Last year, the world's biggest internet equipment maker Cisco ran a series of television advertisements with the slogan: "Are you ready?"
Well, are we? As we enter the 21st century, e-commerce is rapidly moving out of the realm of speculation. Near-term forecasts are now in the trillions of dollars and invest ment in e-commerce systems is increasing exponentially.
But we're not quite there yet. US retailers made billions from wired consumers last Christmas, but they also lost billions. One source estimated that poorly designed websites cost American retailers $6bn in potential sales. Most still haven't learnt to translate what they like to call the shopping "experience" from the real world to the virtual one.
About 10% of people who ring call centres give up before ever reaching an operator. On the internet, the failure rate for transactions, based on the number of online forms started but never completed, could be as high as 90%. This is because suppliers are only now beginning to get to grips with the problem of integrating their e-commerce systems with the back-office systems responsible for accounting, fulfilment and administration.
Most media coverage of e-commerce has centred on the .com companies, the supreme example of which is Amazon.com. Just as powerful a case can be made for applying e-commerce to conventional businesses, but the spin is different. Without winning a single new client, companies can use e-commerce to cut the cost of doing business. Premises on the web have low rents, they don't need to be heated or lit and, most importantly, they need very few staff.
Insurance firms like Direct Line have already shown how moving to a direct sales and servicing model can slash costs. A recent study of insurance companies showed that while it costs an average of $19 per year to administer a policy through a conventional agent/broker network, a call centre can halve the figure. But a call centre is still relatively expensive to run. The same research asked insurance firms to estimate the cost of servicing policies online. They put it at around 45 cents per policy, or roughly a fortieth of what it costs now.
US credit card companies send out 6.9 billion letters, statements and other items of customer correspondence every year. On the conservative assumption that each one costs a dollar to produce and deliver, that's nearly $7bn that could be saved by letting customers service their own accounts online.
Similar calculations have been made in the travel industry. Commissions paid to travel agents eat up much of the profit in a business where margins are already pared to the bone. For the biggest operators, cutting out the agent could put tens, even hundreds of millions on the bottom line.
Impressive as the figures are, most of these benefits are still theoretical. Suppliers have to tackle three issues.
First they need to identify an appropriate e-commerce business model. This means addressing potential conflicts between their online activities and the rest, and answering difficult questions about how to run online businesses alongside traditional ones. It means thinking about how much of the money saved needs to be re-invested in equipment and new forms of marketing to support the online venture. Ultimately it will come down to difficult and painful questions: how many staff are you prepared to lay off this year?
The second issue is about how e-commerce is managed. Whose responsibility is it - the IT department, marketing, the board? Where can you get staff with experience of running this kind of business?
The third is often regarded as most difficult issue of all: how do you build an e-commerce system? Most of the back-office systems required for e-commerce are in place, but were never designed to be used directly by customers.
Building a website is the easy bit. Integrating it with existing business systems is harder. But technical difficulty is no longer a valid excuse. It might cost a million or two to solve, but the cost of doing nothing could be much higher and the potential rewards of acting early higher still.
The real enemy is not technology but time. Egg did a great job of attracting customers for its new internet-based credit card last year but went on to suffer a series of technical problems that damaged confidence in the service. Some of these problems can be blamed on pressure to rush the product to market ahead of the competition. Even so, customers will no longer forgive suppliers that use them as guinea pigs for half-finished products or provide an unreliable service. It's important to be first, but it's more important to get it right first time.
Most businesses spent 1999 preoccupied with the Y2K problem. With that out of the way, retailers, travel companies, banks, insurance firms and others are putting e-commerce programmes into top gear. For established companies in these fields, the move to e-commerce carries risks as well as benefits, but for consumers the news is almost all good: more choice, lower prices, less hassle.
Are we ready? Revved up by e-hype, we've been ready for a couple of years. It's just taken reality a while to catch up.
• Roger Willcocks is chief executive of iE, an e-commerce solutions provider.
