E-commerce is bigger than online shopping

What pops into your mind when you hear the word "e-commerce"? I mean, after the feelings of wistful regret that you didn't buy Amazon shares a year ago?

If you're like most people, you probably think of Amazon itself and what the company does - selling books over the Net (and toys, videos, electronics and music. Oh, and Amazon hosts an auction site as well).

Most people equate e-commerce with buying and selling things online; specifically, with consumers buying things and Internet-based retailers selling things to them. This is the vision of e-commerce relentlessly portrayed in the media. And that's a big problem for businesses.

Many businesses seem to have a hard time "getting the Net" because the vision of the Net that they're getting isn't a particularly relevant one. They feel e-commerce is all about selling things to consumers and they don't believe that this angle applies to them. Maybe the company doesn't sell to consumers. Maybe existing channels work well. Maybe the outlay on a retail site doesn't seem justified by the potential returns. Maybe they just aren't convinced about this whole e-commerce thing anyway.

Nonetheless, they worry that they're missing something. Of course, they are. For most businesses, that something is business-to-business e-commerce and has nothing to do with online retail shop-fronts. According to analysts, it's business-to-business e-commerce that is, well, big business. BtoB commerce (as opposed to BtoC, business-to-consumer) dwarfs the value of online retail sales.

Consider some figures. Online retailing to consumers is already growing healthily, with analyst Boston Consulting predicting 1999 will be worth $36 billion (€33.8 billion) in sales, compared to $14.9 billion last year.

In contrast, business-to-business commerce was worth $43 billion last year, and is predicted to jump to $1.3 trillion by 2003, according to analyst Forrester Research. Business-to-business sales have been growing annually at 99 per cent and Forrester thinks just under 10 per cent of all business-to-business transactions will be conducted online by 2003.

While computers and electronics are predicted to be the leading industries for business-to-business sales by 2003, the next three in dollar value according to Forrester are motor vehicles, petrochemicals and utilities. But food and agriculture, shipping and warehousing, and the construction industries also figure, along with many others.

Not surprisingly, individual business-to-business sales are for fatter figures than business-to-consumer sales. At the moment about 50 per cent of business-to-business transactions are for amounts of around $1,000, according to ActivMedia. In contrast, a third of consumer transactions are for amounts less than $100.

While International Data Corporation suggests that business to consumer e-commerce will also reach about $1 trillion in value by 2003, keep in mind that business-to-business sales are only part of the business-to-business e-commerce picture.

Giga Information Group places the cost savings value of doing business online at $17.6 billion in 1998, to rise to $1.25 trillion - $600 billion for US companies alone - by 2002. According to a new Giga study, such cost savings give greater profit margins than online sales.

In addition, for many companies, especially those that feature many collaborative projects or that move projects through several development cycles within various departments, shifting a company's internal functions onto a Net-based system means huge efficiencies and greater clarity in operations.

Given that "documents" in a Web context doesn't mean just text but can include detailed graphic elements, or sound and video, the majority of company projects can be moved into easily-circulated electronic form.

So why do companies keep thinking in terms of an online shop directed at the consumer, when clearly the Internet offers businesses much more than this simple image of e-commerce?

Partly, it's the lack of sexiness in business-to-business e-commerce. Consumer retailers such as Amazon, e*Trade, Dell and eBay all are interesting stories because anyone can go to their sites and see what they do. They all are dealing in a tangible form of commerce that everyone understands. Click on a link, buy a book or a computer or a set of shares.

But businesses buying goods and services from each other are part of a more obscure world - even in the bricks rather than clicks realm - and hardly set the pulses racing. The back-end processes that animate a company's internal operations by transferring them to a Web environment also mostly fail to stir the blood.

Another difficulty is that many Web-design companies are geared towards creating basic websites. At best, they can add in some e-commerce functions in case a company wants to retail items over the Net. The vast majority do not have people who truly understand the nature of business operations and management, making it impossible for them to explain, much less create, proper Web-based working environments for companies.

So, unless you know what you're looking for as a reader and can track down the relevant business-related news items (and can translate the techno-jargon), and unless you have the fortune of finding a Web company that is truly business-knowledgeable, you could easily have spent the past few years thinking e-commerce means books on the Net.

At the moment most businesses need to do some homework - and have courage - to explore other e-commerce options. That will undoubtedly change, but early explorers and adopters may find considerable competitive advantage later in making those moves now.

Karlin Lillington is at klillington@irish-times.ie