Despite heavy investment in ecommerce, a lack of innovation from European companies is preventing the majority from reporting profits from their electronic business, according to consultants Arthur D Little.
To succeed, companies must adopt an innovative approach to meeting customer needs because ecommerce has shifted the power from the manufacturers to the consumers, according to Gerhard Sundt, European director of Arthur D Little.
"Ecommerce is all about a change in power, those that understand this will do better," said Sundt. "Companies that can center their ecommerce business around the customer will win."
"It is the larger, traditional players which will face increasing competition from new entrant unless they re-focus their business to the customer," he added.
Sundt says there are five key criteria for companies wanting to achieve financial success from their ecommerce ventures. First is market approach: companies must identify a cluster or community of consumers that share a common profile.
An example of an innovative marketing approach given by Sundt is Cisco. The networking company's home page does not confront the user with information straight away, it asks the user details and then tailors the content to the user's needs based on who they are and what they do.
Secondly, companies must fully integrate their ecommerce activity with the rest of their business and not have it as a separate venture. Sundt warns that by just starting a daughter company to operate the ecommerce product will fail as it lacks channel and process integration.
For example, Deutsche Bank initially set up Bank 24 to handle its online banking. This caused conflict with both the online service and the high street branch competing for customers.
"There was no incentive to sell the new channel, but it has been revised and today Deutsche Bank is a good example of a company that has achieved cross-channel reference," said Sundt.
Thirdly, products and services must be modified and tailored to suit the needs of the Internet community, otherwise their is no incentive for the consumer to buy online.
One of the best kept secrets on the Web, according to Sundt is Dietrich.com a German shirt designer that not only makes shirts to order, like any tailor, but who stitches the customer's email address into the shirt's collar. A quirky, low cost service which adds value for online consumers.
Fourthly, Sundt recommends consumer oriented companies change their sales approach to work with other companies to share customer information about their products and services and those of their business partners.
For example online bookstore Amazon.com shares customer profiling information with UPS, the service that delivers the books.
The final criteria, according to Sundt is an innovative approach to advertising. Instead of bombarding consumers with offers on more of the same products, a company must analyse buying patterns to build a portfolio of relevant products.
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