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E-commerce sites return investment

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Electronic commerce continues to be the hot topic as business-to-business marketers strive for the Online Grail: return on investment.

This month's NetMarketing Web Price Index finds that costs for building an e-commerce site, like our hypothetical CubicleMax, continue to be high but still can pay off in the long run. The median price quoted by developers for creating the CubicleMax site was a lofty $693,500, but research shows that the returns on a site of this size could start mounting quickly.

Forrester Research, Cambridge, Mass., has upped its earlier estimates of revenue that business-to-business e-commerce sites will generate. Figures for this year should top $100 billion, and more than double that, to $251 billion, for 2000, according to Forrester's most recent report on the subject.

Revenue is expected to increase dramatically as the Internet reaches what the report calls the "e-commerce threshold," with the number of companies and customers online growing to a point when e-commerce becomes not only viable, but commonplace. By 2003, the report predicts, revenue could reach 10 times today's numbers, or $1.3 trillion.

Jeremy Sharrard, a Forrester research associate who worked on the report, said there are definite benefits to being in the space sooner rather than waiting for the "threshold."

"If you're just starting [your e-commerce site] now, you're pretty late," he said.

Build incrementally

Not every company can afford a high-end, custom-built online storefront. Off-the-shelf solutions have increased in sophistication. They can now not only handle the basics of secure transactions, but also automatically calculate tax and shipping based on the shipping address of the customer, and e-mail a receipt after the order is placed.

Some Internet service providers, such as EnterAct, Chicago, partner with e-commerce software companies to provide low-end services to their subscribers. EnterAct uses a software suite called SoftCart and can get a small e-commerce site up and running for less than $100. Scalable packages can be bought, and all cost less than $5,000 a year.

Most developers will caution clients about ramping up too quickly.

"Don't go out and build a $50 million marketplace tomorrow," said Doug Rice, chairman-CEO of Interactive8, New York. "Build a smart, solid business plan. We're believers in incremental development."

Exair Corp., a Cincinnati-based maker of industrial compressed-air products, develops its site in-house, "by committee," said General Manager Brian Peters. "Our business has a broad direct mail program and, from Day 1, we've included our Web address in all our mailings."

The cost per lead in e-commerce is dramatically lower than from print or from being listed in a "card deck," a bagged stack of 3x5 cards mailed directly to potential customers.

Exair found that customers' direct mail was "generating low-cost orders from catalogs, so we thought, why wouldn't they do the same over our Web site?" Mr. Peters said. "Our customers wouldn't necessarily take a large risk but would take a smaller one."

Exair's site, launched in 1996, has been profitable since it began selling online last year.

Marketing remains important parts of the site-building budget. Investing in e-commerce won't pay off if customers don't know about your site.

"Most companies need to have some solid media dollars in play," Mr. Rice said.

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