Saturday, September 27, 2003

Doing E-commerce For Real

I would like to start my own e-business for real, but I lack some very important elements of a business. First a product to sell, and second a reason for people to think that buying it on the internet would be better than buying somewhere else.

Over the last 3 or 4 years, the world experience a "Dot Bomb" hundreds of dot coms went bankrupt. People have to be much more careful about doing e-business now, the have to ask themselves harder questions. Will this website add value to the business? Does it make anything more convenient? Is there information value, is the information there and presented in a useful manner? Does it get rid of a middle man or just change who the middle man is? Does in create a new better/cheaper middleman? Does it make a lower price more feasible?

The internet has a bunch of effects on businesses and consumers.

1. It is a Mediating Technology, it helps to connect people/parties and helps them to exchange information.

2. It makes the world both smaller and larger. Larger because number of people you compete with will go way up, since there are very low barriers to entry. Smaller because you can do business from anywhere, being in a major center is the same as being in a smaller city.

3. Often it has the effect where the more people that connect to it, the more valuable it is. Take this site for example, the more different people that post, the more useful it is to entertain and inform others about what the family is doing.

4. It can be a distribution channel. This is mainly relevant for information based services. I saw an example on a show called Venture, there is an accounting firm in South Africa that is emailed Canadian companies information. They process it and send it back. The South Africans are making a fortune (in their opinion) and the Canadians are saving a fortune.
It can also enhance some channels of distribution, for example if you mail a package via FedEx, you can track where your package is along it's journey.

5. It is a time moderator. Websites are open 24/7. Information is delivered much faster, and you don't have to stand in line. Take a bank for example. You don't have to wait in line (or on hold) during bank hours to do your transactions (that don't involve cash) and you can do your transaction any time.

6. It shrinks information asymmetry. Both parties are on more equal ground. I, knowing nothing about cars, can look car info up on the internet and I can check prices in lots of dealerships before I even test drive.

7. It gives infinite virtual capacity. If 50 people go into a bank, it would take a long time to handle that many people. Over the web, you could get 1000-10000 visitors with in seconds of each other, and they could all be doing transactions at the same time. It's like having a thousand or more staff members.

8. The standards are low cost. Standards for programming on the web are open. You don't need to pay someone to write a program in their computer language. This means that there are low barriers to entry. I could make a website just as easily as someone with 4 times as much money as me. This also means that I can make changes easily because I don't have to pay fees to someone to get the right to use their programming standard.

9. It is a creator and a destroyer. 10 years ago, no one had heard of an internet service provider, the only way to be on the internet was through a University, the military or the government. Providing internet service is a new industry created by the internet. It also has completely changed the way people travel. Lots order tickets online, and so travel agencies are going the way of the dodo, unless they can somehow change the way they do business.

10. It reduces transactions costs. It becomes easier(cheaper) to find buyers/sellers. You can pay a couple hundred bucks to host your website, or you can pay a couple hundred bucks to have flyers printed. If there's mistake on your website you can change it, but if there's a mistake on the flyer you pay a couple hundred to have them printed again. It becomes easier to collect information.

A good e-business would take into account the effects of the internet and try to do something that is aided by the them. If you are interested in an example, post a shout out.

-Gary Milner, Internet Idea Man

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