In the last 12 months there have been more Internet applications pop up than a blind man can poke a stick at, but the question needs to be asked - can the Internet provide the technology smarts to make things happen? In this feature ARN journalists Molly Furzer, Ian Yates, Peter Young and Matthew JC. Powell spotlight Internet applications such as Internet commerce, online banking, online travel bookings and distributor Web sites that are being created, supposedly, to enhance the online experience of the customerAs you may remember, earlier in the year Reseller News published its first "Online and on time" - a section dedicated to distributors' Web sites, letting you know what is on offer in the way of online support. Back then, the main concern for distributors was that if they hadn't already launched a site, to build one and place all of their pricing and product material online.
Now it's stage two - the early birds have had their sites online for a couple of years and it's time for an upgrade. While companies like Chips and Bits and Tech Pacific, for example, have been offering extended online services - the ability to check stock levels and see where orders are in the pipeline - online ordering and transactions over the Net have just been promises.
Well it's good news all round! Get ready in the new year for online ordering and e-commerce being offered by at least four distributors we've contacted: CHA, Chips and Bits, Tech Pacific and SCSI Corporation, who all expect to have secure servers and online commerce facilities in place by early next year.
Growing success
Distributors have found the Web site experience to be fruitful with favourable feedback from resellers and growing hits to the sites over the last year. Chips and Bits' site (www.chips.com.au), according to Ross McCaffer, the company's national marketing manager, is getting around 150 hits per day for product information. As a result, the number of phone enquiries has dropped and McCaffer expects online ordering will free up even more of Chips and Bits' sales staff's time.
"It will get to the stage where the sales staff will be more proactive than reactive," McCaffer told Reseller News. "Currently people ring up to get information, but this will allow the salespeople to get back on the road and sell," he said.
As marketing communications manager for Tech Pacific, Fiona Stewart believes TechLink (www.techpac.com.au) to be the most strategic communication device the company has with its customers. Nearly 3000 of Tech Pacific's largest accounts access the site, making it an extremely important part of the company's operation, she said.
SCSI Corporation took a lesson from its suppliers almost 12 months ago and hasn't looked back. "Everything was starting to move to the Web," explained Janice Stead, marketing manager: "we were looking at our suppliers' sites a lot for information and we thought 'well hang on, if we're doing this our dealers are going to be doing the same' - that's why we said we've got to do it."
These are the early birds once again, so look forward to even more distributors joining the e-commerce brigade.
Australian e-retailers finding business slowThe IBM ad proclaims it is; however, the question on the minds of most Australians when they hear the words "Internet commerce" is: is it safe?
Despite the release of several secure Internet transaction methods over the last year, consumers are still extremely wary of parting with their precious credit card numbers over the Internet.
This spells disappointment for resellers quick to pioneer the mostly uninhabited landscape of Australian Internet commerce.
Two Internet retailers Reseller News contacted were both finding business disappointingly slow.
Peter Heywood, the director of Netsales, a retail business which only operates through its Web site (www.netsales.com.au), is unsure of how profitable his business will be given a dismal first few months of sales.
Launched in September, Netsales offers goods in nine "departments" ranging from computer hardware through to babywear. It boasts over 2000 products from 130 suppliers - another few thousand products are in the pipeline to be listed.
Heywood said feedback on the site and the number of "lookers" - 22,000 - had been favourable but few sales had occurred since the site was launched.
"Sales haven't been good, to be honest," he said. "But we think it's early days and we're just going to keep adding products and keep our prices competitive and we believe it will work."
It seems Web users from the former Soviet Union are more appreciative of the convenience buying over the net offers. The only problem is, they have been using fraudulent credit card numbers to place orders, leading Heywood to bar some countries from accessing the Web site.
He believes Australian Web users are conservative and wary of buying over the Internet, and need to be convinced e-commerce can be safe.
"It's a cultural shift in Australia. More and more people are using the net and seeing the opportunity to buy over it, but they're not quite sure yet.
"There's been a lot of hype about it, probably for good reasons. But we use secure links and no one else can see your credit card number on our server. The way we see it, it's exactly like mail and telephone ordering," he said.
Sean Wallis, the owner and developer of Microchip Computer Sales, a computer reseller operating solely through a Web site, is facing the same problem.
