eBusiness Is growing faster than ever

We first published an article on eBusiness in 2005. Now seems a good time to revisit this, although it does make it even longer.

Every (well - 99%) Kiwi business either uses the internet or has an agent (such as an accountant) do so for them. If you're reading this e-newsletter, if you have ever received an email from a customer or ordered something yourself from a supplier by email; if you purchased a ticket to travel; or something from Amazon or Trademe (which became part of Fairfax in 2006), and when you do banking online (is there still a business that doesn't) - then you are involved in ebusiness. eBusiness is just "using the internet for doing business".

More and more SMEs have their own websites, and that of course raises the competitive stakes and puts pressure on others to do the same. if it's not already, should yours be one of them? And if so, how do you go about it? What’s a sensible game plan for preparing to embrace a website of your own and provide it with the functionality to do business online?

That’s the issue we'll be looking at in this article.

The information will, of necessity, be general, but it should make you feel much more comfortable about seeking expert advice once you understand the underlying business and technical issues involved in first deciding if you will go online, and then deciding what sort of ebusiness setup you want.

So what’s the big deal about ebusiness - is it anything more than just a shopfront on the internet? Yes - in two basic ways:

1. eBusiness offers new ways to deliver information about your business and, depending on what you sell, sometimes a way of delivering the product or service itself.
2. eBusiness can enable a business, any size business, to operate more efficiently and productively.

Here are some examples that demonstrate how doing business the ebusiness way allows for something new to happen. 

Reducing process costs

Many paper-based operations can be automated to save time and reduce transaction costs. The most dramatic illustration of that has been bank transaction costs where some sources estimate there’s up to a 99% difference between the cost of an over-the-counter transaction and an internet transaction (how much of that is passed on to you is another matter!).

A raft of business-related processes can be speeded up and processed more cheaply by the internet, such as using online employment agencies, payroll (almost essential with the new IRD systems), or introducing an electronic expenses system, as well as all the customer service operations like logging service requests or providing product information.

Adding value to the customer experience 

eBusiness provides opportunities to improve service to customers, suppliers, distributors and business associates. Just by using email, a small business can communicate faster with these groups about such things as their products and ordering information or providing quotes.

Take it a step further and you can offer a service like sending an email notification at each stage of the fulfilment process - an email when the order is confirmed, another when the order is shipped and another when your courier confirms it has been delivered. The cost is next to nothing once the system is in place.

As well, many small businesses with a website provide extras like product frequently asked questions (FAQs) and do-it-yourself hints or technical specifications. This sort of thing helps differentiate them and makes the site more useful to customers. A bonus spin-off here is that this assistance often results in a reduction in the number of customer telephone enquiries and the time spent on answering them.

eBusiness allows you to get closer to your customers and add value to their shopping experience and that’s important where the competition is only a click away. The more value you add to a transaction, the harder it is for competitors to offer an inducement that would change a customer’s loyalty.

Extending "open" hours and customer reach

An online store is never closed, or more to the point, it's open when your customers are shopping online, which is frequently out of standard business hours. You can be open 24x7 without the overheads of "a brick-and-mortar" store.

It also removes geographic barriers. Many SMEs that previously sold only to local passing trade have suddenly found this to be a real benefit - from a winemaker in Marlborough to a Maori artist in Northland who can now take orders over their website from customers who may never even visit NZ. There could be real potential here when you realise that more and more people are accessing the internet and, as the retail sales figures show, are becoming more confident in buying online.

Service provision

Small businesses, as well as private individuals, interact with a range of professional and government services such as insurance companies, banks, telcos, power utilities, accountants, IRD and other government services.

Many of these organisations have well-developed ebusiness systems in place, allowing clients to access information or complete transactions at any time from their own location. Accessing these services online saves time waiting in queues and eliminates the need for paper and postage.

An example is Digital Boost - helping businesses make the most of digital tools. If you haven't seen it check it out - it's sponsored by MBIE so is independent of suppliers.

In a word

 It all comes down to three main reasons why a business, including an SME, ought to maximise its use of the Internet:

1. The opportunity to improve business practices and improve competitive position. This is straightforward - using internet technologies makes operations faster and cheaper. Those businesses that take advantage to cut their cost of operations; those that don’t work on a lower profitability basis.


2. The internet has opened the market to a lot more players - and increased your competition. Even micro-businesses can access a global market, and some do when for the price of a computer, an internet connection and a simple website they can mix it with the multinationals. In other words, in many industries, the barriers to entry have been dramatically lowered and competition dramatically increased.


3. People want to use the Internet to do business. eBusiness is increasingly accepted and used by both your customers and suppliers to do business - if they want to interact with you online can you afford to say "No"?

