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Guides to Ecommerce Business |
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e-Commerce in Asia: The rising Singapore.com
Abstract
In the fast moving world of e-commerce, businesses are rushing to gain a share of this rapidly evolving market. Forrester Research predicts worldwide e-commerce will reach US$6.8 trillion from $657.0 billion in 2004. North America will continue to be the global e-commerce leaders, contributing US$3.5 trillion in online business but the region's dominance will be eclipsed as some Asia Pacific and Western European countries hit hypergrowth over the next two years. |
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The sweet taste of e-commerce success |
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The sweet taste of e-commerce success
Tucked away in a suburban bottle shop, Bert Werden is a seven-year e-commerce veteran whose site now turns over $4 million a year.
While well-financed competitors such as Foster's WinePlanet - which collapsed in 2001 - burned cash with no hint of return, Werden quietly built his WineStar online wine cellar from the back of a Strathmore bottle shop in Melbourne's north.
WineStar hosts the most popular wine forum outside the US, receiving a million hits a month. But it was uncorked in 1997 as a five-page website with an order form.
"A guy who used to come in here and buy Jim Beam-and-cola cans said we should go online," Werden says.
"I designed our first website in Excel but we still found people actually using it, which amazed us because we were just piss-farting around at this stage. It went from fortnightly inquiries to weekly inquiries to daily inquiries, so we thought we should look at the full e-commerce bit."
Back then, e-commerce was touted as a business revolution. Anybody, anywhere could sell anything to anyone - eliminating superfluous costs such as shopfronts and sales forces. From the selling of car parts to automotive giants to getting text books into school kids' backpacks, in this electronic grand bazaar anyone could hang out their shingle and be a global player.
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Expectations soared with the share prices of the newly listed online retailers (e-tailers) as they built lavish cyber shopfronts for consumers. Online business-to-business marketplaces were also constructed so organisations could screw down their suppliers on the prices of everything from stationery to semiconductors.
No idea was too ambitious, no business plan too sketchy - build it and they will come.
But often, no one came.
An example is winepros.com.au, which is about to be used by wine group Cheviot Bridge for a backdoor listing on the Australian Stock Exchange, five years after the original e-tailer raised $25 million in capital and three years after it went into voluntary liquidation.
Another was Werden's chief competitor, Foster's, which closed down WinePlanet after its bricks and mortar retailers revolted - but not before it dropped nearly $100 million into the venture. It was joined in the same year by bottleshop.com.au, which burned $405,000 in two years.
But it is not all doom. After a hard couple of years Australia's wider business community is embracing the internet after watching the rise and fall of many e-commerce startups.
Half of small business and 40 per cent of medium-sized business are now taking orders online, according to the Sensis 2004 e-Business Report. The past year saw many more shop online - the proportion of small businesses buying goods and services jumped from 45 per cent to 55 per cent and medium businesses rose from 64 per cent to 74 per cent.
Capitalising on this trend, online marketplace corProcure - formed from 14 shareholders including Pricewaterhouse¿Coopers and Telstra - has turned 90 degrees from when it was conceived as a massive buying group for Australia's blue chips. Australia Post bought the flailing online marketplace to be a foundation for its e-commerce platform.
After sifting through the e-commerce graveyard to see where others went wrong, Australia Post's corProcure product manager Karyn Welsh shifted the marketplace's focus from blue chip giants to medium and large-sized companies.
It's a lesson that might have saved corProcure competitor Cyberlynx, which looks set to implode after it emerged last week that five of the seven founding companies will abandon a marketplace that was supposed to generate $9 billion a year in transactions. "The biggest corporates have buying power in their own right, but the medium to large companies don't have so much power and so only by participating in a collective buying group can they achieve similar savings," Welsh says.
corProcure's downfall was a lack of direction, with "14 shareholders pulling it in 14 directions," she says.
"The technology was fine - it was like having a Rolls-Royce motor but no body, so we had to build the body around it."
Fear of missing the e-commerce wave drove the construction of many online marketplaces, but poor management led to their downfall, says Ariba's Asia Pacific managing director, Peter Stavroff.
Ariba builds electronic procurement systems for online marketplaces and itself rode the e-commerce roller coaster but survived by expanding into services and training.
"On paper you'd look at corProcure and say, "That's just got to work', but it was an absolute dud," Stavroff says.
"To get multiple stakeholders to agree on the same thing across multiple businesses is almost impossible - that's really the bottom line. I think a lot of people were blurry-eyed about the hype and there were people making decisions who didn't know what they were doing."
And with in excess of $50 million a year now passing through corProcure, Australia Post's Welsh says e-commerce wasn't a failure, it just failed to match the hype.
At the peak of the e-commerce hype, WineStar was quoted $50,000 to build an e-commerce website. Werden resisted the temptation to build an expensive site in the hope customers would come and instead bought a $200 off-the-shelf e-commerce package. He customised the package himself and also started an online wine forum for customers, which he follows closely to predict sales trends.
Four years after the dotcom bubble burst, and having outlived well-financed competitors, Werden says overcoming the impersonal nature of shopping online is key.
"I think we've succeeded because we've made an impersonal medium quite personal with features such as the forum," Werden says. "Now we need to build on this by winning over the older market - those in their 50s and over who may be comfortable using email and the web but haven't embraced e-commerce."
Despite the demise of so many online business ventures, e-commerce is not a failure and most of those which survived the dotcom mania are turning a profit, says Forrester Research vice-president John McCarthy.
E-commerce rode the wave of dotcom hype and was unceremoniously dumped when it failed to reach unrealistic expectations, McCarthy says.
"I don't think e-commerce failed - like anything else, the people who understood what their target market was and had a viable business plan survived," he says.
"As for the 'Field of Dreams' approach - build it and they will come - that was just crazy. A bad idea is still a bad idea no matter how much money you throw at it." |
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E-commerce patent casts shadow |
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E-commerce patent casts shadow over Aust-US trade
A controversial e-commerce patent granted in Australia late last year could have an unexpected impact on trade with the United States according to NSW Liberal senator, John Tierney.
It's alleged that the patent's owner, IP lawyer Edward Pool, told Australian trade officials in Washington he may use United States customs authorities to help enforce his claim in Australia.
Tierney, Deputy Chair of the Senate Standing Committee on Communications and Information Technology, has asked the Department of Foreign Affairs and Trade (DFAT) to produce an e-mail Pool is alleged to have sent to one of its officers in Washington.
Pool "apparently made threats to search and seize Australian goods" said Tierney. It's understood that the e-mail was sent after the patent was sealed late last year.
The senator said he had only had been privy to a "bald statement" on the e-mail, leaving questions on how such an intervention might be granted by US authorities. However it's fair to presume that Pool would target goods traded using e-commerce systems he believed were in violation of the patent.
The patent Pool has filed in 32 countries -- under his own name or that of his company, Canada-based D.E. Technologies -- has been followed by howls of protest in each jurisdiction in which it has been granted including the United States, New Zealand and most recently Australia. Critics argued the patent was overly broad, opportunistic and lacked uniqueness.
It described a framework for a software design that electronically automates paper transactions involved in international commerce.
The patent was first submitted to IP Australia (application number 758864) early in 2003 but the alarm over its entrance into the Australasian region wasn't raised until July when D.E. Technologies began attempting to extract in some cases up to US$25,000 in royalties from New Zealand e-commerce companies.
The outrage spread across the Tasman, and business and political figures began a last-minute charge to block the patent in Australia, which was close to being sealed by local intellectual property authority IP Australia. |
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