By Jerry Bujaucius
The Internet and the World Wide Web represent a set of potent tools to any business. What started as a research network to link together several universities, military organizations and research facilities has now developed into one of the most powerful and profound business tools in memory.
NUA, an Internet strategy, research and development agency (http://www.nua.ie), predicted Internet usage worldwide would grow from 150 million users at the end of 1998 to 350 million by 2005. This market remains a potential windfall for the first mover within any industry, as exemplified by Amazon.com (books) and Egghead.com (software). These two businesses took different routes to their e-commerce strategy, but both were extremely effective.
Blazing the trail
Amazon.com took on the nation’s bookseller establishment with a cost-reduction strategy that translated into price reductions for the consumer. The improvement of the supply chain, coupled with its first mover advantage in the Web retail industry, paved the way for Amazon to branch out as a pioneer in several other facets of retail including music, videos, electronics and toys.
Egghead.com revamped its business from a “brick-and-mortar” software retailer into an on-line retail outlet. Its success in that vein—which began in early 1997—eliminated many of the distribution channel inefficiencies it had faced and revitalized sales as well as stock price.
With this in mind, the biggest gains in e-commerce in the foreseeable future—and the bearing H2Oproducts.com has taken—lie in business-to-business (b-to-b) solutions. Forrester Research (http://www.forrester.com) estimates this niche of e-commerce to grow by more than 30 times, to $1.4 trillion over the five years between 1998 and 2003. By the same source, business-to-consumer (b-to-c) e-commerce will grow to only $41 billion, a difference of 3,415 percent. And the creation of a hub provides the leverage to maintain consistent gains within that growing market.
What’s a hub?
A hub provides a forum for interaction between and among buyers and sellers. While b -to-c companies like Amazon and Egghead increase the efficiency of their supply chains but provide only a price savings to their customers, an Internet hub can extend supply chain improvements to everyone involved. The power of b-to-b e-commerce lies in those improvements, as well as other benefits to all parties.
Vendors (referring to the first b in b-to-b) can benefit by using the site in several ways:
- Rapid contact and feedback with customers,
- Cost savings from expensive marketing such as catalogs now handled on-line,
- Gained access to an increased customer base.
Vendors can use these benefits as tools to improve service to their customers (the second b), an added value that not only increases the likelihood of new business but also encourages repeat business. One example of this is the on-line auction house, eBay. Although it operates under a consumer-to-consumer model, the principle is the same. The two entities interact in the same frame (Note: Please briefly explain). Thus the buyer doesn’t have to look for a seller, and the seller need not look for the buyer, saving time and resources on both ends. By the same token, both ends of a b-to-b e-commerce plan benefit from their contact with each other and the time and resources saved by that channel.
Taking the plunge
In the oft-fragmented water systems market, the ability to visit one website anytime and be assured of the highest quality and best prices will not only benefit the host but also those who use it—i.e., manufacturers, retailers and suppliers—by saving them time, costs and resources.
The most pressing challenge for any company entering into a new area remains developing the client base. As a new entry into the water products distribution arena, my company, H2Oproducts.com, must work to achieve that. Traditional methods of brand development must be employed and newer techniques must be developed and used. Our primary focus initially involved advertising in trade journals, as well as several direct mail pieces. In addition, we planned to visit several national trade shows. We expect that these will remain among the most effective marketing plans in the industry, but we must also expand plans to include advertising on the Web, through hotlinks and banner ads.
Web marketing involves another shift from the traditional marketplace. The large start-up cost associated with the creation and development of the site, as well as normal marketing costs, translated into a large up-front expense that typically doesn’t exist with brick-and-mortar establishments. Where costs for such things as business property can be financed over a certain time period, costs for new industries are almost entirely up-front. The net effect of this—pardon the pun—can be seen in such companies as Amazon.com, which has yet to post a profit despite having operated for almost five years. If its up-front costs had been spread out over those first five years, the valuation of its stock—considered an anomaly by many people, due to a lack of profit—becomes much more justified.
Ease of use imperative
The ease of use of a website is one of its most important features. With over eight million websites currently in existence, attracting potential customers is becoming more and more difficult. The standard cycle for ordering and reordering will soon be drastically changed, and the company that develops the simplest process will have a distinct advantage over the field. An order can now simply involve logging onto the site and clicking on the desired product. Additional information can also be provided, simply by typing your specifications into the site and developing an algorithm that can determine what products match, or any other desired information.
