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If you can't beat 'em, join 'em

If you can't beat 'em, join 'em

Online selling has arrived. While this poses a threat to resellers in many ways, the old adage, "if you can't beat 'em, join 'em", still has some truth to it. Durelle Fry investigates.

Vendors have tried in the past to do without resellers in their bid to get their product into the hands of consumers, often concluding that the contacts and exposure to end users provided by the channel are indispensable. The channel can, after all, capitalise on its accessibility to the end user and provide something which is difficult for a large vendor to provide in the same way - service. The channel now has to prepare to be ready to set up business on the Internet via e-commerce. While it is still a little early to set up an e-commerce business in Australia, it is worthwhile doing some homework on how it is being done elsewhere in order to gain experience from the mistakes and successes of others. Resellers should be poised and ready to go once the local banks have sorted themselves out in terms of accepting payments from online sales.

John Chambers, chief executive officer of Cisco Systems, speaking at a White House meeting on e-commerce at the end of November, said that today, more than 70 million Americans use the Net and 44 million have shopped on it. "By 2003, an estimated $US1.5 trillion in annual e-commerce is forecast and by 2005, over one billion people will be online worldwide."

Chambers added that "by 2010, a quarter of global commerce will be transacted over the Internet. In short, it will change retail forever."

As part of the White House e-commerce plan unveiled at the same time, Bill Clinton and John Howard have agreed on a joint laissez-faire policy for electronic commerce between the two countries. Australia has followed the European Union and Japan in signing a "joint statement on electronic commerce". Major points from the document include:

Taxes and tariffs: no customs duties on electronic transmissions. Taxes are permitted but they should be "neutral, efficient, simple to understand and should promote certainty";Laissez-faire policies: both nations will back World Trade Organisation plans to "foster the growth of electronic commerce by reducing the scope for trade-distorting government intervention";Internet: Washington should end its role in the Internet name and numbering system "in a manner that ensures the stability of the Internet";Electronic authentication: moves for an international legal framework on recognition and enforcement of electronic transactions and authentication methods; and removal of paper obstacles to e-trade;Privacy: agreement that governments and business should implement strong privacy protection, based on OECD guidelines.

In the US, enforceable privacy programs are supposed to be in place by the end of Q1 1999.

The Shop.org Report, conducted by The Boston Consulting Group for the online retailers association, is the result of an in-depth survey and analysis of 127 online retailers in seven categories. The study involved leading online retailers of apparel, computer goods, food and wine, home and garden products, gifts, entertainment and services. The study is distinctive because it examines hard data from a significant sample of online retailers, rather than the behaviour of online consumers or a few select businesses.

Future growth

The study clarifies myths about online retailing and its future and how the convergence of offline and online retailing will drive future growth. It also examines the best practices that leading online retailers are employing; what is and isn't inevitable about e-commerce and its impact on retailing overall; the challenges to growth that online retailers now face; and the size and growth of online retailing to date. The report has resulted in a number of key statistical findings.

While it is still in an emerging state, online retail is experiencing exponential growth in excess of 200 per cent per year. Multichannel retailers like Dell, Schwab, Eddie Bauer and Lands End account for 59 per cent of revenues, and generally, multichannel retailers experience better conversion and loyalty.

Online retailers are investing heavily now to grow their customer bases. For example, 65 per cent of the revenues generated by the sample of online retailers in the study are reinvested in advertising and marketing, compared with 4 per cent for most traditional US retailers.

Another finding of the report was that while there is a proliferation of retailers selling online, revenues are still concentrated in only a few mature sites. The 10 largest account for 50 per cent of revenues, and computer goods, entertainment, travel and discount brokerage account for over 80 per cent of the online retail market.

The report shattered several widely-held misconceptions about e-commerce, and concluded that it is not limited in scope to "appropriate" products and services. An ever-increasing range of products is being successfully marketed and sold or facilitated online. The report found that online retailing often expands overall market demand, rather than adversely affecting traditional retailing.

Existing structures

A further conclusion was that many online retailers are using existing distribution structures to lower costs or improve convenience, and many retailers are choosing to invest early to grow their customer base and achieve critical mass.

The study argues that the Internet poses a fundamental challenge to existing retailing business models. The traditional retail outlet performs functions which include display and merchandising of products, fulfilment and warehousing, and sales and service. Traditionally, a customer interacts in one way or another with these areas in the physical store, through packaging, product placement and salespeople. However, the Internet enables retailers to dissociate information from the physical environment, and this results in a deconstruction of the existing value chains that drive retailing. Online retailers are redefining traditional retail activities, like physical display of merchandise, with virtual displays and rich content and information that enhances and personalises the shopping experience. This shift has enabled new retailing models, and value will come from the depth and breadth of the customer base.

