The Challenge of Electronic Commerce: Selling lemonade has never been this tough

By David Strom

The business of selling products and services via the Internet - commonly called eCommerce - is in a rapid state of confusion and change. There are hundreds of products that can help even the most casual of merchants put up a Web-based storefront and hundreds of consultants that will readily come to a business owner's aid to establish a cyber-store. Picking the right combination of products and consultants, though, in a climate where the challenges still outpace the opportunities can mean the difference between failure and success and have costly implications for any eCommerce project.

While it is nice to have choices, many of these products don't work very well, if at all. And just as there are bodegas and high-rent fashion shops, the quality of Web storefronts varies from the mundane to the truly useful. Shopping on the Internet is still fairly primitive, with poor-quality tools, hard-to-find stores and limited ways to pay for merchandise. Many potential customers have been scared away by stories of credit card theft, while others are using outdated Web browsers that can't properly view many Web storefronts.

There have been some spectacular eCommerce failures over the past few years, as businesses pump money into storefronts that serve few customers and generate profits only for the site's designers and programmers. There have also been some tremendous success stories, particularly for computer-based companies such as Dell Computer Corp. (Austin, TX) and Cisco Systems Inc. (San Jose, CA), which move millions of dollars of their hardware products via their Web stores each month. But these large failures and successes are in the minority - most eCommerce sites are unremarkable and go unnoticed. Last fall, Business Week claimed the number of money-losing Web sites was twice the number of ones in the black. (see Sept. 23, 1996 issue). Until merchants find the right ingredients for their cyber-stores, this will be the case for the foreseeable future.

Until companies selling eCommerce solutions make better integrated products that require less skillful installation and maintenance, most eCommerce sites won't be much more than static pages of Hypertext Markup Language (HTML) with an 800 phone number to place orders. Developing a more sophisticated site that is connected to a live inventory and accounting system won't be easy for several years to come.

Business Implications

• eCommerce will be hampered by a lack of integrated, turnkey products and a high level of skill needed to design, produce, and maintain Web-based storefronts.
• The several notable success stories have been the exception rather than the rule. For the most part eCommerce sites still suffer from poor sales and few visitors. Moreover, there are few generally accepted metrics as to what defines a successful Web storefront.
• The perception of insecure transactions will continue to prevent many shoppers from making their first 'net-based purchases. While consumer attitudes about paying for goods and services online will slowly improve over the next few years, it will not be enough to fuel rapid growth in eCommerce.
• The well-positioned companies with wide-ranging suites of eCommerce tools - such as IBM, Open Market Inc. (Cambridge, MA) , Oracle Corp. (Redwood City, CA), Netscape Communications Corp. (Mountain View, CA) and Microsoft Corp. -- for the most part offer first-generation products that are complex to install, configure and maintain.
• Those companies that can exploit the intersection of database cultures and the Web -- such as Allaire Corp. (Cambridge, MA) and Bluestone Consulting Inc. (Mt. Laurel, NJ) -- will thrive, mainly because eCommerce requires both.
• Companies that can exploit business-to-business transactions will fare better with eCommerce solutions than those that go after a pure consumer market.

(This is an excerpt from a May, 1997 report prepared for Decision Resources Information Technologies Spectrum subscription service. To subscribe, contact Joan L'Esperance at +1 (617) 487 3751. I have a limited number of single copies available. To obtain one, please send a SASE with 55 cents postage to my office, David Strom, Inc., ., Port Washington, NY 11050, attn: DRI eCommerce Report.)