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Dear Dr. Ecommerce,

How does eCommerce create value for businesses?.

I do not want anything with jargon. But simply want to know how eCommerce helps businesses.

Thank-you for your help.

Zak.

Dear Zak:

If you look at our essay "Electronic Commerce - An Introduction", you will find a very useful introduction which should help clarify the value creation aspect of e-commerce.

Also, you should purchase a copy of this week's (April 1-7,2000) Economist magazine as it includes an article that covers this topic: "Internet economics: the real, long-term impact of IT and the net".

Unfortunately, e-commerce attracts jargon like a dog attracts fleas and you will probably find it impossible to find jargon free sources of information.

The value creation side of e-commerce is clearest in business to business (B2B), particularly in terms of cost savings. Consider:

1. An online catalogue is cheaper to develop, publish and disseminate than a printed catalogue. You can also instantly update an online catalogue.

2. By automating processes (such as ordering, invoicing), you reduce labour costs.

3. By allowing customers to monitor their orders, you save staff time in answering queries

4. By publishing your purchasing requirements on the Internet, you attract a wider range of potential suppliers and so can select the best offer

5. By using auctioning systems, you can sell to the highest bidder and buy from the lowest bidder.

6. By putting your catalogue and ordering system online, you can cut out middlemen.

7. By putting your suppliers in your network, allowing them to monitor your orders, you can work together to achieve "just in time" delivery; ie, you receive your parts just as they are needed in the production process. This cuts inventory costs and improve efficiency.

These are just seven value creation aspects off the top of my head. Check out the reference sources for more information and more ideas.

Dr. Ecommerce

Note: Since writing this response to Zak, there's been a big change in the popularity of the B2C dot-coms. A number of big names are shutting their virtual doors, stock prices are dropping and venture capitalists' secretaries are turning away proposals that venture capitalists themselves would have fought for a few months ago. Clearly this is an overreaction, but the fact is that the value added of B2B has always been clearer than it is for B2C. Finally, the venture capitalists and investors are realising this and being a lot more careful about investing in B2C dot-coms.