SBC, AT&T Might Be Headed for Merger

In a potential blockbuster trade that could re-unite two telecommunication giants separated by regulators, SBC Communications is reportedly in talks with AT&T about a merger that could be worth at least US$16 billion.

If the deal comes to pass — and various reports say it is as likely to fall through as it is to be consummated — SBC would be acquiring its onetime parent company. The two were separated in 1984 as part of the massive breakup of the original AT&T. The remaining AT&T became a long distance specialist, and the regional “baby bells” handled local calling and basic service.

Since then, huge changes in the marketplace have made two of those baby bells — SBC and what is now known as Verizon — formidable telecommunications giants with a hand in everything from local calling to high-speed Internet service and mobile communications, while weakening AT&T as a consumer company and forcing it to focus on businesses to survive.

Powerful Business Focus

AT&T still has nearly 30 million long-distance customers, but has all but stopped seeking new customers on the residential side of its business. SBC has about 50 million local-phone customers.

Analysts said the deal would give SBC access to a powerful business-focused operation in AT&T, albeit one that is struggling to grow revenues and profits in the face of fierce price competition with MCI. AT&T’s massive global high-speed fiber network would likely be one of the main prizes if the merger were to take place, along with its enterprise client base.

Shares of SBC were lower in early trading today, losing more than 2 percent to $24.02. AT&T shares, meanwhile, surged higher, up as much as 7 percent to $19.58.

That the merger would partly undo the breakup ordered by regulators more than 20 years ago is not a surprise given the direction the rapidly evolving telecommunications marketplace is taking, independent telecom analyst Jeff Kagan told the E-Commerce Times.

“What’s interesting is that the marketplace is trying to put back together what the regulators took apart,” Kagan said. “But at least it’s putting it back together again in markets where there are multiple competitors.”

New Era

The telecom landscape has completely changed since the AT&T breakup, with telecoms now involved in businesses, such as data services, that weren’t envisioned at the time, and competitors — including cable companies and VoIP specialists — readily entering a business that was once thought to be barred to new entrants.

The bottom line, Kagan said, is that “long-distance wasn’t a standalone business. It’s only viable now as part of another business.”

While the Bush administration has been welcoming to changes in the marketplace and has taken a favorable, anti-regulatory approach — particularly under outgoing Federal Communications Chairman Michael Powell — the marketplace changes are more important than the regulatory ones, Kagan argues.

“We had mergers in the Clinton administration, then we had a break because of the telecom meltdown and WorldCom and the like,” he added. “Now we’re getting back into it in the Bush administration.”

“What we’ve learned is that we’re better off not trying to predict or mold the industry,” Kagan said. “The industry is changing and we’re better off letting it figure it out. We need to watch it, to make sure that consumers or other groups aren’t taken advantage. But I think the industry needs to find itself and we need to let it do that.”

Green Lights Predicted

Regulators would be likely to green-light the SBC/AT&T linkup because AT&T has largely moved away from servicing residential customers. Last year, it announced it would no longer service the local phone calling market after regulators gave baby bells the right to set their own prices to allow those calls to be carried on their networks. AT&T long ago spun off its wireless division.

Analysts said AT&T is ripe for acquisition because of its falling fortunes in recent years. BellSouth, another regional carrier created by the breakup, was reported to be in advanced talks of its own to buy AT&T, only to have discussions break down on issues of price.

While its traditional business is partly still a regional one with a heavy concentration in Texas and California and in the midwest, SBC’s reach is much greater in other areas. For instance, along with BellSouth it co-owns Cingular Wireless, which after the recent buy of AT&T Wireless now has around 48 million customers.

It became one of the first major carriers to offer nationwide VoIP service in November of 2003, and it has been a longtime partner of Yahoo, co-branding a high-speed Internet service with the portal.

While consumer groups might express concern and might even have success in mobilizing regulators or lawmakers, the merger would be good for the industry and consumers alike, Steve Titch, senior fellow for technology issues at The Heartland Institute, told the E-Commerce Times.

