By Herb Dennenberg
First of a series on e-comerce. The most efficient merchandising technology in history is in its early infancy, but already is demonstrating explosive growth and explosive economic impact.
E-commerce (electronic commerce) uses the technology of the Internet to buy, sell, auction, inform and do almost everything else a business has to do. It's also creating a new group of billionaires and millionaires, and now Fills the business pages with new e-commerce ventures and other developments.
"It is a true transformation of the economy, commerce, and the way we do everything," said Dr. Rocco Paolucci, chairman of the Information Sciences and Technology Department of Cabrini College in Radnor.
He adds that those who do not understand the Internet and e-commerce, whether businessmen or consumers, are doomed to be losers.
One text, "How to Invest in E-Commerce Stocks," has defined it as follows: "Taking its cue from the traditional definition of com- merce, electronic commerce sim- ply involves the transfer of value over the Internet through one of the four basic activities: buying, selling, investing and lending."
The e-commerce evolution: The same text points out the Internet revolution came in three waves: First, starting in 1992, the companies that provide the building blocks of the Internet's infrastructure - such as Cisco, U.S Robotics, Hayes, and PSI net.
Second, in 1993 and 1994, came those providing information - such as Yahoo!, Excite, Lycos, and CNET.
Third, in 1995 and 1996, came the companies buying, selling, investing and lending - such companies as Amazon, com. 1995. selling books; Wat-mart.com, 1996, selling all the goods and services of the largest retailer, Wal-Mart Stores Inc.; E-Trade, 1996, an online brokerage company; and Quickquote.com, offering quotes on insurance policies to consumers.
E-commerece or perish: E-commerce has a series of advantages which make its utilization essential for business survival and for consumers who want to buy, sell, borrow and invest most advantageously.
Those businesses that do not integrate e-commerce into their operations and do so quickly are not likely to survive. That's why one loading businessmen said that there will be the quick and the dead, with those that do not understand and use the new technology ending up in the latter group.
United Parcel Service (UPS) is a good example of why and how every business has t(. use and integrate e-commerce into its operation.
When it went public, it was treated as a blue-chip stock with Internet potential. Why? As one published report said: "The market is recognizing them as more than just a transportation company. They are also an extraordinary player in the field of e-business."
UPS, For the last few years, has been investing $1 billion a year on information and technology so it was ready and able to capture a big chunk of the booming Internet transportation market. Last Christmas it delivered 55 percent of all goods consumers bought through the Internet.
Here are some of those advantages of e-commerce:
Lower cost: E-commerce escapes much of the expense of brick-and-mortar business and can operate with less labor and other resources. As a result, costs and prices can be sharply reduced,
For example, Barnes and Noble has 1,000 stores. Amazon, com, the leading Internet merchant, has no stores. Yet, Amazon.com sells about $1.5 billion, about one-half of what Barnes & Noble sells with all their 1,000 stores.
That reality of lower cost was demonstrated by a recent survey of Consumer Reports magazine, finding the lowest cost for prescription drugs can now be found at online pharmacies.
Despite the massive infrastructure of the giant chains, the online pharmacists can still undercut the price cutters of brick-and-mortar retailing. Another study found that online prescription drugs are about 28 percent lower than those offered by brick-and-mortar competitors.
Another example: One executive of an online stock brokerage firm said it costs about $8 to make a trade over the Internet, but over three times that much when the trade has to be executed and processed in the usual way.
This cost and price advantage in many lines is likely to increase as online businesses mature and utilize the constant stream of more efficient technologies and work out the kinks that are inevitable in new operations.
One small book-store owner told me their most devastating competition comes not from nearby giant bookstores (such as Borders and Barnes and Noble), but from online selling which can offer millions of books, often heavily discounted beyond the ability of small bookstores to compete.
Anyone who shops online quickly discovers that the lowest prices are often online, not with conventional retailers or catalog houses.
As impressive as the present cost advantage is, the potential for lower cost technology and escalating cost advantages for e-commerce is even more impressive.
There is Moore's law. which says every 18 months computers double in power while halving in price. This trend is expected to continue for up to 10 years. That's what almost any computer you buy is on its way to being obsolete before you get it home
Then there is Gilders law which says bandwidth of technology will triple every year for the next 25 years. This incredible growth of the productivity and efficiency of Internet infrastructure will continue to enhance Internet cost advantages. In my next column, I'll have more on the advantages of e-commerce.
Herb Denenberg is the consumer and. investigative reporter for the Adelphia Cable Update and the Tri- State Media All-News Network. His columns appear Wednesday and Friday in the Reading Eagle. You can write Herb at FOB 7301. St. Davids. PA 19087 or e-mail him at email@example.com