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ABC: An Introduction to E-Commerce

Get an overview of e-commerce from the experts

PAGE 2

• What is B2C e-commerce?
• What is the difference between B2C and B2B e-commerce?
• Why was there so much hype surrounding B2C e-commerce when it got its start in the late 1990s?
• How should companies organize their B2C initiative?
• What are the major challenges of B2C e-commerce?
• What is channel conflict and how can I avoid it?
• Can B2C e-commerce be profitable?
• Do I need a privacy policy for my B2C initiative?
• Do I have to worry about Internet taxation?

Why was there so much hype surrounding B2C e-commerce when it got its start in the late 1990s?

Mainly because the stock prices of some of the early pure plays went through the roof. In the late 90s, dotcoms like Amazon.com and eBay — which were quickly gaining in size and market capitalization — posed a threat to traditional brick and mortar businesses. In many ways, these dotcoms seemed to be rewriting the rules of business — they had the customers without the expenses of maintaining physical stores, little inventory, unlimited access to capital and little concern about actual earnings. The idea was to get big fast and worry about profits later. By late 1999, Amazon had a market capitalization of close to $25 billion, eclipsing some of the largest and most established companies in America.

Retail giants such as Kmart and Wal-Mart — hoping to cash in on the dotcom frenzy — spun off separate companies to run their e-commerce operations. But many never made it to the initial public offering after the Nasdaq started to tumble in the spring of 2000. Almost as quickly as the dotcom phenomenon took over, the hype over B2C e-commerce dissipated along with the crumbling Nasdaq. Funding for Internet ventures started to dry up and major companies started to reel in their spinoffs, bringing e-commerce initiatives back under the corporate fold.

Companies that spun off their e-commerce operations as separate businesses were at a disadvantage when “multi-channel” commerce became popular in 2002. Those that kept their web operations in house, such as Sears, Office Depot and Circuit City, had a much easier time integrating their web sites with the rest of their brick and mortar operations and systems. These companies were able, for example, to check local-store inventory via the web and could allow their customers to buy online and pick up and return at a store. Multi-channel commerce continues to be an important initiative today.

Amazon and eBay still dominate online retailing. But the fastest growing sites are now traditional merchants that have become more serious about their Internet operations. According to the research firm ComScore networks, traditional retailers had a surprisingly strong showing over the 2005 holiday season. In fact, Wal-Mart was the third most popular site, trailing Amazon and eBay, ComScore said. Target, Best Buy and Circuit City were close behind.

How should companies organize their B2C initiative?

In the early days, e-commerce initiatives were often led by groups that were separate from the main IT department. The extreme example of this kind of separation was the spinoff model, in which stand-alone Web units were created thousands of miles from company headquarters with entirely new staffs. In these cases, IT leaders at the home office often had little to do with the B2C projects. Increasingly, e-business departments are coming back under the corporate umbrella and CIOs are often in charge.

 

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