Wallis launched his site (www.micro chip.com.au) in October last year. At the moment it is only a hobby - business has been "pretty slow", he says. "I've had a fair few inquiries and a couple of sales but generally it's pretty slow."
Wallis is just hoping e-commerce in Australia will take off over the next 12 months as more people learn about the Internet and get hooked up.
"It's all to do with what happens with credit card security and how that's pro-moted, basically what people are doing to increase confidence of consumers buying products over the Net," Wallis said.
"It's a problem that is eventually going to resolve itself - that's what I'm looking forward to."
Both Heywood and Wallis say there has been no need to convince the vendors and distributors. According to Heywood: "they're ringing us up constantly asking 'can we put our products up on your site?' so we're just flooded with work."
They also both agree that it's worth hanging in there and encourage other businesses to take the plunge. As Heywood put it: "All we need to do is get the consumers on the net convinced and we should be doing well."
What's on offer?
There are a number of products available which can be implemented to quell end-user fears of serious Internet commerce security breaches.
South Australian-based Internet services company Camtech has teamed with Perth-based smart card maker Intellect to provide a secure pathway for purchases on the Internet, from the customer to the merchant, and then to the financial institution involved.
The resulting product, to be marketed as Inte-pay, integrates Intellect's Java Wallet, which securely transfers credit card information from the online customer to the merchant, with Camtech's Secure Online Sales system, which provides merchants with real-time credit card authentication, enabling them to securely sell goods through the Web.
Camtech CEO Bruce Linn said Inte-pay would cost less than $400,000 as opposed to the $1 million-plus price tags of competing products. "There's nothing like it in Australia and probably in the world," he said.
"There is a huge pent-up demand for secure Internet sales. We expect multi-million-dollar revenues for software and services alone during 1998."
Another vendor to peddle its Internet security wares is DataFellow with its F-Secure range of encryption software which is distributed in Australia by Open Systems. The F-Secure products, which include F-Secure Desktop, F-Secure SSH for remote server security and login, and F-Secure Commerce for Internet commerce, can be used to protect information sent via the Internet or residing in the hard disk of a laptop.
The product range also comes with pre-licensed patented encryption algorithms like RSA, IDEA, three-key 3DES and Blowfish.
Sky's the limit
Depending on who you speak to, the security issue has been tamed by the independent software vendors, so now's the time to decide what can and can't be sold over the Net. Some items for sale make more sense online than others. At least they do at the moment. Maybe in the future we'll buy washing machines and cars over the Net, but right now it seems unlikely. What seems to work best, with both vendors and buyers, are low value items like software and CDs.
Buying software online appeals because you can have it delivered online as well. No need to be nervous that the vendor will just take your money and never be seen again. You get the goods now and pay up if you like the result.
Other kinds of services which don't involve any physical goods are proving popular as well. Insuring your car or house online can save time, and money, as anyone who has sat in a phone queue for an hour or so will know. By the time you get through the sales spiel of one company you're probably ready to just pay up rather than waste any more time. You want to send in your premium with a fee deducted for the hour you sat waiting instead of earning.
Doing business with insurance companies online makes sense. You hopefully only deal with them once a year and when it comes time to make a claim, rest assured that their efforts to make it difficult won't be reduced any by dealing over the Net. The GIO doesn't even have claim forms online and my request by e-mail for the forms has fallen on deaf terminals.
Some things can only be ordered by mail, so they are as safe online as not. You have to send them your money anyway, so it's no greater risk doing it by Internet. Some things done properly on the Net can save you time, if not money. The EAC is promising that you can visit thousands of houses without leaving yours, by browsing its Web site. This will surely save you wasting time driving around to all the houses that the agent says are "just what you're looking for".
In case you aren't fluent in estate agent speak, this actually means "I haven't got anything you'd be interested in but I'm going to try and sell you this turkey anyway". However, you'd need to be a prize mug if you actually forked out $350,000 for a house you never visited in person. You can bet that the online photos don't include the view of the asbestos factory over the back fence.
Something that should work online, and does, is travel. Now this is not going to please a lot of travel agents who, in case you didn't know, have a monopoly in place. You can't just go and start up a travel agent business. There's only so many licences. So that means you can't just turn up in whichever suburb seems to be full of travellers. But you can if you're on the Net. And if you haven't tried it, you should. Several agencies have their Web sites connected directly to the international reservations and ticketing computers.
So what does work?