The emerging new business models for online retailing also suggest that the combination of "scale" advantages (ie increasing returns as online businesses grow deep, loyal customer bases) and "scalability" (the ability to grow quickly) created a unique growth dynamic. The report suggests that this environment favours first movers that establish leadership positions in their businesses.

A taste of things to come

In mid-December, EarthLink, which is headquartered in California, will be releasing new entrepreneur class e- commerce Web site solutions. The packages, based on Breakthrough Software's ShopZone Web Edition software, are designed for small-to-medium sized businesses, with three levels of operation, beginning at $US20 a month. The package will include standard e-commerce tools like a catalogue, shopping cart and secure connections. The process of building and updating a store is automated in nine easy steps, with design templates provided.

The packages range from the entry-level Kiosk package for $US20 a month, through to a $US80 a month SuperStore package. Each package includes Earth-Link's Store Builder Wizard, licensed from Breakthrough Software, to facilitate store building. The packages also include pre-made design templates, a catalogue, shopping cart, and secure connections with customers.

Using the Store Builder Wizard, the process of choosing a design, cataloguing and pricing of products, and building or updating a site, is simplified. The vendors claim that the site-building process can be reduced to less than an hour. Additional features of the software are automatic tax and shipping calculators, an automatic e-mail order responder, and secure connection ability.

Further information about EarthLink's Internet-related products and services is available from www.earthlink.net/business/ ecommerce/Australian banks are dragging the chainAccording to Rob Hartnett, Hewlett-Packard's e-commerce and Internet marketing manager, the major banks in Australia are not ready with the tech- nology for online payments - "they aren't up to speed with taking solutions". Until this happens, of course, online retailing in this country will stay on the starting blocks. Adding weight to this opinion, Dr Phil McCrea of the CSIRO, in a briefing to the Victorian Parliament, said that "while some Australian banks have introduced Internet-based home banking services, they are lagging behind their American counterparts in recognising that they form an integral part of the global information economy. "Unlike their US counterparts, most Australian banks have been slow to accept credit card payments over the Internet, particularly for small-to-medium businesses," McRea said. He added that as proof of the globalisation of the eco-nomy, at least one US bank has made inroads into corporate Australia. "Chase Manhattan Bank is handling the accounts payables of a major Australian retailer by sending them over the Internet to the US for processing."

Judith King, of the Australian Coalition of Service Industries (ACSI), told the briefing that business, governments and consumers should have online economy issues at the top of their agendas because "Australia, more than any other nation, has much to gain from taking the lead in the online economy. It is a major opportunity for us to overcome the limitations of our geographic isolation and small local market."

Hartnett told ARN that the immediate future of e-commerce in Australia is in a business-to-business model. He added that e-commerce reduces expenses without reducing revenue, partly because the retailer knows what the target market is. Hartnett is seeking the assistance of resellers to help HP identify businesses which would benefit from HP's electronic commerce package. The company wants to be viewed as the vendor "with the highest level of capability to produce real electronic commerce and Internet solutions for our clients".

To this end, HP has established an E-Commerce and Internet Partner program where the assistance of resellers is sought "to create an electronic commerce and Internet marketing 'village' around HP to ensure customers get the best solutions for their e-opportunities".

Products

Modem vendors are bending over backwards to promote their own products over their competitors'. Competition for the modem market has become so fierce that, according to Niels Kofahl of Tecksel, "nearly all modems now come with a free Internet kit and free online hours are increasing all the time - up to 100 hours with some providers. Competition among vendors for resellers and their cheque books has produced a trip to Hawaii for one of our resellers and a Toyota for another, all courtesy of 3Com. The Sirius camp is enticing resellers with large screen TVs, VCRs and other electronic goods, just for purchasing Banksia modems. Hayes, not to be outdone, is offering free Internet installation and configuration for external Hayes modems." With the recently ratified DSL standard, G-lite, a market is guaranteed for future modem sales. To achieve G-Lite download speeds of up to 25 times the present rate, customers will need to purchase a new modem3comLaunched in mid-November, 3Com's new range of 56Kbps V.90 standard desktop modems features an enhanced range of voice and message management features.

The 3Com U.S. Robotics 56K V.90 External Professional Message Modem and 3Com US Robotics 56K V.90 External Message Modem allow users to receive voice and fax messages even when the computer has been turned off.

The External Professional Message Modem offers caller ID; one-button access to voice messages; remote retrieval of voice messages through a dial-up connection; built-in high quality speakerphone; V.80 (video conferencing) capability; easier installation and use; software upgradability for future enhancements; a lifetime warranty; and value-added connections CD-ROM software.

The Message Modem offers remote retrieval of voice messages through dial-up connection; easier installation and use; software upgradability; a lifetime warranty; and Connections CD-ROM software.

