E-Commerce Getting Ready for a Lean, Mean 2002

In the waning weeks of 2001, companies that have not already done so must prepare themselves for the possibility of more economic pain ahead, as most experts believe current fiancial conditions could last well into the second quarter of 2002.

In fact, the economy could actually get worse, depending on how consumers react to news on unemployment, biohazards and the war on terrorism.

With all the uncertainty ahead, analysts told the E-Commerce Times that the best defense for companies is to get their own houses in order -- to shape up everything from spending priorities to security and customer retention programs.

Brace Yourself

"It's going to stay tight for the short term, and companies need to brace for continued weakness in the market for at least the first two quarters of 2002," said Peter Kastner, chief research officer for Aberdeen Group.

Now more than ever, said Kastner, basic business principles are coming into play for e-commerce, and companies can no longer build their futures on spending-fueled buzz and marketing hype.

"The Internet gold rush is over," said Kastner. "Businesses are putting their dreams more in line with reality. They're using a much sharper pencil when making their plans and decisions."

Preparing for 2002, companies need more stringent, focused planning than they might have settled for in past years, with better defined objectives and a much tighter rein on new spending.

Tighter, Shorter, Smaller

For example, Kastner foresees fewer overhauls of existing Web sites in the waning weeks of 2001 and early 2002. Companies are already instituting shorter timetables and smaller budgets to get results from projects, and looking to get more value out of the dollars they have already committed.

"Businesses are putting IT and other elements of their organizations on a much shorter leash," Kastner said.

As a result, Kastner projects only high-single-digit growth in information technology purchases by e-commerce companies in the coming year -- perhaps 7 to 9 percent -- marking a sharp drop from previous yearly increases.

In the current atmosphere, Kastner predicts similar slowdowns in rollouts for new products and services , at least for the first half of 2002.

Batten the Hatches

The need for enhanced security is another reality that companies must be thinking about as they get ready for the new year.

Andrew Bartels, research leader for e-business strategies at Giga Information Group, said that e-commerce firms are devoting more time and money on security matters than they did in preparing for 2001.

"It's as much an emphasis on process and procedure as it is on the hardware and technology part of overall security," Bartels said.

Bartels added that companies are also working harder to solve integration problems in their internal operating systems. Many firms have very expensive software programs that do not work well together, and spending on new systems will be restricted in the current climate.

Looking for Paybacks

"E-commerce companies need to make sure that applications are working together, so they get the benefits of programs they've already spent money on," Bartels said.

He added that companies right now are looking to improve existing human-resources and financial programs for "relatively quick paybacks" in terms of efficiency.

"Generally, these will lead to cost savings and more cost-effective operations," Bartels said.

Keep the Old

Companies are also working to streamline their customer service operations, analysts said.

Bartels said customer relationship programs need to be improved to keep existing customers and avoid having to obtain new ones -- a much more expensive proposition.

Tough times demand that companies have effective sales force automation and supply chain inventory management tools, which Bartels said are necessary to keep inventories closely in line with demand.

Check the Channels

With the holiday shopping season getting underway, now is also a good time for e-commerce firms to coordinate their various sales channels.

Gartner analyst Adam Sarner said that Macy's, for example, recently doubled the selection of merchandise on its Web site with the holidays in mind, and has also added features that allow customers to pick up Web-purchased merchandise at its physical stores.

Sarner said this is a growing trend that will carry into 2002 and beyond, as e-tailers tear down walls separating their various channels.

Wild Card

No matter how well prepared they are, businesses cannot anticipate everything that 2002 will throw at them.

Bartels said consumer reaction to current and future events is the "wild card" that will decide whether e-commerce companies need to make even more changes in the year ahead.