“If this merger in fact moves forward — which is in and of itself far from certain — it would probably be good for consumers and investors alike,” Titch said. “Regulators and elected officials ought to stay as far away from this development as the law allows.”

Titch said the merger would not be a reconstruction of the old Ma Bell. “It is about simplifying home technology for consumers,” he added. “Legislators and antitrust officials should carefully consider the impact that blocking mergers like this would have on progress toward networked applications in the home.”

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5 Ways To Sustain an E-Commerce Business in a Recession

economic downturn recession

Talks of a possible global recession coming in the next months have been abound lately. Even if it’s not yet certain, the threat of a downturn is something that e-commerce business owners should prepare for.

In a recession, prices can soar. Supply chains can be disrupted. Customers will be buying less. How these would specifically affect your business can vary depending on the nature and niche your business operates in.

The 2008 recession should serve as a warning to entrepreneurs. Small businesses struggled during this period with many ending up shuttering their doors. As such, it’s important to strategize for sustainability in a harsher business environment.

Here are five ways to sustain an e-commerce business during a recession.

1. Prepare Cash Reserves

Having ready cash on hand provides the agility and flexibility to spend or invest when needed. But not all startups come with a stout war chest. Typically, this is where funding can come in.

“Funding isn’t just a hurdle at the start of an e-commerce business plan. Once your shop is up and running, you’ll need constant cash flow to order inventory, run effective advertising, optimize your supply chain, and innovate your products,” according to e-commerce funding firm 8fig.

A recession can compound this need. For instance, inventory and fulfillment costs typically rise during a downturn. Having extra cash can help absorb these price bumps readily.

The most straightforward way to shield a business against this is by saving to build up capital. Instead of spending profits on non-essentials, think about investing the money back into the business. Another idea is to sell some assets like machinery or equipment that may not be critical to operations at the moment. You can always repurchase them after things bounce back. Liquidate while you can.

Lastly, if external financing from investors or funding firms are available, consider those as long as you’re clear with the terms.

2. Adapt to Customers’ Needs

The pandemic emphasized how quickly businesses should adapt to the changes in customers’ buying behaviors and preferences. The lockdowns hit brick-and-mortar business hard. While many businesses failed to adjust, the ones that survived were the ones that were able to pivot quickly. Some changes were even quick to implement. For example, offering delivery services and curbside pickup options and accommodating digital payments.

“[T]he most adaptable marketers don’t do different things; they do things differently. In particular, they listen differently and they plan differently,” says Cassandra Nordlund, Director, Advisory, Gartner.

The same need for adaptability is true for e-commerce businesses. Put on your marketer’s hat and keep a close ear to what your customers are saying. Reach out and talk to them. Create a survey of what they would likely do or buy should the downturn happen. This should help to plan ahead.

For instance, a recession may compel customers to become more price conscious. If you’re in retail, you can tweak your catalog to feature and stock up on more budget items than luxury ones.

3. Become Lean and Mean in Operations

Aside from raising capital, you can also improve your finances by managing cash flow more carefully. Wasteful spending will chew away at your margins and capital.

It’s critical to streamline and optimize operations before the crunch hits. Review your business costs and see which areas you can trim. Some common sources of wasteful spending are uncontrolled use of office supplies, unnecessary technology (equipment and subscriptions), and unproductive workers. When making cuts, focus on these costs.

Keep in mind, however, that while you may be tempted to restrict spending entirely, this may become counterproductive. For instance, you may try to do away with some of the digital tools and subscriptions that you use to manage operational tasks. But if cutting them will seriously impact efficiency, it may be a bad idea to do so. Dive into the details to see how each line item benefits you before deciding whether to cut or retain it.

Remember that not all spending is bad. Opportunities may also arise even during turbulent times. Sudden market demand might make offering a new product or service profitable. If such chances do come up, consider taking the calculated risk. This is where having cash reserves also comes in handy.

