E-Commerce activity: a new metric to consider - Market Intelligence

Information Superhighways Newsletter, Feb, 2002

Until recently, many businesses have been reluctant to report the amount of e-commerce activity that their company does. One reason for this silence has been due to their preference for privacy, most corporations regard technology investments as a critical element of their business strategy and do not want competitors to gain insight about how they are improving their operations.

Another reason has been due to the general lack of Internet-based e-commerce activity, which for many firms had been non-existent prior to 2001. With the exception of a few e-business leaders that have been engaged in e-commerce for some time, most businesses were still only piloting their e-commerce initiatives through the end of last year.

But as cost-cutting and a focus upon efficiency have come to the fore, so too have companies become more willing to speak of their e-commerce activity. The announcement of e-business initiatives is now seen as a way for a company to demonstrate its ability to think strategically and develop a long-term vision for success in the new economy. Businesses that can point to their growing e-commerce activity are able to project an image of being in-tune with the times, and show their preparedness for tougher competition in the future.

For investors, it is this latter point that makes learning about a company's e-business strategy worth knowing. By considering how one company's e-commerce activity compares to that of ills competitors, shareholders may gain insight on management by seeing how well they have grasped the main issues of e-business, developed an integrated technology strategy for their company and then executed upon that vision. So far, it has been those companies that are e-business leaders within their respective industries that seem to be the most ready to speak about their own e-commerce activity, at least in general terms.

IBM, for example, has reported that in 2000 the company did $43 billion (94 percent of all of its procurement) electronically while conducting $23 billion of its sales through the Internet. General Electric has also reported its e-commerce activity for 2000, with $7 billion in electronic sales, and $6.8 billion in online procurement conducted through Internet-based auctions on its Global Supply Network. At the end of last year, GE reported that its online auction activity had almost doubled to $13.2 billion in 2001.

Besides these two technology giants, picking the e-business leaders in other industries is not that hard to do. Boise Cascade, a leader in the office products industry, anticipates e-commerce sales of approximately $800 million in 2001, an increase of 16 percent of the total company sales in 2000.

Eastman Chemical has already conducted 13 percent of its sales electronically in 2001 and stated its goal to capture more than 50 percent of its sales through electronic channels over the next three to four years. As one final example, Arrow Electronics took in $1.8 billion (17 percent of its worldwide revenues) in 2000 through its various e-commerce channels.

In each case, these companies are continuing to build upon their early e-business success, and they are in a good position to extend the lead they have over their competition. These companies are able to offer higher levels of customer service, gather increasingly detailed information about their internal and external operations and then use this information to learn how they can become more efficient or better serve their customers.

Those corporate leaders who are not shy about reporting e-commerce activity have begun to keep their shareholders abreast of their e-business initiatives in their companies' annual reports. With a new round of annual reports for 2001 about to start rolling out later this year, it will be interesting to see what other companies have to say. (Source: Steve Butler)