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E-Commerce: Is the Information Highway Paved in Gold?
By admin | July 18, 2008
Today everyone wants a piece of the Internet action. Large and small retailers are beginning to recognize the potential. Shopping carts can allow expansion without the huge costs of building new stores, moving into new regions, transporting merchandise to retailers or printing catalogs. Through secure credit card transactions with instant verification, there’s less potential loss from shop lifting and damaged merchandise. And, by using credit cards, international transaction are simplified. The cost of producing and maintaining Web sites is falling nicely as are the costs of setting up Web-based shopping carts. The public is beginning to accept the idea that purchasing products on-line can be safe and convenient. Wow!
There’s gold in them thar hills.
Yes, there is profit potential for many. But much like the gold rush of a century ago, most people do not get rich quickly. Most find wealth only through hard work and dogged determination. So before you head west with your virtual picks and shovels, take a careful look at where the gold is.
There is huge potential for a nationally established firm in the electronics industry. Cisco Systems, a manufacturer of computer networking equipment, now sells more than $7 million per day through electronic commerce and they have stated they are saving $270 million a year in personnel costs. And their growth has been nothing short of phenomenal. GE sold more than $1 billion to other businesses last year. A leading retailer on the scene, Dell computers, is selling more than $1 million a day from its Web site. Dell is doing very well, but note that Cisco Systems and GE combined easily exceed the entire world’s retail dollars in sales.
So where’s the gold?
The safer money is in business-to-business sales and in savings gained through improved efficiency. But retailers should not despair. They too can find savings with the Internet, through greater efficiency. Further, Internet usage should double by the beginning of the next millennium and the potential increase in sales is considerably larger. It may seem that the Internet arena is already crowded but, in fact, one study shows only about 3% of business-to-business Web sites are designed for selling. So far, only about 1% of U.S. sales come from e-commerce, so the potential for expansion is enormous. Capturing just a smidgen of the projected growth could yield the mother lode.
Even if transactions don’t occur on-line, Internet promotional efforts can give companies a big bang for the buck. The cost of producing catalogs for the Web is very cheap when compared with print. Dollar-for-dollar, banner advertising can yield results two to 20 times better than direct mail. But many campaigns deliver far less because of poor targeting and a lack of knowledge about Internet strategies. One study commissioned by the Direct Marketing Association reveals that ad-to-sales ratios have nearly doubled for the Internet in the past three years. Now $1,000 spent for targeted advertising, yields an average of $7,000 in sales. The promotional tools now used are in their infancy. Tremendous advances can be expected over the next several years.
Before you head out west on the Internet . . .
Anyone considering entering the Web arena or expanding their Web presence should carefully plan their time and investment. Often companies must plan events, provide free services, and find ways to interact with Web visitors, on and off-line. The odds of success are greatly enhanced by being unique, strategic, and persistent. It is crucial that good old-fashioned customer service, print advertising, sales promotion and all traditional marketing are well integrated with any on-line strategies.
Now a little cold water—some large Web centered businesses such as Amazon and Excite have yet to turn a profit. They are gambling that the future of e-commerce will be rich with gold.
So roll up your sleeves, consult with the experts–if you can find them. There’s gold out there but get ready to mine some holes and break some rocks.
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