Despite the dot-com jitters of the last several months, it may well take a while to discover who will be the winners of the e-commerce race and why. But those participating in “Winners and Losers in the E-Commerce Shakeout” brought some definite ideas to the party. Jointly sponsored by the
Despite the dot-com jitters of the last several months, it may well take a while to discover who will be the winners of the e-commerce race and why. But those participating in “Winners and Losers in the E-Commerce Shakeout” brought some definite ideas to the party.
Jointly sponsored by theWharton E-Business Initiative, the Marketing Science Institute and the William and Phyllis Mack Center on Managing Technological Innovation, the conference participants focused on some celebrated companies whose stocks have been in freefall and others, some not so celebrated, who seem to be going in the right direction in this segment of the New Economy.
The participants, ranging from Wharton professors to executives from such firms as Eastman Kodak, Johnson & Johnson and Knight-Ridder, broke up into workshop groups and traded ideas on e-commerce business models. At the end of the two-day conference they came away with several dozen do’s and don’ts for e-commerce companies or those old-line companies looking to use e-commerce.
During one break from their workshops, they heard from Joel Koppelman, CEO of Primavera Systems, a Bala Cynwyd-based company that coordinates construction and engineering projects. Though Primavera has done this kind of work for 17 years, Koppelman reported that the company has recently jumped carefully, but fully, into the Internet with its primecontract.com web program.
Koppelman, who said Primavera has done business with 375 of the 400 largest engineering and construction firms, noted that one key to using e-commerce is making sure what a client really wants.
“We have had success with our old customers, so we didn’t want to alienate them,” he said, pointing out that Primavera was happy to deal with its standing customers in any way they wanted, but would help try to educate them in the ways of e-commerce. “But going into the Internet, we wanted to cut a wider swath in a $3.7 trillion industry, construction, where the top ten companies only do about 1% of the business.”
Koppelman is looking to e-commerce to improve his business in three major ways. First, he said, construction and engineering customers, with his help, should be able to find better prices for goods and services through the use of the Internet.
Second, the construction business – and to an extent all businesses – are rife with disputes and litigation centered around who promised whom what and when. “No one knows what they want until they see it and, thus, delivery promises get altered all the time,” he said. “We’re hoping that the use of the Internet can aid everyone in speeding up delivery time.”
Finally, he said, using e-commerce should help everyone in controlling all aspects of a project. “We’ll be able to more effectively monitor what was intended, what has been done, what changes should be made,” he said. “Integration is so important in a business. That is where e-commerce should be able to help us, and everyone.”
Koppelman, of course, hopes Primavera is a winner in the e-commerce game, but he did have three ideas on what the losers will be doing. “First, they will go into areas where they have no business experience,” he said. “You still have to know a certain business to know how to respond to customers. “Second, they will look toward too narrow a niche. Bigger players will be able to do many features and will kill off those who specialize too narrowly,” he said. “Finally, there will be people who blew their horns too loudly in the beginning and then won’t be able to deliver on promises quickly enough,” said Koppelman. “People very quickly get tired of waiting and then those companies who promised too much will be out of luck.”
The seminar groups concurred with Koppelman’s assessment, and with the help of conference facilitator David Reibstein, Wharton professor of marketing and director of the Marketing Science Institute, compiled their list of winner/loser assumptions. Winning companies in e-commerce, the participants agreed, would:
- Have a lasting business model. This should be a model that doesn’t work just for today, but is flexible enough to adapt to tomorrow’s needs.
- Have brand recognition. It is as important now as any time before. Amazon and eBay may well be showing the way in that regard, whatever their other problems may be.
- Have a plan to acquire, convert and retain customers after the initial contact.
- Be consumer-centric. With more e-commerce choices, customers have even more reasons to drop you if you aren’t aware of their needs.
- Have synergies with your existing “old economy” business. The participants particularly lauded Land’s End for developing not only a good interactive web site, but linking it in many different ways to the company’s current product lines.
- Make sure the management team handling e-commerce is superior, not a mere vestigial branch of the company. If you are using e-commerce, devote proper resources to it.
- Clearly identify real or projected revenue streams. In the end, the money-losing model for e-commerce that some have followed in its early stages will be seen as faulty.
- To that end, too, make sure that if you see a need to lose money in e-commerce initially to gain market share or some other goal, that you have a definite time when you are going to have profits from the e-business.
- Make certain the e-business model chosen is not easily replicated. One workshop group noted that despite its early success, eBay may well falter in the future if more players nip at its auction model, or if a Napster-like program allows everyone with an Internet connection to trade items without a facilitating organization.
After their workshops, the participants came to see a similarly long list of reasons why some companies will end up losers in e-commerce. Included were:
- Not realizing their initial product was of limited value to customers. Gadgets that seemed quirky and hip, but which actually were only quirky and hip, often sold well initially in e-commerce, but had no long-lasting value.
- The great need for supplier support. The participants used Priceline as an example. It depends to a great extent on airlines to sell the company its tickets at a discount. But airlines are already lining up to say, “Hey, we can do it ourselves” and are moving toward cutting Priceline substantially out of the mix.
- Depending on flawed assumptions. Here the participants pointed to Webvan. The flawed assumption is that consumers all over were waiting for someone else to go food shopping for them. While Webvan found initial success, presumably with harried and well-off venture capitalists, the conference participants said the company is unlikely to find enough of a mass market to survive.
- The importance of being different. Again, the example is eBay. If no one challenges eBay’s formula successfully, then it could be an e-commerce legend. But there was concern that eBay may be copied and copied again and pushed to some sort of fringe-player status.
The overall conclusion of conference participants seemed to be that e-commerce is in its infancy and that anyone entering it should be mindful that there are still no rules. Winners and losers are yet to be determined.