What Kinds of Revenue Opportunities Does E-business Create?

If you're thinking of going global or just completely connecting with your
customers, e-biz offers plenty of prospects. Still.

BY JAMES D. COLLINS

Much of the interest in e-business in the 1990s was driven by the belief that it would be the source of exciting new revenue opportunities both for existing businesses and for new start-up businesses. Both the business-to-consumer (B2C) and business-to-business (B2B) models proliferated as traditional companies and new e-commerce companies entered the online marketplace. The revenue opportunities these models represent are almost endless. Nevertheless it is possible to understand them as falling into several broad categories driven by the nature of online commerce itself:
Enhanced access to customers
Enhanced sales to existing customers
Electronically enabled products

Enhanced Access to Customers
A business, whether it is a B2C or B2B business, can increase its revenues by selling its products and services to a larger number of customers. A business is always looking for new sales channels, new geographies and new customer segments as ways to access these new customers. E-business offers powerful new ways to reach them.

New Sales Channels Online sales channels may take several forms. A common form of online channel is the online "shop." Within the online shop the customer may browse the company's products and services, learn more about them, understand options and features, and ultimately place an order. Even in cases where the order is not placed online, there is benefit to the company in having informed customers when they come in to a physical store to make the purchase. Some companies strive for a mix of "bricks and clicks." According to J. Crew and others, buyers still want physical catalogs and stores in which to browse or see and touch certain items, but want the online channel to shop for greater information, greater selection or other reasons at other times. The optimal solution according to Wal-Mart is "deep integration [of its online store] with the [physical] store."

Many companies use this channel instead of having retail storefronts. Good examples are consumer electronics companies such as Sony or Palm. These companies typically have no dedicated retail storefronts and work through regular retail stores. But they also offer direct retail sales online (e.g., www.sonystyle.com or www.palm.com). This gives them access to customers that might not frequent those retail stores or who live in areas not served by a broad variety of retail establishments.

Extended Geographic Reach Online commerce provides an easy way to penetrate a new geographic territory. Large, small or specialized businesses can use their online sales sites to sell on a worldwide basis with little extra cost of doing so. This ability to tap into expanded domestic or even international markets can be an immediate revenue boost to artists, jewelry makers, wineries and the like, for initial orders and especially for reorders. As another example, the Hotel Gatti (www.hotel-gatti.com) is a small hotel in northern Italy that catered primarily to Italian travelers. By introducing its own website with English language options, it significantly extended its geographic reach. Now, at very little cost, the hotel communicates with and takes reservations from potential customers in the United States and other English-speaking countries. The bottom line is that e-business now allows any company to become a global one, regardless of its size.

New Customer Segments Online commerce allows a business to identify and target customer segments that otherwise would be difficult or costly to serve. Several specialty automobile parts companies do significant business online with target customer segments. For example, 928 International, a company dealing exclusively in new and used maintenance and high-performance parts for the Porsche 928 automobile, has used its online shop (www.928intl.com) combined with selected advertising in specialist magazines to become the leading supplier of aftermarket parts for this specialty car.

A La Zing (www.alazing.com) is a small, specialized provider of foods. An interested customer segment can easily find A La Zing via any number of Web search engines. Once the customer is connected with the company, the company can easily maintain a relationship with that customer. A narrow segment of customers, such as those wanting beef stroganoff specialty foods, can find A La Zing via a Web search on "beef stroganoff." Once registered, the customer remains an easy target market for A La Zing in the future. It is unlikely that this segment would otherwise be large enough to support a regular retail presence. But when this business is aggregated through the Web, it can become a profitable niche...

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