Web profits an e-dream: Gartner

The e-business model has all the hallmarks of success that traditional bricks-and-mortar enterprises can only dream about, including bigger profit margins and faster growth, according to a Gartner case study released last week.

The study entitled "ToysRus versus eToys" which was presented by Gartner research director John Roberts, shows the most differentiating features of the e-business model are reduced physical overheads and infrastructure costs, improved productivity and powerful tools to drive repeat business.

Roberts said eToys costs are declining while ToysRus are increasing to support stores, staff and other overheads.

"eToys gets paid by the consumer before it acquires the toy whereas ToysRus has an average six-month inventory and is supporting huge real estate infrastructure," he said.

The Internet also ensures the eToys brand is global, open 24 hours a day, seven days a week, 365 days a year.

"When a customer buys in Beijing, eToys has a store there at no cost," Roberts said.

The Internet is also a powerful tool for tracking repeat business allowing eToys to track what people look at, who buys, when and how.

"If I'm a customer of eToys I buy a product with my credit card - they know about me in that database. I provide a physical delivery address, which is more information, and they can see where I clicked and can track me to other sites allowing them to integrate this into market intelligence," Roberts said.

One of the biggest challenges of e-businesses has been physical delivery and Roberts said these logistical processes are now improving substantially.

Skyrocketing growth is another differentiator between the traditional organisation and e-business.

Roberts said eToys is growing at 400 per cent plus a year, compared to 4 per cent at ToysRus.

Roberts said eToys can also recruit executives with stock options and use stock currency to acquire what it needs to grow quickly.

He described the year 2000 as one of e-evaluation as companies develop an e-business strategy in preparation for implementation next year.

Roberts warned that plenty of creative latitude should be made available to staff when developing a Web site which will then need to be integrated to the back end by IT staff.

"Large corporate structures can just stifle innovation and in the new economy the traditional hierarchy is not effective; the focus is team based," he said.

"The need for speed is paramount because deployment time is short. We estimate that by 2003, 70 per cent of enterprises will source external service providers in the Internet space."

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