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Being Local Helps: The Role of Brick-and-Mortar Strategies in E-Business Growth

Creating as many points of contact with the customer as possible is increasingly becoming the central theme of many of the world's leading companies as they embrace electronic commerce. E-commerce expert Louis Columbus explores the brick-and-mortar component of e-business.

Creating as many points of contact with the customer as possible is increasingly becoming the central theme of many of the world's leading companies as they embrace electronic commerce. E-commerce expert Louis Columbus explores the brick-and-mortar component of e-business.

Increasingly, the world's companies are realizing that having a local presence in addition to a Web site capable of being used on a global scale increases the number of customers reachable. Traditional telemarketing companies using the direct sales model can reach only so many customers on the phone. Moving into customers' communities with a retail store that is tightly integrated with the customer's telephone and online shopping experience creates a comprehensive sales experience for the customer. Creating as many points of contact with the customer as possible is increasingly becoming the central theme of many of the world's leading companies as they embrace electronic commerce.

One of the most successful companies in using the brick-and-mortar model as part of an e-business strategy is Gateway Computer. With now more than 140 stores throughout the United States, Europe, Canada, and Japan, one of the key messages in Gateway's advertising is "Call, Click, or Come In." Promotional programs with strong tie-ins to the Gateway Web site have since been introduced first through the Country Stores, yielding significant sales gains. The YourWare Program introduced in the fall of 1998 yielded close to a 30 percent gain in sales, according to analyst's estimates.

Like many companies adopting e-commerce strategies, Gateway first looked to its strengths and built from what it knew best. In this instance, its key strength was innovative advertising that generates between 60,000 and 70,000 inbound calls per day. Fully 6 out of every 10 in-bound calls are generated from television advertising, which has increasingly focused on the e-commerce commitment that Gateway has made. Only recently has Gateway made a philosophical shift to considering outbound calling, and only in business accounts. Why? Selling primarily to consumers, the company did not want to be obtrusive.

Yet today Gateway is like many companies that have been successful in other arenas and want to extend that market leadership into e-commerce. Starting in 1999, the Gateway Country Stores were realigned under the Gateway Business division of the company. Furthermore, Gateway created an Electronic Commerce Division in Gateway Business to specifically find areas of opportunity for partnerships that strengthen the computer maker's position in selling to other businesses. The challenge for Gateway and millions of other businesses is how to successfully implement a business-to-business e-commerce strategy.

The travel industry is another area that is seeing rapid adoption of e-commerce strategies to benefit both the consumer and the business traveler. Microsoft's Expedia site is the leading portal in this area, providing trip-planning and ticket-purchasing capabilities that many businesses use as an online travel agent. The interesting aspect of e-commerce adoption in the travel industry is the strategies that airlines are taking, given the predominance of online travel sites as the preferred method of planning and purchasing trips. Of the airlines that have most successfully integrated e-commerce into their existing reservation and booking systems, both Southwest and American Airlines stand out.

Southwest Airlines is one of the few airlines using the Internet as a channel to market its low fares to both new and existing customers. Its Click 'n Save weekly email updates include fares available only through Southwest's Internet specials. As the first major airline to launch a Web site in the mid 1990s, Southwest aggressively marketed its Web capabilities and currently allows members of its frequent flyer program to receive double flight credit for booking ticketless travel online. The site promotes hotel and vacation offerings from Hilton resorts and hotels, offers vacation packages, and even allows customers who are shipping cargo to track their shipments online.

American's Web site is typical of many airline Web sites in that it primarily focuses on its frequent flyer customers, allowing only registered AAdvantage members to book online. The site has a link from the AOL Business Traveler section and provides up to 1,000 bonus miles for customers who book flights online. The site offers Internet-only specials to registered users and Net SAAver fares on a weekly basis. In addition, AA.com provides links to AAVacations.com for vacation packages and offers competitive fares and links for markets that the airline does not currently serve.

Going Business to Business with E-Commerce

The market dynamics occurring in e-commerce today signal a coming generation of solutions that include the strengths of many companies in one. Due mainly to partnerships between e-commerce companies becoming commonplace, as well as the rapid increase in mergers and acquisitions, the future products and services offered will be more robust in their functionality and more adaptable in their content. AOL's acquisition of Time Warner is just a foreshadowing of events to come. It is entirely feasible to assume that the missing component to date in e-commerce, which is e-fulfillment, will be supplanted soon in one of the major e-commerce providers' business model. As the velocity of transactions grows for any business, the need for being able to accurately and efficiently deliver ordered goods is crucial for growth. Many industry analysts agree that each holiday selling season is actually cathartic for the e-commerce industry overall because it points out quickly areas of expertise, in addition to areas of improvement. From the last holiday season, it became clear that an area for growth is fulfilling orders when they are promised.

Just as each holiday season brings a multiplier to the number of holiday sales, two significant trends will continue to propel e-commerce growth globally for the coming 18 months, at a minimum. First, there is an abundance of new technology that, in many cases, is turn-key in approach. Examples of procurement are auction site, marketplace software, and EDI translators for business-to-business use, which are capable of being implemented in months instead of years. The second key factor driving e-commerce growth is the sense of urgency created from early adopters who are significantly supplanting their businesses via e-commerce strategies. With The Wall Street Journal calling the disintermediation of a given industry "being Delled" the Web-enablement of the direct model is now a given.

Driving business-to-business e-commerce growth are sales of information technology products and services. Most commonly purchased products include computer software, hardware, information systems services (including outsourcing and the emerging application service provider [ASP] model), telecommunication services, and telecom equipment. Information systems-oriented products have benefited from the rapid growth of business-to-business e-commerce because they are essential for a company to get an e-commerce strategy underway. Within the coming year, however, this mix of products and services could potentially change significantly—vertically focused portals such as Chemdex, eSteel, and PlasticNet are expected to be among the top business-to-business e-commerce sites.

In conclusion, being able to combine a strong retail presence that is supported by web-enabled tools spells success for some of the world's most innovative companies including Gateway. Many smaller businesses around the world who continue to focus on the personal contact with their end customers on the one hand, and the benefits of online tools on the other, are taking the ASP concept to test. The combination of click-and-mortar is a great combination for companies who have business models that support this approach.

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