Ease of use not only determines whether a customer will remain at your site during the initial visit, but also whether they’ll return. Since the cost of retaining a customer is drastically smaller than winning a new customer, it’s imperative to keep customers in order to minimize costs. Once competition forms, the only way to retain customers is to ensure the most value added for your customers. Otherwise, even current customers are only one click away from never buying from you again. The challenge in the water conditioning industry is to develop a strong customer base and retain those customers through superior service, while continuing to increase the size of that base; and the barrier to entry of this new market is only the cost of the technology.
The benefits of the Internet go straight to the core of any business model. Real-time information cuts costly and time-consuming procedures out of the mix. The business-to-business e-commerce model is one best suited for highly fragmented, decentralized industries. With increasingly commoditized products offered in the water systems industry—and its segmented nature—the current supply chain lends itself to inefficiency, errors, and time consuming processes. The prospect of Internet-based commerce allows for extensive savings for resources across the entire chain.
The author wishes to thank Patrick O’Neill, e-commerce marketing manager for H2Oproducts.com Inc., who also provided input into this article.
About the author
Jerry Bujaucius is information technology director at H2Oproducts.com Inc., a leading e-commerce provider of water systems, water conditioning and irrigation products online that sells directly to professional contractors, dealers, commercial buyers and industrial buyers. His master’s degree in computer science is from Rensselaer Polytechnic Institute, and his bachelor’s is from Worcester Polytechnic Institute. Bujaucius can be reached at H2Oproducts.com, 105 W. Dudley Town Rd., Units J&K, Bloomfield, Conn., 06002, email: email@example.com or at its website: http://www.h2oproducts.com
FYI: Surf these!
The following are a list of resources used for this article and recommended for those looking for additional information to enhance they’re virtual presence online:
Forrester Research http://www.forrester.com
Other B-to-b Resources on the Web:
E-Business Magazine http://www.hp.com/Ebusiness
US E-commerce Policy http://www.ecommerce.gov
International Data Corp. http://www.idc.com
T: Use logo with this if possible, saved in Stories as wwwlogo.doc smd
What technologies power H2Oproducts.com?
A number of different technologies are needed to provide the support and power behind an e-commerce website like H2Oproducts.com. Industrial strength hardware products and software tools ensure that an e-commerce website remains up and running with a high degree of reliability and responsiveness.
H2Oproducts.com operates on the IBM AS/400 platform (http://www.as400.ibm.com) using a model 720e computer. This mid-range computer system has 20 GB of hard disk storage and 1 GB of RAM. The system is accessible from the Internet via a T1 connection provided by Cable & Wireless (http://www.cw.net).
Software tools used for the H2Oproducts.com website are state-of-the-art. The software platform is Lotus Domino (http://www.lotus.com). Domino allows Lotus Notes databases to be automatically rendered as HTML files on the fly when visitors to the H2Oproducts.com website access them. Domino technology allows customers to use popular web browsers such as Microsoft Internet Explorer (http://www.microsoft.com) and Netscape Navigator (http://www.navigator.com) instead of Notes client software.
The software package is ezMerchant from Binary Tree (http://www.binarytree.com), which allows users to create their own website, their own content, and display and maintain their own catalog of products to sell online. Also, this product allows a website to register customers, create shopping carts to buy goods and services, and process orders using secure and authenticated transactions. No detailed knowledge of web programming is required to use the ezMerchant package. However, native HTML is fully supported throughout the entire package should a user wish to further enhance specific web pages.
Another important piece of the suite of software packages used to support the H2Oproducts.com website is e-Card from ROI Corporation (http://www.roiconnect.com). The ROI e-Card package provides the back end credit card processing so that H2Oproducts.com actually gets paid for the products it delivers to its customers. Credit card authorizations can be obtained in either real-time or batch mode from any major card clearinghouse through any major authorization network in just seconds.
Finally, any e-commerce website can have product catalogs and credit card authorizations. But how do you know that they have the product available to fulfill your order? H2Oproducts.com uses an Enterprise Resource Planning (ERP) solution from Lawson Software (http://www.lawson.com) called Lawson Insight II Business Management System to accomplish this processing. This ERP package provides tools to handle company financials (general ledger, billing, etc.), procurement (purchase orders, requisitions, etc.), and supply chain activities (inventory control, shipping/receiving, etc.). A live link between the Lawson and Binary Tree products provides instantaneous feedback regarding the availability of products at H2Oproducts.com