Calculating the cost for e-commerce

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oldclass: 2 Building an e-commerce site is not inexpensive for a business-to-business marketer, but for established brands, the benefits can be almost immediate.

This month's Web Price Index takes a different tack than in previous issues. Rather than adding features to the hypothetical "small," "medium" and "large" marketers we had already created, the WPI this month examines the costs for a hypothetical business-to-business company with an existing site to enter the Web sales arena.

A category-leader site

The median price quoted for CubicleMax by the participating developers was $479,250. The prices ranged from $30,000 to $1.2 million.

CubicleMax was modeled as an industry leader in the office supply realm. This affected the scope of the project and, to some degree, the price proposals.

"If this was a start-up, we would focus on getting a lean and mean setup and putting a lot of effort into branding and getting the name out," said Rob Santos, VP-business development for Los Angeles-based CyberNation. "But for an established company, we would aim to create a category-leader site."

Large companies especially are shifting some of their transactions to the Web. Forrester Research, Cambridge, Mass., predicts that 65% of companies with 5,000 or more employees will have some sort of e-commerce functionality on their Web site by the end of this year. At the start of this year, only 20% had e-commerce, but Forrester predicts the number will grow to 92% by 2002.

Developers are also seeing the growing interest in b-to-b e-commerce.

"We're increasingly building it into almost every proposal," said Mr. Santos.

Sales figures swell

As the number of e-commerce sites explodes, so do the sales figures. Forrester figures indicate a projected increase from $8 billion in 1997 to $17 billion in 1998.

Figures should swell to $327 billion by 2002, says Michael Putnam, an analyst in the business trade and technologies division of Forrester.

Not all marketers are looking for a quick return on their investment. Some recognize that Web-based sales are just part of the industry now.

"Everybody must keep running just to stay in place," said Mr. Putnam. "Dell shook up the computer space as a result of cutting costs. Now others have to go direct just to keep up."

Mr. Santos points out that e-commerce is about more than the actual sale. "We look not just at transactions, but whatever Web application will facilitate the sale."

Dealer-locators and sample catalogs have been used by marketers for years as a way of driving consumers to their stores or authorized resellers. More and more, intelligent applications are also being used to gauge consumers' buying habits and upsell other items.

Forrester refers to these types of customer-driven selling paths as "transactional content."

"We see the Internet as another channel for conducting business," said Mr. Putnam. "But there are some cost advantages, such as automation, that you can't see in another medium."

Still, e-commerce is not for every company. "It depends on your category. For some, like publishing, sites should focus more on branding and supplementation of their off-line offerings," said Mr. Santos.

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