E-COMMERCE - Far sited

E-commerce is the way forward for the channel - most believe it, but many are reluctant to jump in and fully adopt it, despite knowing the benefits.

Many resellers and SMEs are waking up to the benefits of e-commerce -many are reluctant to jump in and fully adopt it, despite knowing the benefits. from entry into different markets and improved customer service, to the physical savings in dealing over the Web compared with the telephone or fax. But despite the obvious benefits, many businesses are resisting a full implementation of e-commerce, particularly the adoption of extranets, because of the initial investment and know-how required.

The internet, of little interest to many in this market sector just a couple of years back, is becoming an essential communications tool. Even though the US model, where there are no local call charges, does not apply to Europe and the UK in particular, connection growth - if not the adoption of a electronic trading - is explosive.

According to a recent survey carried out by Spikes Cavel on behalf of IBM, UK businesses are leading the charge in Europe to get online. But the survey, based on a poll of 1,700 IT and business managers in European countries including the UK, Germany, France and Spain, indicates there is still significant room for growth. Twenty seven per cent of the IT managers questioned indicated that they were planning to establish not just Web access but an intranet within the next two years.

While Web access growth has reached saturation point in the US, internet access saturation in the UK will not be reached until 2001 - at 92 per cent of businesses. It follows that e-commerce still has plenty of growth potential too, on both sides of the Atlantic.

The attitude of distributors and resellers on the whole is upbeat about the potential of e-commerce and the effect it could have for gaining and servicing existing partners and customers. The effect of e-commerce take-up is seen by many as squeezing only ordinary resellers and not Vars or distributors.

One reseller, Computer 2000, in an effort to encourage SME resellers to buy online, has created a 3Mb database for dealers to import onto their own system. 'Business-to-business selling is not the same as selling to customers or users, which is catalogue based,' says Chris Miles, internet services manager at C2000. 'We are not using our online presence to increase business at the moment. It's more to do with providing dealers and resellers with the sort of information which decreases telephone and fax traffic. It is more about reducing our costs.

'We basically operate in what is a finite market. We don't expect to be squeezed growth-wise, but e-commerce will not only reduce our operating costs, it will also increase our efficiency,' he adds.

Darren Billings, group IT director at Azlan, says e-commerce is both a threat and an opportunity for the channel. 'Vendors control the route to market. Vars are not under threat. Organisations at risk are those which cannot translate the concept of value-add into an e-commerce environment. The opportunity is mainly in service delivery at an economic cost. The hope is there for incremental sales in the process.'

As a result, Azlan is focusing on the service reseller channel to generate growth. 'Generally, the threat is disintermediation - organisations that are trying to reduce their supply chain, such as Dell and Compaq,' says Billings. 'Dell has been successful in this disintermediation because it can build-to-order and deliver in a matter of days.'

Andy Macfarlane, SME business development manager at IBM, says the vendor prefers not to take the disintermediate approach, preferring to work with integrators, systems providers, distributors and Vars. Macfarlane says in the US, there is a growing desire to deal with IBM directly, but only a handful of global customers that did so. 'These are mostly catalogue resellers with a growing customer base that want cheap goods direct with no support.'

Adding value is seen as the key to interaction with customers over the Web. This means providing information and technical helpas well as post-sales technical support. These are factors which will capture customers and maintain their commitment. Organisations that cannot show they add value along the chain will be the ones to lose out. The Organisations that will fail will be the ones that regard e-commerce as an interesting sideline, merely a bolt-on to existing operations.

Increasingly, there is a need to review the way businesses operate in this technological environment and to reorganise processes which will enable the core business to be taken to this market - it is a case of back to basics. The technology of e-commerce alone is not enough to succeed.

The whole business infrastructure has to be changed, including the marketing side.

It was not about IT at first. Amazon became a huge success with books.

It used its Website not just for browsing Amazon's database of titles - it added reviews, comments and created an almost cult following, a community of people, not just prospective customers. It was an innovator, rather than just a replicator. Amazon is a success, however, mainly because it is able to deliver books on a next-day basis to almost anywhere in the world.

But it's not just retailers that are embracing e-commerce. Customers are squeezing Var margins, and to maintain them, resellers are going online to take advantage of the cost savings and broader geographical if not global markets the Web opens up.

It is a common belief that dealing with the channel online means the relationship between vendor and customer is not as close as when dealing over the phone. But because of the ability to customise information to the target audience, the opposite is often the case.

