide details that interest purchasers, i.e., pricing, shipment and payment information that would allow for spontaneous sales electronically. Marketing on web sites should include three components: 1) product concepts and added value information, 2) catalog information, and 3) order processing.
Customer Service. People using the Internet still want to talk to a live person. The human side has to be considered. The Internet is a potential boon to budget-conscious companies. According to Forrester, a 5,000-employee business with $650 million in annual sales, during the course of a three year rollout using the Internet reduced the cost of customer contact by 43 percent and allowed the company to provide the same level of service with 12.5 percent fewer customer staffers. Early adopters expect to shift almost one-fifth of their customer service contacts from the phone and fax to the Internet, according to a survey by Forrester.
New Tools. The future will provide service applications that rely on knowledge-based systems, software and hardware that afford on-line access to live customer service representatives via separate phone connections. Some systems automatically handle 60 percent of incoming calls within five seconds, stated the president of American Finance Investment, Inc.. After eight months use, it enabled American Finance to reduce its customer service staff from four to two, despite a 400 percent increase in e-mail traffic.
It is projected that virtually all types of transactions will transpire electronically, e.g., appointments, credit cards, meetings, and big-ticket purchasing. As the idea of electronic business spreads, companies will begin to recognize the magnitude of savings, customer service, revenue generation, and marketing opportunities that it will provide. This concept will allow them to stay on the competitive edge.
Lessons Learned. The essence of business to business discussions center around lessons learned and security. As the desire to move forward with more Internet activities prevails some reluctance comes to view because of the security issue. We don't want everyone in our systems. We aren't sure of laws that limit us. We are sure of the way we are doing business. At first the Internet was basically hype. We had a new toy that could be advantageous to all of us. The information age has lead the shift to a paperless environment. We have realized the need to become more effective and to provide the best service in ordering and delivering products. This service is centered around having systems that would truly decrease personnel while improving customer care. It is crucial to maintain the human side of customer service when it comes to the Internet.
Lessons learned are as follows:
- there should be a clear navigation path for user
- the merchant contact name and phone number should be on every page
- site should be separated into market segments
- search program will enable visitors to determine what products they might want
- web sites should be planned
- security needs should be transparent to the user and should flow from the time of the transaction to the time it is processed
Conclusion. The use of the Internet is not a fad but the beginning of the next business revolution. For the first time, organizations can create personalized relationships with each of their clients. Companies can no longer think of market share. They must think of mind share and customer share. The real value of the Internet lies in mass customization. For the first time, you can reach a large number of people and establish a personal relationship with every one of them. The information can be customized and adjusted on the fly, so that the web browser sees only what they requested. Behavior can be tracked, the internet can be used to create unbeatable levels of responsiveness and client loyalty. Web sites are divided into three distinct generations:
- First generation sites are based in the assumption that the Internet is essentially similar to existing broadcast media.
- Second generation sites have feedback mechanisms and response vehicles such as e-mails, or forms that visitors can complete.
- Third generation web sites tap the Internet's full potential as an interactive and customized experience for each visitor. Information is created on the fly. The behavior of visitors can be traced to the smallest detail. How often do they visit? What is being requested? For how long?
Third generation web sites become "mission-critical" core of a business. Typically such web sites are integrated into tracking, market research, sales, inventory, order fulfillment, and other back-end systems. Technical benefits are also offered. All pieces of the system are stored in one central object-relational database; web pages, images, text, audio, video, business data, executable code, and system logic and rules. This enables full security, back-up, roll-back and recovery, version control and transaction integrity. Without such a foundation it is impossible to reliably conduct mission critical business or electronic commerce on the Web.
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