Ecommerce: North America
A survey of current ecommerce prospects in north America.
Introduction: USA Experience
The USA forged the ecommerce revolution, and still leads in ecommerce
services, software and entrepreneurial skills. Phenomenal successes
have been mixed with spectacular failures, and if the overall picture
is complicated, there is much in the American experience to provide
lessons and pointers. {1}
Ecommerce started in the mid-nineties, accelerating rapidly through
1999, when large sums could be raised for nebulous and untested
notions. Shares traded at unsustainable levels {2}, making fortunes
for e-company bosses and cannier investors. {3} The bubble burst
in early 2000, {4} when shares tumbled to a fraction of their
previous values and funding ended. The eighteen months to late
2001 were tough for most concerned, whether e-marketers, investors
or financial institutions, and were exacerbated by the US recession.
Of the estimated 7-10 thousand Internet companies receiving funding
to 2000, some 501 were shut down in 2001, and another 1283 taken
over. {5} Nonetheless, online revenues increased {6}, even if
profit did not. Gradually, in one group or another, it became
apparent ecommerce was surviving {7}, even picking up. {8} Then
came September 11th and corporate accounting scandals. The ecommerce
recovery continued, but with patchier results in the business
to customer sector.{9}The hype is over, but ecommerce remains
an essential and growing part of the US economy. The Forrester
prediction of worldwide online revenues amounting to 3.2 trillion
US dollars by 2004 {10}, was based on heady prospects in 1999,
and has since been revised to $217.8 billion by 2007, and in 2003
to $105 billion by Jupiter Research. {11}
Lessons Learned
E-companies successful today fall into several categories. There
are those who became market leaders — Amazon, eBay — by starting
big at the right time, and by continuing to invest heavily in
technology. There are those with forward-looking managements that
have brought in intranets, CRM {12} and ERP {13} with corresponding
staff reorganization and training {14}: their reward has been
better-run enterprises, with cost savings and increased competitiveness.
There are companies, large and small, that have moved their business
online, building on existing supply relationships and customer
services. And there are those who have brought new businesses
online by exploiting market niches and local trading situations.
Few of these developments have been without difficulties, and
most are still learning to adapt to a new and changing environment.
For an unhappy majority of larger companies, however, ecommerce
has been a frustrating business. If their websites are not actually
losing money, they have not fulfilled expectations either, nor
repaid the considerable money and effort expended. Lessons have
been hard earned, and perhaps were obvious from the beginning,
{15} but the experience is not being thrown away. Ecommerce continues,
but with phased objectives, and sounder notions of costs and benefits.
That leaves the smaller companies. Some followed the herd and
were swept up in the 1998-2000 dotcom land-rush. Some simply thought
they'd 'have a go', ignorant that ecommerce is anything but easy
money. They underestimated the expertise and management effort
needed to get the website right, not to mention maintaining and
developing it. Capital was cheap, and financial control never
caught up. The websites usually achieved orders, but the fulfillment
process was painful for everyone. Some e-businesses were developed
for sale, but the dotcom era ended before they could be brought
to market. And software houses that were light-years ahead woke
up to find themselves suddenly dead when orders and financing
evaporated. {16}
But the verdict ten years down the track? Ecommerce can work,
and has worked in countless thousands of cases. In America it's
continuing to work, or there wouldn't be the buzz among hardheaded
businessmen. It's how, in what areas, and with what success, that
are being discussed. {17} A proper assessment is years away. But
the obvious truth is that ecommerce is a business like any other
business. {18} Amazon notwithstanding, ecommerce companies must
watch the bottom line. {19} Success comes slowly. Effort, planning,
knowledge, experience, commitment and resources are all essential.
{20} The one advantage of ecommerce is its supporting medium,
the Internet, which provides information, case histories and guidance
for those who can use them.
Prospects 2003-4
Despite the current recession, ecommerce prospects may still
be soundest in the USA. Canada comes a close second, where a slightly
higher percentage of businesses were trading online in 2001. {21}
North America is familiar with ecommerce {22}, and has the right
mix of expertise and deregulation. {23}. Some 56% of retailers
surveyed by Shop.org reported profits on their online operations
in 2001. {24} The July 2002 Economist Information Unit {25} ranks
preparedness for ecommerce as follows {25}
Country
|
Index
|
USA
|
8.41
|
Canada
|
8.23
|
Between market sectors, profitability not only varies widely
but shifts quickly. In the difficult trading conditions of early
2001, only 20% of larger dotcom companies surveyed by McKinsey
& Co were profitable, and these were e-tailers, not content-providers.
{24} A year later, however, and some 40% of the 200 public Internet
companies were in the black, these providing online travel, software
and financial services. {25} Customer acquisition costs are also
falling, from a high of $77 in the last quarter of 1999 to $40
in mid 2000 (with customer retention costs at $35). {26}
That said, it's still not an easy time for ecommerce startups
{27}, particularly where funding is sought. {28} Prospects may
be best for small companies (exploiting market niches) and for
the very large (self-financing, with long lead times). Medium-sized
companies will benefit from the better organization that CRM and
ERP can bring — to the extent that improvement are instituted
gradually, with costed objectives, proper consultation and training.
Some 70% of B2B companies are currently profitable, and constitute
80% of US e-transactions. {5} B2B growth is expected to be slower
in future, but seems more secure than growth in the B2C market,
which is still beset by uncertainties.
The August 2002 Forrester report estimates that US ecommerce
will amount to $217.8 billion by 2007, and account for 8% of total
retail sales. {29}
References and Sources
This page was written in 2003, and is now out of date. For a
current picture, and full information sources, consider our
ADVANCED GUIDE TO ECOMMERCE, now in its eleventh edition —
concise, plainly-written and packed with information unavailable
elsewhere.
An overview . . .
- The Internet's most detailed guide to ecommerce: 185,000 words
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- Fourteen comparison tables in key product areas.
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- Ten up-to-date surveys of ecommerce prospects worldwide.
- Insider information based on Internet research and our own
studies.
- Strategies to test customer behaviour and improve sales.
- Comes as an interlinked webpage ebook (2 Mb) and as a pdf
document (9 Mb). The one-time subscription covers both.
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