E-Commerce Reaches Beyond the ‘Net
The word “e-commerce” often is used with different intent and meaning. In much of popular media, e-commerce is synonymous with the Internet. While e-commerce is dependent upon the infrastructure of the Internet, even to the point where it is hard to separate the two, e-commerce actually is bigger and more pervasive than just the Internet.
Limiting one’s thoughts on e-commerce only to business that can be conducted on the Internet is to limit e-commerce to Web pages and Web-based ordering systems. However, e-commerce also encompasses electronic payments in the form of automatic bank drafts; debit, credit, and procurement cards; consolidated invoices that offer one monthly electronic invoice for the entire organization with account code distribution included; and wire transfers, to name but a few.
Two components that make e-commerce less costly than traditional commerce are the speed of the transactions and the reduction of risk. Both time and risk increase cost, which returns to consumers as higher prices. Using electronic processes to speed up ordering, invoicing, payment, and receiving of goods and services not only will lower the cost of these goods and services, it also will lower the startup costs for a new business.
New businesses sharpen competition and keep prices competitive. The amount of cash required to keep the operation running while waiting for invoices to be paid is a cost to both new and established companies. E-commerce reduces the time between order and payment and frees cash by eliminating overhead cost for invoicing and receiving payments.
E-commerce also includes the movement of inventory, stocking of items, and delivery of goods. Many private- and public-sector entities are working to eliminate warehouse space and often contract on a “just-in-time” basis. Bar coding, scanning, and the automatic electronic transfer of inventory and reorder data make this possible.
Both manufacturers and retail stores capture usage data by scanning bar codes either at the point of sale or as materials are used. When the stock or inventory hits a predetermined level in the system, items are automatically reordered, shipped, and restocked. In some retail stores, restocking is done directly to the shelves, reducing the need for warehouse space. Many companies offer Web ordering and deliver requested items directly to the desk, often within 24 hours. Some retail stores allow people to order on the Web and pick up locally, combining the immediacy people want when purchasing with the convenience of ordering online.
Can any good or service be sold using e-commerce? The short answer is yes, but more important questions are: Should a certain good or service be procured by an entity using e-commerce, and if so, how? What are the advantages and disadvantages? Who are the customers? Would making a good or service available via e-commerce in any way limit competition, increase price, or make it more difficult for end users to get what they need? The answers to these questions require an understanding of the entity that one serves and the needs of its customers.
E-commerce impacts all industries, sometimes planned, sometimes unplanned, sometimes purposefully, sometimes by happenstance. The music industry provides a good example. In the 1990s, Napster appeared as a “free” site allowing users to log on and “share” music that they had stored on their personal computers. The music industry fought in court for years to shut down Napster, but the genie was out of the bottle. Any person who had ever purchased an album or CD just to listen to a couple of songs by an artist could see the attraction of purchasing and downloading only the songs that one liked. Napster transformed the music industry in a way that hasn’t happened since radio first became popular. As the way music is produced, marketed, and sold changes, it also affects the radio industry, the advertising industry, and how artists market themselves and their music. The music industry has been forced to react to, and ultimately embrace, a technology that it at first tried to restrict or ban.
E-commerce has other far-reaching effects. What does it do to towns and cities when people can shop anywhere in the world from any computer, not just for goods, but for loans, insurance, and banking services? What does e-commerce do to local jobs and the personal touch of having one’s own “insurance man” or “banker”? How will the distribution of the population of America be affected if people no longer have to live near large population centers to buy or sell? What business opportunities will be available to future entrepreneurs? How will the composition of the work force change? What job skills, training, and education will be more in demand; which will be less in demand?
What will happen with sales taxes as more sales move to the Internet? Is it acceptable for the government to charge businesses fees for online transactions and for receiving bid documents? What about international sales? Will there be calls for tariffs or other protections from foreign companies?
Research has proven that parting with cash is much more emotional for people than writing a check or using a card. How will that play out in an electronic world where purchasing decisions can be made and paid for in seconds with just a few clicks? Will people’s idea of money change? Is it already changing?
Purchasing professionals must have a broad view of e-commerce and its impacts, implications, and shortfalls in order to most effectively implement e-commerce in the entities that they serve.
About the Author
J. Kevin Beardsley, CPPB, CPPO, is the Director of Purchasing of the Virginia Beach City Public Schools.