Building up an ebusiness

Those are compelling reasons for considering moving further into ebusiness. In the next section, we’ll elaborate on how a business could progressively implement some of the enabling technologies and what benefits they provide. As I will explain later, you don’t have to jump into the deep end of becoming an ebusiness. You can build on different functionalities depending on what is right for your business purposes. For example, many people think of AI as the same as ChatGPT, but there are so many tools these days which use AI; ChatGPT is but one.

 We’ll go through these quickly and explain how each new addition enables certain business benefits. The first steps don’t even require you to have your own website, and the third is almost trivial.

Level 1: Using email

Email is your base-level entry to using the internet and, likely, you have already progressed this far - after all, the majority of small businesses have. It has some well-known advantages - such as communication with customers to market to them or provide customer service, and with other businesses to take and place orders; it’s fast, it’s cheap, it’s always available. With the huge penetration of email into both homes and businesses even if you don't want to communicate with others via email, they want to communicate with you. So email should be considered a must-have for any business.

With its rise in popularity has come a rise in misuse of email. A basic tool like SpamAssassin minimises this, and providers also make their own attempts to thwart attempts to exploit their systems. Sadly this can cause new issues. For example, if you regularly send emails - especially sounding like sales or with attachments - to Gmail, it is important to get clients to "whitelist" your address(es).

Level 2: Using Internet services

Since you have email, you have access to the World Wide Web too. Many businesses use this access for business purposes, including research, banking and dealing with IRD. You should have MyIR accounts for yourself and your business, that is certainly your first step. Just as banks are now largely online, so is IRD. " Research" may sound a bit esoteric, but it includes everything from finding out about government regulations, product liability, safety regulations that apply in their offices and on the shop floor, what the competition is up to and sourcing products and services, to identify potential customers - the list is endless.

And the range of goods and services that can be bought online is increasing daily and so are the number of services available - especially banking and government services as I mentioned. The beauty of using the internet for these tasks is that it allows you to do it from your desktop saving time and money.

Level 3: A brochureware site

When you are ready to have your own site you don’t need to load it with a lot of functionality immediately - or ever if your business plan doesn’t warrant it.

At its simplest, a website can consist of only three or four pages containing a company profile, some information about products and services, your contact details, and perhaps your catalogue if you sell products. Just ensure you keep it updated with any changes.

These are called "brochureware" sites - they don’t do much other than advertise your existence and provide a way of contacting you - although the catalogue idea can work well if your customers just need to find an item number.

A brochureware site doesn’t involve any connection to back-end office processes: it's pretty well independent and can be put up at minimal cost and is low maintenance.

As with any website, it's not just a do-and-forget exercise. If you do, your site will quickly be "forgotten" - it will slide down the ranks when people search for it. SEO (search engine optimisation) is part science, part perseverance and a little luck. But the most basic rule is to provide well-written and illustrated copy.

Level 4: Online store

Adding a shopping cart allows customers to compile and submit an order online. These follow the metaphor of the supermarket shopping trolley; browse around, select the items you want, add them to your trolley, reject any you don’t really want, ask for them to be totalled, and then submit payment details - usually a credit card number.

There’s a range of shopping cart software available, so this functionality can be added without spending a fortune. However, customers are pretty ready to abandon their shopping trolley as soon as anything confusing happens along the way, so you want to select a very user-friendly process.

Using your shopping trolley process to enhance customer service by putting them in control is one of the great advantages of Internet shopping. An electrical retailer did this by creating a site that allowed customers to find the product they needed, find matching components, and then gave them the choice of ordering online or being shown a list of retailers in their area.

And when it comes to purchasing, so that customers feel secure, ensure that the system sends an order confirmation note by email to them. In this scenario, delivering the order and taking payment are done through established offline procedures. However, taking payment can be added to the site to move it along to the next level, a transactional website.

Level 5: Real-time transactions

A transactional website allows for the complete transaction to occur in real time by accepting payment details and having the customer’s credit card information passed through to the bank and authorised (or declined) immediately.  In effect, you are integrating your website into the banking system. Although they have come down in cost, they are still relatively expensive solutions. You need to ensure your pricing is adequate to cover this.

There may also be issues to resolve about how you will accept payment in other currencies and dealing with different taxation regimes from region to region. Anyone going down this path needs a well-thought-out list of requirements that they can match the possible solutions against before committing to a particular software solution.

Level 6: Involving the customer / supplier

Providing high-level customer service is one of the most time-consuming, and so expensive, business processes. And yet the types and levels of customer service a business provides are often at the core of what sets it apart from its competitors.

I’ve already mentioned that an esolution can allow for new types of customer service, such as notifications; and that you can add extra layers of service like FAQs. But you can go further. Customer-specific passwords can let them check the status of orders and payments themselves on your site and have become the norm. Be careful not to overload their address with sales emails. You're likely to find yourself blacklisted.