The biggest opportunity for the channel appears to be in the business-to-business market. But in the short term, it will remain effectively a finite sector - a closed trading community of established business partners. The universality of IP as the de facto standard makes it easy for anyone to connect to the internet, but the Website is still a self-service medium because its interface is not clever enough to operate in a fully open environment.

The tight co-ordination between channel partners means it is easier to operate to a standard set of rules in a closed system. In Ovum's report on business-to-business e-commerce, it predicts this restricted area will make market operations more competitive.

Businesses which fully appreciate the market potential of e-commerce will become market-makers and they will be the ones that will thrive, the report says. These market-makers will be the innovators in engineering commitments from their trading partners - both from inside and outside of the channel. But there will be losers, not just winners.

These markets will provide the impetus for the adoption of integrated trading processes. It is within this closed group that integrated trading processes will develop, which will be the enabler to open up the market for business-to-business e-commerce.

In the medium term, although the market will remain largely closed, the processes within the closed community will become fully integrated. Others will have no choice other than to follow. Gradually, with the ability to integrate with APIs and real-time information, there will be not be just interaction between established trading partners, but also with unknown, alternative traders, even on a casual basis.

In the long term, the market will become open, but this will happen gradually, not explosively, over the next five years, although it is difficult to predict how long the road to e-commerce trading integration will be.

In the meantime, the use of call centres as complementary to the Web is an important strategy. Even though Websites are interactive, call centres allow traders to be persuasive in a way a Website cannot be. A real enhancement to e-commerce is achieved by call centre enabling the Web. This allows the resolution of problems and direct contact with other businesses which require live support, which will increase the number of successful Web transactions. Call centres will remain key to business strategy along with Web-based e-commerce.

E-commerce is simply the biggest in a series of changes in history to the way businesses operate. Once the Web's GUI is enabled to integrate with APIs, it will provide something very close to an individual relationship between vendors and buyers.

To some extent, the Web has the technology to achieve this already. Potentially, it is estimated that transactions entirely over the Web will make up about 30 per cent of retail turnover on average in the next two years. Dell's claim of 67 per cent indicates what can already be achieved.

What makes a good channel distributor/reseller Website seems to be a combination of how attractive they are and whether they provide for the specific needs of its customers.

The navigability of a site is particularly important. Visitors to it should be able to get to the particular Web page they require quickly and without the need to negotiate several unnecessary pages or even get lost due to ambiguous text associated with the navigation.

Many commercial sites offer circuitous routes and hyperlink connections to distract visitors. The corporate image may also be overbearing and detracts from what should be a welcoming home page and site generally.

Information overload should be prevented by the use of menu-driven options, so just the right amount of information, in manageable amounts, is presented per page. There should not be any unnecessary graphics or pictures to junk up and slow down the downloading process.

Thomas Power, e-commerce consultant, evaluated a number of Websites recently.

One of the best sites was considered to be that of Ideal Hardware. He rated this as a highly attractive and interesting site, easy to use and navigable. The main purpose is fulfilled - to provide the facility to set up an account, a database of product information and other trading tools.

C2000's site is potentially as good visually and in terms of navigability, but fell short because of ambiguous and unclear text associated with the navigation.

Techdata's site came off worst of the bunch. It was confusing to navigate and offered complicated Var options not appropriate at that early stage, when customers are looking at product information and possibly to set up an account.

ISPs provide services to assist in the setting up of Websites, such as Planet Online, to name just one. Many manufacturers and distributors offer Web hosting and re-badging facilities, such as IBM and C2000.

Many online enterprises, the failures few talk about, have been consigned to the scrapheap of history because of uninspiring, uninformative Websites. First impressions are important.

GET YOURSELF CONNECTED

The TeleAdapt Group was established in 1992 as a two-person company. It is now a global business with 500,000 customers worldwide, and one of the fastest growing UK companies, according to the 1998 Sunday Times/Virgin Atlantic Fast Track 100 survey. It has an annual turnover in excess of £9 million just seven years later.

TeleAdapt provides connectivity, security hardware and software and power systems for mobile and remote workers wherever they are located in the world. TeleAdapt has established distribution channels including distributors, resellers and authorised dealers. TeleAdapt also offers direct sales either by telephone or directly over the Web.

The company believes it will generate 50 per cent of its revenues online within the next two to three years. The Website offers information about remote connectivity systems, and customers can use online configuration tools which can be used to design bespoke mobile packages. This bespoke system can then be ordered and purchased online.