Information Sheets > The
Cyber-Suspicious
The UK government
is aiming to make 90% of its routine purchases electronically by 2005-
another sign of the growing importance of the Internet for business.
Is the e-commerce world really so tempting?
WHERE'S THE GROWTH?
-
The
business-to-consumer sector is expected to reach $5bn in 1998,
-
However
the business-to-business sector will soar to $17bn this year and $105bn
by the year 2000; front runners in this sector are financial services,
travel and IT providers
The real boom is
therefore in business-to-business
(HOW) DOES IT AFFECT
CUSTOMER LOYALTY?
New research by
Stanford Business School shows loyalty:
-
Diminishes
- where shoppers do not need to sample the product - e.g. CDs, PCs,
as they make their decision by comparing prices at the click of a
mouse
-
Increases
- where sampling is required, e.g. footwear - as customers go straight
to the product they already know and trust
Customers are therefore
most fickle where the product does not need to be tried and the brand
does not matter, or is just one of many
WHO'S MAKING MONEY?
-
Product
providers - who are now able to cut out the retailer middle man
-
Info
providers - still uphill nearly all the way to persuade users to pay
for what they need
-
Service
providers or "portals" such as Yahoo - no cash-flow problems,
as fees for "premises" in their on-line malls continue to
rise
-
Product:
Dell Computers makes sales of >$4m/day from its website, up from
$1m/day last year; has hallmarks of a "cyber sell" product
- no sampling required (a PC is a PC) and is right on target (techie
net users buy techie goods)
-
Info:
the Wall Street Journal's Interactive Edition shows the power of a
strong brand and a product driven by business-led content (it is easier
to justify buying info if you can argue it will help you make money):
WSJ now claims over 150,000 paying customers; but with a team of 100
to run it, great distribution but how much margin?
-
Service:
earlier this year, three brokerage houses agreed to pay $25m each
for prime real estate in AOL's mall
-
The
Automobile Association is soon to close all of its 142 high street
shops; likewise, Victoria Wine and Thresher off-licences plan to close
300 shops after they merge.
Portals have the
power and therefore have the profits
IS IT ANY MORE
SECURE?
-
The
mountain: of 2,000 corporate purchasing decision-makers in the more
cyber-smart US, some 70% said they do not buy over the Internet for
security reasons
-
The
molehill: from its 2.2m customers in 160 countries, Amazon.com has
yet to receive a single complaint relating to fraudulent use of a
credit card when paying over the Internet
Could it just be
an excuse?
STILL CYBER-SCEPTIC?
A report from Andersen
Consulting has found that though 80% of 300 European execs recognise
the strategic importance of e-commerce only 40% are doing anything about
it.
SO - YOU ARE NOT
ALONE!
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