Insights -- July 2005

Consumer Good enterprises, just like many other enterprises, experienced the rise and fall of the dot.com. As with all things, times change and e-commerce solutions installed during the 1990's are beginning to show their age, and enterprise IT organizations are beginning to update their sites' capabilities and IT components. This dot.com makeover is happening for several external and internal reasons. Externally, consumers continue to adopt broadband and wireless technology at a ravenous pace. This technology in the home enables multiple consumers to surf the Web simultaneously, eliminating the need to share a single phone line with family members. Moreover, the speed of this technology enables consumers to surf at speeds that meet shopping expectations. Furthermore, these consumers can surf the Web in many hotspots (e.g. retail shops, airports), as well as over their web-enabled cells phones.

Catalyst for Change

Widespread access and increased service speeds have been a great catalyst for the Internet since it removed a main road blocks to success. This environment is driving increasing numbers of consumers to the Web for shopping, self-service and product research. The market pull for product information and content is driving consumer goods enterprises to review Web site capabilities for areas such as brand building, direct interaction with consumers for services and support, as well as for reviews and input on new designs and products. In some sectors, companies are trying to become a fun destination for the customer (www.postopia.com, www.ploids.com). This is very popular in areas where the products are consumed by tech savvy kids.

Lastly, consumer goods companies are trying new functions such as lead generation with hand-off to retailers for fulfillment, and offering consumers capabilities such as e-mail, planners and community building capabilities to promote brands. For example, sports equipment suppliers offer training tips and logging capabilities for running, swimming and cycling (www.nike.com).

Internal Affairs

Internally, updating e-commerce systems is due to age. In many cases, the systems launched contained a large amount of home-grown code due to the unavailability of commercial off-the-shelf solutions. In some cases, enterprises created their own search, Web content management, shopping cart and product catalog capabilities. It is this home-grown code that creates higher maintenance costs and longer site update cycles. Neither of these conditions is good for the enterprise as consumers demand site updates in shorter intervals or the site becomes stale and not worth revisiting. Other contributing trends the to the dot.com makeover are the shift to service-oriented architectures that enable the enterprise to build a flexible e-commerce environment and interest in the use of open source programs. Today, consumer goods enterprises have more options for commercial off-the-shelf functionality since e-commerce platform technology providers offer a robust collection of e-commerce functionality. It is these commercial offerings that have enterprises evaluating the state of their dot.com. In many cases the home-grown functions are now core functions offered within an e-commerce platform. Functions such as shopping cart, personalization, content management, search, product catalog, portal and order management are contained in a single e-commerce offering from a single technology provider.

Avoiding Temptation

However, it is not all upside in the Internet world. Consumer goods companies still have to be wary of channel disintermediation issues. With the growing number of consumers online, it is tempting to sell direct to consumers and bypass retailers. This temptation can lead down a path to channel backlash. Instead, companies need to view direct interaction with the consumers as lead generation for products through existing retailer channels and as direct input to product performance and requirements for new products. Furthermore, companies must safeguard any consumer information acquired through Web offers as more consumers are privacy aware and wary of online scams.

So will we see explosive dot.com growth in the consumer goods space? Not necessarily. Instead we will see maturity of dot.com into the next generation of customer interaction and commerce.