You can find out how many cheap seats are left on a flight and you can watch the status change to confirmed before your very eyes. You can also discover lower prices than your regular agent, if they are not feeling helpful. They should be able to give you the same price and options over the counter as you can get over the Net. Either way it means staring at a computer terminal, but over the Net you get to stare, while over the counter you stare at the back of the agent's screen.
When booking travel online it helps if you speak some airline jargon. These people were using acronyms before the computer industry thought of it. You can type in your destinations by using the name of the town or city you want to visit, but it helps if you know the name of the airport. You won't get anywhere trying to fly to Byron Bay, but if you know that BNK is airline speak for Ballina, rather than Bangkok (BKK), you'll find the flight you want.
You'll also be offered some deals online that you can't have. Most of the specials have some special conditions too. It pays to read them before booking or you might find you're not booked. Or that you're booked but have to pay more than you expected.
Traveland (www.traveland.com.au) has a very good online service that has helped me part with my cash several times already. It has a nice list of holiday places that are on special, which is good when you suddenly realise that you're on leave next week and your plans so far consist only of ordering extra beer. And its menus of options allows you to attack the travel question from a few different angles. You can just fly to Melbourne on Tuesday because you have a meeting, or you can ask the system to suggest when it would be a good time (that is, cheap) to fly to Melbourne.
The interesting thing about this approach is that sometimes you'll find a lower price that also coincides with when you just have to fly. Online systems don't tell lies - I mean make mistakes - about there being no more seats unless you upgrade to business class.
One thing about the Traveland site that I don't like: why charge me $6 a ticket for booking online and saving their staff from answering my silly questions?
If this online commerce stuff is going to work, it's going to have to be free of additional costs. When I buy something from David Jones, the price includes all their hidden costs of doing business. I don't expect the checkout girl to say "That shirt will be $60 sir, plus $5 for the truck driver, $2 for the accounts clerk and $3 for the lease on our mainframe". And I don't expect my travel agent to charge me $6 to pay for its mainframe either, since it is getting my business without spending anything on offices and wages. Online commerce is here to stay, but we'll need more of it and more competition before it becomes the preferred way of doing business by the majority of shoppers.
The Internet: the joy of online consumerismI've never felt entirely happy shopping from home. I like wandering around a big mall and the level of customer service and contact in a small specialty store. I like seeing what I'll buy and handing over cash for it. OK, I'm not thrilled about handing over cash.
Printed catalogues, however glossy, are limited by their pages - they can only hope to show a small subset of a large store's range. For some specialised stuff (obscure collectible artefacts and the like) I have resorted to mail order catalogues, but once you've sent off your order, there's no way of knowing it arrived safely. If all you have is an address, the only way to check is to write another letter, and if the first one didn't get there the second one won't either.
Don't even mention buying stuff from infomercials or the Home Shopping Network on TV. Ick. "You won't find this in any store." Ever wonder why?
Then I found the Web. The Web is sort of like catalogue shopping, but not limited by pages. It's sort of like mail order, but the means of communication are so much faster (hassle recalcitrant vendors with e-mail. Make yourself popular). On the snazzier sites (with video or VR of the products) it's even a bit like TV-shopping, but without Tim Shaw.
Take Amazon.com, for instance. Billed as "Earth's Biggest Bookstore", it's actually run out of a fairly modest set of offices. By not having to maintain a warehouse-sized store in a premium retail neighbourhood, Amazon keeps its costs low and passes savings to customers. By dealing directly with publishers on a per order basis, Amazon can lay claim to having every book in print available. At a real store, I'm limited to what the store's buyer thinks will be popular, and my tastes are rarely with the mainstream. At Amazon, whatever I want is there, as long as someone has thought to publish it.
Likewise for indulging my specialised tastes. Obscure B-grade horror movies, Beatles memorabilia, science fiction toys and general weird stuff - all of these have Web sites put up by dedicated folks who share my interests and have the nous to know that there's a way they can make a bit of money out of me. If they tried to set up a "real" store someplace, they'd go out of business, because the market for these types of things is too small in just about any location you wanted to set up shop.
As every vendor knows, the three things you need for a successful business are location, location and location. The Web blows that rule away. The Web is everywhere. The customers are everywhere, and the stores can be anywhere. Sometimes when I buy things online, I actually have no idea where the goods are being shipped from until I see the return address on the invoice. Of course, this is because books, CDs and videos won't rot and decay in transit, so they can come from anywhere. You wouldn't buy anything perishable from the Web, now would you?