This sort of service cuts down telephone and written queries dramatically. Customers appreciate the ability to be able to check such information any time they want. Couriers, Countdown, The Warehouse (and associates) and NZ Post promote relationship-building with their customers by logging onto their websites. But smaller firms do it too, and for the same reason - this interconnectedness comes at a lower cost and is on-demand, thus providing a more efficient method to respond to customer needs and wants.

Level 7: Integrating operations

 This step involves linking up what goes on at the customer, or front end of your website, with those processes that they relate to in your office or the back end. A simple illustration of this is linking your inventory control system to your sales records - a customer buys from you online and the system, as part of the process, notes you have one less part in stock. When you are down to a preset level the system warns you and creates another order for replacement stock. Of course, you can control this process by changing the numbers that trigger the actions and so on.

Taking it a step further, all these can be linked to your accounting system to show a change in your committed funds and budget figures.

So there's a lot possible. What you choose to do will depend on your business plan as I said. So let’s look at how you plan out whether or not ebusiness is for you, or which level of entry would be appropriate for your type of business.

eBusiness is still business

We concentrated on technologies in that section but I want to emphasise this point - ebusiness is a strategy, not a technology - ultimately of course the word "business" is what is important in the term "ebusiness".

That is to say, the fundamentals of running a business still apply and it’s no use going into ebusiness without a well-prepared plan about exactly how you are going to use it and in what specific ways the business will benefit from it. This point was, unfortunately, lost in the early phases of the move by businesses to the internet - hence the dot.com crashes. So many of those businesses never checked out even such a simple thing as the cost of customer acquisition and eventually found they’d spent huge multiples of dollars setting up and advertising their sites only to attract a few customers who bought a few dollars worth of merchandise.

That lesson has now been learnt and no one would suggest you go to developing a website until you’ve done your homework.

Developing an ebusiness plan

As I said, using technology doesn't change the basics of running a good business. If you want to be successful there are some crucial planning decisions to be made before going anywhere near having a website built.

We won't go too deeply into the nuts and bolts of developing a full ebusiness plan - that requires professional and independent advice. I just want to bring out some of the main things you will spend time considering and getting answers on during this process.

Link ebusiness goals to your overall business objectives

Basically, this is saying - ask yourself what level of ebusiness used in what areas of operation would be good for your business overall. It's almost certainly higher than it was in 2005.

What this means in practical terms is thinking about what your business objectives are - are they to increase productivity and reduce process costs, improve customer satisfaction or market penetration, and so on, and then assessing how ebusiness can help you attain those objectives.

There’s no reason your site has to be a sales channel for instance. You may decide the real business need is to become more efficient in some processes, such as procurement. Using the Internet to set up a procurement system could reduce inventory levels and purchasing administration costs, and eliminate maverick spending by employees for instance. For one business there may be nothing to be gained by doing anything more than using email and banking online, whereas, for another, their objectives may only be achievable by having a website with full sales transaction capabilities.

Knowing what you hope to achieve by using the internet in your business is fundamental to selecting the type of ebusiness solutions you implement, how much time and money you will be prepared to put into it and how you will judge whether it's been a success or not.

Understand who your customers and prospects are

If your objective is achieving growth through increased sales then understanding your customers and what they want to see on a business site become the prime considerations. After all, it may be the main determinant of how the site is designed to function. Doing your homework here may even help you decide that an internet presence isn’t the way to achieve that objective after all.

The issue here is, just who are your customers? If most of your business comes from people who live in your area, or you plan to deal with just a handful of customers, you may decide setting up your own site isn’t going to be cost-effective.  Secondly, consider the technological capabilities of your customers - do they actually use the internet to locate and transact business?

If you don't already use them, tools can monitor not just your online sales but also your online visitors - where they come from and what parts of your site they visit - and leave from. The potential is enormous, but takes time and effort to get the most out of it.

Now, you might decide you are just local at the moment and your current customers aren’t great online users - but that could change if you DID build a site and marketed more widely to other customer groups.

Understand what your customers want

Another consideration is, what parts of the buying process for your type of product or service sit well on a website. Say you sell clothing - you could create a virtual fitting room and match customer size to items and styles in stock; but currently, most clothes shoppers want to physically try things on - so your investment in the virtual fitting room could be wasted.

Finally, you need to consider what your customers would consider a value add on your website to give you the edge over competitors. The difference between a successful site and one that doesn’t make it is often reduced to how well the shopping experience has been personalised. For instance, as Amazon does when, based on your past interaction with the site it makes suggestions of other items you might be interested in. Or as other sites do that, let the customer put together their order by asking them what they want and then displaying the items that would suit, along with some information about each so a sensible choice can be made - many hardware and software businesses follow this model. Personalising a website makes the customer aware that the business cares about them and wants to give them the best possible service.

Understand which business processes could work more efficiently

On the other hand, if your objective is to achieve efficiencies and reduce process costs how do you get started?

