E-Commerce Looks for a Second Chance in 2002

Last year tested all of us, with unprecedented job contraction, more failed Web companies, and heightened security fears spurred by September 11th.

Lulled by the longest period of economic growth in U.S. history, many of us abruptly awoke to the realities of recession.

Against this backdrop, how does the year 2002 look for e-commerce ? Information technology budgets are paper thin, and leeway for money-losing initiatives is non-existent. But, as they say on Broadway, the show must go on. So here are some of my expectations for the new year.

1. The Death of "E"

In the business world, the ubiquity of the prefix "e" -- as in e-commerce, e-business, e-collaboration -- will taper significantly. Fortune 100 companies like General Motors (NYSE: GM), who have created discrete e-business units and hired dedicated e-executives, will begin to absorb e-initiatives into the core of their businesses.

Indeed, GM created eGM in 1999 as a transient entity, fully expecting to incorporate the earnings of eGM into the entire corporation.

Clearly, e-technologies like procurement, supply chain management, and enterprise resource planning (ERP) applications are not going away. On the contrary, as companies integrate these technologies more deeply into their internal operations and into their trading partner relationships, the technologies will become core components of doing business. And isolating them as unique investment areas will become obsolete.

Few companies will invest in brand new technology in 2002, due to tight IT budgets. But many will work hard to leverage investments already made in ERP , customer relationship management (CRM), and inventory management systems.

As a result, rather than hearing overarching monikers like e-commerce and e-business this year, you're likely to hear more functional terms like supplier integration, partner collaboration, and knowledge management.

2. Bye-Bye Pure Play

In the coming year, the last of the purely Internet-based retailers will disappear. Over the past year, it has become clear that consumers have diverse shopping needs that are best fulfilled through multiple sales channels.

E-tailers that began as pure-play online sellers have struck deals with brick-and-mortar retailers to satisfy the in-store shopping needs of their customers. Even Amazon.com (Nasdaq: AMZN) is no longer a pure Internet play anymore because of its Target and Circuit City partnerships.

In fact, don't be surprised if Amazon sets up shop, literally, in that vacant office park down the street sometime this year.

Similarly, many traditional retailers, like Walmart and Kmart, have reeled their Internet spin-offs back in and woven them into multichannel sales strategies.

E-tailers who ignore physical world channels will perish or be acquired in 2002.

3. EBay Will Leave Cloud Nine

Are you tired of the constant stream of anomalous good news coming out of San Jose? Most recently, trend-bucking powerhouse EBay (Nasdaq: EBAY) reported 2001 consolidated net revenues of US$748.8 million, representing 74 percent annual growth.

Sure, the company has plenty of reasons to look forward to more happy days in 2002: a promising international business, freshly inked sales and marketing alliances with IBM and AOL Time Warner (NYSE: AOL), a solid executive management team, to name a few.

EBay's financial worries are few, but the company will lose a step or two this year because of lingering problems with the buying experience.

With a record 126.5 million listings during the fourth quarter alone, EBay is having increasing difficulty ensuring the integrity of its sellers. Stories of misrepresented and undelivered EBay merchandise litter online discussion boards.

Granted, EBay's bottom-line concern is its paying customers -- the sellers. But because it has been ignoring its customers' customers, the company will struggle with a retreating buying community in 2002. With EBay customers looking around, the underdog Internet auctioneers may have a chance.

4. In Liberty We Trust

Web services have a lot of growing up to do this year. This next wave of e-commerce, say analysts, will involve client-hosted applications that interact in real-time with other applications, using Internet protocols.

Under this model, consumers will conduct multiple related transactions simultaneously, using single-sign-on registration.

However, still unresolved is the question of which entity should be trusted with our personal registration information. Microsoft (Nasdaq: MSFT) (Nasdaq: MSFT) has elbowed its way to the forefront of this discussion with its .NET initiative.

But the story by no means will end with Microsoft. By mid-year, look for industry-shaking online identity specifications from the Sun Microsystems (Nasdaq: SUNW)-backed Liberty Alliance Project.

Working behind closed doors since September 2001, the multi-corporation initiative intends to create an open, federated solution for network identity -- enabling ubiquitous single sign-on and decentralized authentication.

I'm betting 2002 will bring a solution to the online identity riddle, courtesy of Sun and friends.

Overall, this year will be a year of big changes and second chances.