Go bananas
I have been alerted to the imminent opening of a Web-based greengrocer. Under the witty moniker of Greengrocer.com.au, this will be my first opportunity to buy fresh fruit and vegetables without leaving my office or home. It's also a workaround for my aversion to the aroma of mangoes, which repels me from "real" greengrocers when the horrible yellow-orange blobs are in season.
At Greengrocer.com.au, I can search through a fairly wide variety of fresh edibles, which will then be selected at the markets (right here in Sydney) the following morning anddelivered before close of business.
So there are the three roads to a successful Web shop: have a much larger selection than your customers will find elsewhere (like Amazon.com); have stuff your customers can't find elsewhere (like "The Gore Store" et al); make buying goods on the Web more convenient and pleasant (and less smelly) than real shops (like Greengrocer.com.au). Follow them, and the world will click a URL to your door.
Online banking no panacea
A survey of Internet banking services in Australia gives the country's banks poor marks for innovation and Web site design.
They lag far behind their counterparts in other countries, according to the survey by Milind Sathye, a former assistant director of the Commonwealth Treasury.
His survey, published in the Journal of Internet Banking, claims that only two of Australia's 52 banks currently offer what could be classed as Internet banking services.
One of the two, the Commonwealth Bank of Australia (CBA), draws criticism from Sathye for the unfriendly design of its site which "appears to be constructed under the assumption that every user is a computer engineer".
According to Sathye, the CBA needs to "get rid of the technical jargon . . . and stop frightening the average customer".
The services on offer include account balance, transaction history, order statements, taxes and interest, funds transfer, bills payment and online creation and editing of payee lists.
The other bank offering full services, Advance Bank (now merged with St George), also has an electronic cash facility. Its customers can exchange real currency for electronic cash which is stored on their PCs and used to pay for goods bought via the Internet.
The Advance Bank's Internet interface scores higher with Sathye than the CBA's.
However, all banks need to conduct periodic customer surveys on the simplicity and ease of operation of their Internet banking, he suggests.
Costs associated with Internet banking services should be stated upfront and not "hidden in a maze of legal, computer and other technical jargons", he says.
Joining the ranks
Set to join in with a full range of Internet services before the end of the year are the ANZ and Metway banks, according to Sathye.
Surprisingly, Australia's largest and most profitable bank, National Australia Bank, has yet to start Internet banking, he found.
Overall, Australian banks have slipped well behind their counterparts in North America, Europe and Japan when it comes to Internet banking, Sathye finds.
Almost no research is being done in this important emerging area and Internet banking is receiving scant attention in academic institutions, he says.
That is happening even though the Wallis inquiry into Australia's financial systems singled out the Internet as a change agent for the banking business.
The revolution in telecommunications costs and the penetration of PCs and modems into Australian households are also aiding the process of Internet banking, Sathye notes.
According to the Wallis Report, 11 per cent of the Australian population over 15 years of age is likely to have used the Internet in the past week with usage doubling every 10 months.
However, the Internet is currently being used by Australia's financial services industry only for brand awareness and promotional activity, according to Sathye.
Its use for transacting banking business is "minimal", he says.
To some extent that is caused by security and reliability concerns coupled with the banks' traditional caution and conservatism.
However, Australian banking must start paying serious attention to the Internet if it wants to avoid looking "medieval in the fast-changing banking world", according to Sathye.
As things now stand today, Australian banks can't be expected "to make a dent in the Internet until 1988 at the earliest", he concludes.
Ain't no stopping the Net
Australian Web users
End of year 1996 607,000
End of year 1997 1.2 million
End of year 1998 4.67 million
US Web users
End of year 1996 16.2 million
End of year 1997 29.2 million
End of year 2001 94.2 million
Internet commerce revenues
Australia
1997 $85 million
1998 $331 million
1999 $1.16 billion
2000 $3.11 billion
2001 $6.35 billion
US
1997 $US8.5 billion
1998 $US22.3 billion
1999 $US45.1 billion
2000 $US85.1 billion
2001 $US155.1 billion
Web users who buy over the Internet
Australia
End of 1997 12.8 per cent
End of 2001 33.4 per cent
US
End of 1997 9.1 per cent
End of 2001 40.1 per cent
Source: IDC Australia 1997