The best approach is to consider which business processes currently offer the greatest opportunity for cost reductions, efficiency gains and increased profitability if you could do them on the Internet.

You could list out your processes (you should have developed a system - not necessarily computerised - for each process anyway to ensure consistency of service), such as delivering, taking orders, invoicing, payroll, banking, production, after-sales service and so on, and then research what solutions are available to improve performance. It’s also worth looking at other businesses to see what they are doing. And talking to your suppliers to see how your ebusiness system would operate with theirs.

For many businesses, improving processes, particularly with B2B relationships, is the area generating the best ebusiness ROI.

Assess the costs involved against ROI

Costs are going to come in many areas - not just the obvious ones of software and hardware, the website developer’s fees and registration of your domain name.

For instance, you will probably find that some team training is going to be necessary. And there will be ongoing costs such as maintenance of your website and web host costs.

When you have assessed all these you need to do a check against your expected return on investment to determine if it’s all worthwhile.

Mind you, for ebusiness initiatives it is important to think beyond traditional financial ROI measures. If your objective is to communicate better with customers you need a key performance indicator that will measure that.

Integration with current processes

Anywhere up from a brochureware site, you’ll need to consider how the processes you carry out over the internet impact on or relate to the processes you are already providing manually. For example, often businesses find that starting to take orders by email or paying suppliers via the Internet means that they have to adjust their accounting procedures and their customer record-keeping procedures. But it can also mean you will face some entirely new twists - for instance, how to handle returns of items purchased from your website and how you’ll provide after-sales support to remote buyers.

You must consider these potential changes when developing an ebusiness plan, and map out the new processes before moving to the technology/implementation phase.

Implementation and risk management

You need to consider the level of risk for your business while implementing an ebusiness solution. If possible a phased implementation that involves small, manageable steps will reduce risks and enable your business and employees to adjust to the new processes.

In general, getting started is more important than trying to get it perfect immediately.

You are also going to need a set of policies to cover the use of the new technologies such as an acceptable use policy to let employees know what they can and cannot do with business-owned equipment and what information they can access and download from the internet and so on.

Technical Considerations

Finally, to round out the issues associated with starting an ebusiness, I want to briefly look at the main technical issues involved in developing more advanced ebusiness solutions. There are six:

1. Website vulnerability: For many SMEs concern over whether they will be hacked or suffer a denial of service attack becomes an obstacle to sharing in ebusiness opportunities. It shouldn't be. Publicity gives these a high profile but in reality, they are low-frequency threats and avoidable with the wide range of security solutions available. One example is the move from HTTP to HTTPS. A seemingly small change, but people are warned to avoid HTTP sites.
2. Trade regulations and taxation law: Laws governing trade and tax differ from country to country and even region to region within a country. Businesses trading across borders are expected to comply with the local rules that can make ebusiness on a global scale a bit daunting. Fortunately, governments have recognised this and many national governments and broader bodies such as the EU, OECD, and the UN are in the process of developing policies to support, manage, and control electronic trading across regions.
3. Transaction security: This would have to be the number one issue for the ebusiness customer - are my credit card details safe in this transaction? Fortunately, encryption and other techniques have progressed to the point where this is much more a perceived problem than an actual one.
4. Privacy: This would be the number two issue with buyers - are my private details safe and how will you, the seller, use them? Again, perception is far more a problem than reality. Government regulations now cover what use can be made of customer information while other technologies protect it on your site.
5. Other legal issues: the global accessibility of websites has meant that governments have scrambled to introduce laws about the use of new technologies and to try and ease ebusiness opportunities by making their regulations as compatible as possible with other jurisdictions. But there are still anomalies and what is considered a legitimate promotion in one jurisdiction could be considered as gambling, and maybe illegal, in another.
6. Bandwidth: or rather, the lack of it. While this has increased significantly, most recently with the introduction of fibre, new features demand more bandwidth. This was a major inhibitor to getting into ebusiness and for customers to use their services but is a rapidly diminishing one, although still to be considered - especially in remote areas.

It’s quite correct that the ebusiness environment is still evolving and changing rapidly, but if you are waiting for stability before you enter, you’ll be waiting a long time - possibly too long for the good of your business. Consider this - there are already tens of thousands of businesses worldwide just like yours, all of whom have managed to get up and running successfully.

Conclusion: Is ebusiness still a fad?

Do you think all those businesses have been blinded by the hype? Is ebusiness just a fad? It's too deeply embedded these days to be considered a fad.

A lot of lessons were learned from the dot com crash - mainly about applying good old fundamental business principles to using the internet to do business on, that is, to demonstrate there would be a positive ROI.

As reality has set in, those businesses that focused on their core business and used ebusiness solutions as just another business tool have become big winners.

So, where is the greater risk - in avoiding it or embracing it?