NFIB

How to View Ecommerce in Your Business
10/ 01/ 2002

In the late 1990s ecommerce was the hottest thing going. Remember the obscene amounts of money made by the initial public offerings of companies like Pets.com and eToys? Venture capitalists threw literally billions of dollars at nearly any ecommerce company they could find, even though none of them, including giants like Amazon.com, had a clear and well-defined vision of how they would make a profit. These companies and the venture capitalists that backed them up assumed that all would be revealed eventually in the learning process of the New Economy.

Today, we can look back and share a grim chuckle at these companies' expense. An ecommerce Web site does not a business make. Billions of dollars were lost, and thousands of people ultimately lost their jobs because of the irrational exuberance surrounding ecommerce. However, we did learn a few things out of this failed ecommerce experiment:

Ecommerce works best as an extension of your real-world business, a way for you to reach new customers and eventually bring them in the store. One of the most successful retailers online today is Wal-Mart, and a large part of that success comes from the company's taking advantage of its numerous distribution centers already located throughout the country. Wal-Mart didn't need to build expensive infrastructure to go online; companies that did got burned.

The fewer real-world, bricks-and-mortar resources--and the less money--you must devote to ecommerce, the better off you'll be. Toys 'R' Us and Target stores both spent millions on ecommerce, and in the end, decided that a partnership with Amazon.com was far more profitable than trying to reinvent the wheel for their own online businesses.

The more you can piggyback your business onto existing ecommerce infrastructures, the better off your bottom line will be. Again, large businesses are now piggybacking on Amazon.com or eBay's infrastructure, while small businesses, like Jay & Silent Bob's Secret Stash, are using turn-key online operations provided by Yahoo!, eBay and other sites.

Obviously, ecommerce is not for every business--it's hard to sell home-cooked meals or legal advice via the Internet. Only a handful of service-oriented businesses translate well to the Internet, and trying to integrate online functions into your daily work could distract you from serving your real-world customers. The online environment is best for goods or services that you can deliver to the customer quickly and easily, using your existing infrastructure--items you can easily box and send or intangibles such as reports or information.

With those cautions in mind, however, ecommerce can be a solid addition to your existing business, and done right, can even be profitable.

Michael J. Martinez is an associate editor for Kiplinger's Personal Finance magazine, covering technology issues and reviews. Previously, Martinez was a business and technology writer for The Associated Press and ABCNews.com in Seattle, covering such high-tech luminaries as Microsoft and Amazon.com. The book is available in bookstores for $17.95.