Incoming voice and fax messages

In addition, the modems can store incoming voice and fax messages with the computer switched off. Users can receive up to 20 minutes of voice messages or approximately 50 fax pages, or any combination of the two.

The Professional Message modem features independent fax forwarding which enables the modem to forward receiving faxes to a pre-specified telephone number, even when the computer is turned off.

The 3Com Modem Manager enables the user to see how fast they are going and watch their send and receive throughput change, graphically and digitally, in real time.

A point-and-click diagnostic speeds up problem diagnosis.

The RRP of the Professional Message Modem is $329 and the Message Modem is $279.

Open Systems

Distributed by Open Systems, Reality Studio is the development environment to create immersive Web environments - 360 zoomable panoramas, into which the user is able to embed FlashPix zoomable images, avi files, directional sound, standard images, vrml objects, and moveable objects modelled from photographs.

Features of Reality Studio include: a point-and-click development environment which eliminates the need for special programming or expertise; all the software tools for rapidly creating rich media types such as 360-degree panoramas, high-resolution FlashPix images which can be zoomed into, and 3D objects which can be rotated full circle - site visitors are placed in the middle of the action and provided with new levels of information to support their purchasing decisions. The software supports the Live Picture Viewer-Java Version, a 20KB Java applet that the browser automatically loads, eliminating the need to use a plug-in to view single media. Alternatively, the Live Picture Viewer plug-in delivers the full impact of mixed media. The software is made up of small files that load progressively so that even visitors with 28.8Kbps modems can begin interacting immediately.

The RRP of Reality Studio is currently $399 (usual price $899). The product is part of the Extreme Promotion which concludes at the end of December.

Also distributed by Open Systems, Image Server runs on Sun Solaris and Windows NT. This software serves FlashPix images to allow Internet users to access "zoomable" images on the Web.

Live Picture Image Servers are available in four versions: the Standard Edition; the Enterprise Edition; the Open Enterprise Edition; and the Developer Edition. Each version features a robust image server at its core with simple administration tools and file conversion utilities. From there, the user can select a version that controls access to images and levels of resolution, and tracks which images are used. For integration with database applications, advanced versions provide a fully documented software developer kit (SDK).

All versions include: rapid image delivery over low-bandwidth networks; universal viewing; high-resolution FlashPix image file format; a choice of operating systems: Windows NT and Sun Solaris; optional cross-platform viewers (Java applets and plug-ins); compatible with all HTTP servers; optimised for Intel MMX technology; and FlashPix imaging tools.

The RRP of Image Server, which varies according to the edition and the CPUs required, starts at $5730.

The third product from Open Systems, Photovista is available as a stand-alone application for creating 360 degree panoramas. The result can be placed on the Web and turned into a screen saver. Photovista is also included in Reality Studio.

Also part of the Extreme Promotion, the RRP of the stand-alone copy of Photovista is $149. As part of the Extreme Promotion, there are also Web Hosting Partner Plans.

These plans have many variations and software inclusions and resellers can contact Open Systems for more information.

Connect

Internet service provider Connect.com.au has extended its range of activities from primarily providing dial-up and permanent Internet access to delivering full Internet solutions for business. These incorporate Web hosting, e-commerce solutions, virtual private networks, tele-housing and Web hosting, and real media solutions.

Just announced is the development of a full Internet commerce solution designed specifically for Australian small-to-medium enterprise.

Intershop software is being used for online trading by the Australian bookstore and newsagency McGills. Connect CEO John Stuckey said that Connect has used Intershop software to develop Internet commerce platforms because "it is scalable enough to cater for the exponential growth in online purchasing without requiring huge investment and risk."

Micrografx

Webtricity 2 is a suite of four Web graphics applications for designing a Web site. The software packages are Picture Publisher, Windows Draw 6, Simply 3D 3 and Media Manager 8.

Picture Publisher, facilitating professional image editing for the general public, allows the user to change, cut and blend photographs through advanced palette controls. Windows Draw 6 is a design studio with Web publishing and Web page templates, and a variety of design and illustration tools. Simply 3D 3, with the aid of project wizards, creates instant 3D animations which can be used on the Web. Media Manager 8 gives easy access to images through managing and cataloging them with drag-and-drop.

Included in the suite is 80,000 pieces of Web-ready art on six CDs; 10,000 photographs; 25,000 vector clip art illustrations; 3000 vintage illustrations; 1000 3D objects; 1000 textures and seamless files; and 1000 animations.

Recommended for Windows 98, Windows 95 or NT, the RRP of the Webtricity 2 suite of products is $299.

Contacts

Connect

Tel (03) 9251 3600

www.connect.com.au

Micrografx

Tel 1800 652 2344

www.micrografx.com

Open Systems

Tel (02) 6261 4900

www.opensystems.com

3Com

Tel (02) 9937 5000

www.3com.com


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