The Dark Side of E-Business

When Sears, Roebuck and Co. thinks about where America shops today, it thinks about the Internet. However, when Sears' catalog operations first tried e-commerce, results were disappointing. Fill rates were not optimal. And inventory management was a challenge. So Sears turned to ASD Systems Inc., a Dallas-based e-business outsourcing specialist. ASD Systems provides and manages scalable back-end solutions for catalog and e-commerce compa-

nies. For Sears, ASD first created a scalable e-commerce site for catalog sportswear. Sears liked what the company did so much that it asked the service company to establish a site for Craftsman tools and home health care products. After two years, the sites boast same-day shipping, refunds within 24 hours and a 96 percent fill rate. Better still, ASD president Norm Charney has shown Sears how to turn its inventory nine times a year.

The reason his company has been successful, Charney says, is because ASD understands that e-business is about much more than technology. It's about government regulations and legal issues. It's about branding and promotion, customer service, and many other things, including security, scalability, disaster recovery and availability, customer service, Y2K, tax considerations, legal issues, branding and promotion.

An e-business specialist has to be able to guide its customers through all of those solutions, lest the customer be forced to turn to another service provider.

E-business experts and specialists say they have become close confidants of their clientele, because they do more than install technology. They are agents of change and are not always welcomed by the entire corporation. That's because some of the work e-business experts do ultimately cannibalizes efforts undertaken elsewhere within a business. Thus, business consultants should prepare themselves for pushback,if not outright hostility,from some of the constituents within their customers.

Of late, many customers are wondering how they can transform their existing businesses into e-business-enabled organizations. Many have concluded that they cannot, or, at the very least, that it makes more sense to set up an e-business organization that runs parallel to their ongoing operations. Barnesand noble.com, DLJdirect and others have all made this decision. Many more are on the fence. Bill Kane, managing director of USWeb's New York office, says this is the most pressing issue on the agendas of the companies he meets with on a weekly basis. Razorfish Inc. co-founder and chief technologist Craig Kanarick says his company advises clients against such a move because they need to integrate e-business thinking into everything they do.

On a more practical note,

e-business experts worry that standalone e-business sites put customers at great risk. Whether due to lack of scalability or lack of security, any failure "can affect the entire business, and it can actually shut you down," warns Ian Bonner, vice president of IBM Global Business Partner marketing.

"When we hear about Schwab or these other online brokers going down for a couple of hours or minutes, as that happens, they're out of business," says Bonner.

No one, regardless of whether an e-businesses is integrated or a standalone operation, is immune to problems. During the 1998 Christmas buying season, several leading Web-based merchants experienced difficulties, for example. Some were high-profile, household names, including barnesandnoble.com, macys.com, toysrus.com and even IBM's well-publicized startrekstore.com. Those sites and others buckled under the crush of holiday shoppers.

E-business pitfalls often share some common themes, says Richard March, senior director of Channel Information Services, a division of CMP Media Inc. Poor planning, improper implementation and bad judgment are only a few the reasons why certain e-business sites run into trouble. He and others pinpoint the areas many Web integrators overlook.

Branding: March says branding involves both retaining customers and driving new traffic. He suggests asking yourself, "What is the value proposition of what you are offering at your site that will be interesting and compelling enough to attract customers?"

Web integrators agree. "If you have an established brand today, in the traditional way, and you're not going to defend that brand in that new online environment called e-commerce, you potentially could fade away rather quickly," says Werner Haase, co-chairman and CEO of New York City-based Xceed Integration.

Security: Because e-commerce sites store and transmit proprietary information, such as credit card data, any security hole can expose a Web site to loss or litigation. And while the Web makes credit card payments convenient, most credit card issuers hold merchants liable for fraudulent transactions when there's no cardholder signature involved.

March strongly suggests focusing on obvious problems once and for all, because unexpected items and situations are bound to occur. That includes Y2K. "This is such a wild card, it would be negligent not to look at it to see what may go wrong," he says.

Customer Service: If a customer wants to build a site that can offload some basic customer service duties, focus on achieving the customer's goals. But make sure the customer understands that those inquires must be handled. Unanswered e-mail, poor return policies and poor handoffs between vendors and virtual retailers can ruin end-user experiences.

Scalability: Finally, make sure your customer understands what can happen if a site gets popular. "That is important, because if you start to receive orders that exceed your capacity, you're going to run into customer service problems," says March. You need to know your customer's projected order rate and make sure that the rate of business can be supported by inventory. "People aren't going to wait while you can get your inventory up to meet needs," he says.

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