Consumer e-Commerce Triples to $11.9 Billion - But Online Holiday Shopping Leaves Some Customers Out in the Cold.

Business Editors/Hi-Tech Writers

STAMFORD, Conn.--(BUSINESS WIRE)--Dec. 28, 1999

Nation's "First Big Test" of Consumer Net Commerce Flawed

by 25% Failure Rate. e-tailers with Conventional Retail

Experience Outperform Pure e-Commerce Providers.

The U.S. consumer e-Commerce or "Net Commerce" marketplace tripled in value in 1999 to over $11.9 billion, driven by strong online sales of $3.35 billion during the holiday buying season.

But as Net Commerce users swelled to 9.6 percent of the population in the last year of the old millennium - the largest test of Net Commerce to date - so did instances of consumer dissatisfaction over slow order processing, inadequate distribution systems and supply chains, lack of strong branding, undifferentiated marketing and poor customer service.

According to enamics, a newly-formed e-Enterprise modeling company that helps companies transform themselves into true e-Enterprises, the failure rate of Net Commerce transactions reached record levels, with one of out four users abandoning attempts to buy via the Net.

Only 65 percent of orders handled by pure Net Commerce companies were delivered correctly and on time. In contrast, the first generation of "click and mortar" enterprises - companies grounded in the conventional retail arena - delivered orders correctly 80 percent of the time.

"In the first big test of Net Commerce, many companies barely earned a passing mark, and were propelled by consumers eager to benefit from the ease and efficiency of ordering goods and services online," said Faisal Hoque, founder, Chairman and CEO of enamics, author of the forthcoming book, e-Enterprise, and a research fellow of META Group, Inc. "While Net Commerce showed phenomenal growth this year, most efforts were highly unstructured. Companies that fared best combined traditional bricks and mortar assets, such as effective distribution, supply chains and customer service, with the efficiency of cybermediation."

According to Hoque, the Net Commerce 1999 experience was flawed by a "mad dash" into the market, with little planning. The following problems arose:

-- Inadequate Systems Infrastructure. One-fourth of customers

experienced frustrating delays and logged off, leading to

significant lost sales.

-- Distribution, Logistics And Supply Chain Issues. The pioneering

"dot.com" or "point and click" companies were overwhelmed by

consumer demand. In many instances, orders remained unfulfilled

and never arrived.

-- Inept Branding and Marketing. Many companies failed to

effectively brand themselves, so that they were

indistinguishable. Others did not differentiate between

customers, using a "cookie cutter" marketing approach that

ignored vast differences in buying habits and preferences.

-- Poor or Nonexistent Customer Service. Customers who experienced

problems were unable to reach service representatives,

compounding their frustration when trying to resolve problems or

track the status of orders.

"Clearly, reality did not live up to the hype of Net Commerce in 1999," said Hoque. "With this learning experience behind them, companies must now adopt strategies that take a more thoughtful, holistic approach, with the goal of transforming their businesses into true e-Enterprises."

Among the steps recommended by Hoque in e-Enterprise:

-- Transform traditional bricks and mortar assets with Net speed and

flexibility;

-- Test strategic decisions prior to making large Net Commerce

investments;

-- Align technology with the business vision;

-- Respond in real time to changing customer demands;

-- Continually improve performance through an iterative "launch,

learn and re-launch" process.

Faisal Hoque, a recognized Net commerce guru, also founded Boston-based EC Cubed in 1996. His new book, e-Enterprise, will be released by Cambridge University Press in late January. Stamford, CT, is the home base for Hoque's newest company, enamics, an affiliate of META Group, Inc.

For more information on enamics, and for a free copy of enamics' White Paper on e-Enterprises, visit our Web site at www.enamics.com.