4. Explore Ways To Deliver Added Value

Even with preparation, many e-commerce firms will likely still feel the brunt of a recession. A drop in sales can and should be expected as customers also tighten their purse strings.

When this happens, a common knee-jerk reaction for businesses is to compromise on price by offering discounts and price cut promotions to boost sales. However, be mindful that slashing prices can hurt margins and financial flexibility.

Warren Buffet once said about pricing, “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”

Instead of slashing prices, consider other ways to offer value. Offer extended return windows or guarantees, free shipping, or loyalty points, and communicate these perks well to customers to justify your price.

But if you really need to attract the price-conscious, offer bundles rather than discounting per item. This way, you can promote your other products and services or move stagnant inventory while avoiding across-the-board price cuts.

5. Pivot the Business

Pivoting, or changing the direction of your business, can be a painful decision for entrepreneurs. But if things are looking grim, it may be a life-saving decision for your business.

For instance, many e-commerce entrepreneurs have made a killing using the drop-shipping business model. Drop shippers can keep operational costs down typically by not handling inventory and logistics. During a recession however, this might not hold true.

Without having a direct handle on stock, any supply chain disruption can easily stump drop shippers who are forced to reassure customers, when in reality they are at the mercy of their suppliers.

Foreign exchange rates can seriously impact the cost of goods. Transportation also will likely be affected. Both typically result in erratic prices and lengthy fulfillment times. Drop shippers would have very little control over these circumstances and could end up with dissatisfied customers.

Anticipating these changes, such businesses can reconsider their model and shift to one that will be more capable of delivering value to customers. Drop shippers can move toward more conventional retail e-commerce where the business acquires, stores, and handles stock. This action may require more capital — and work — but provides control and minimizes uncertainties involved in the drop-shipping model.

From Sustenance to Success

Building business resilience is critical during tough times. Making some sacrifices and tightening the belt in some respects should help weather the negative effects of a recession. What’s important is for a business to sustain itself so that it can live to fight another day.

Despite all this gloomy talk, recessions do end. Surviving a recession should put you in a better position to prosper in a better economic environment. Also, on the upside, e-commerce penetration is still seen to continue its rise globally. Shoppers are expected to continue preferring buying goods online.

Should the trend hold, opportunities in your market, niche, or locality can emerge despite the challenging times. A recession may even provide a chance for tremendous growth. Preparing well in advance can put you in a prime position to jump on such opportunities to thrive.

Ralph Tkatchuk is Founder and Operator at TK DataSec Consultancy, where he specializes in e-commerce data protection and prevention.

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Back-Office Finance Automation: The Foundation of a Solid E-Commerce Enterprise

accountant using e-invoice software

E-commerce retailers and direct-to-consumer businesses of all sizes are dealing with a ripple effect of business challenges. These include continued inflation increasing the cost of goods and squeezing customers’ disposable income, global supply chain shortages, increased out-of-stocks, and more demanding customer expectations.

Add to that, the Great Resignation has led to a mass exodus of vital frontline and back-office workers, leaving retailers understaffed and hard-pressed to provide the service that customers want.

Fortunately, new digital technologies continue to help e-commerce businesses innovate by expanding online shopping options, improving forecasting and inventory management with AI-powered analytics, upgrading customer service with RPA customer-service bots, enabling last-mile optimization systems for omnichannel experiences, and increasing customer buying power at the point-of-sale with services like buy now, pay later.

These are all incredibly important capabilities supporting the front end of the business. But there are also technologies that work behind the scenes. like AP automation, that can deliver important value and quick ROI by helping e-tailers and direct-to-consumer businesses streamline cumbersome finance workflows, improve controls and security, reduce costs, empower remote employees, and help offset staff shortages.

FAQ
What are the benefits to e-commerce companies of automating AP processes?

Automating accounts payable processes provides several advantages:

  • Faster, more efficient finance processes and workflows
  • Fewer errors and less manual effort required to correct them
  • More satisfied and productive staff
  • Reduced full-time equivalent (FTE) requirements and operational costs
  • Increased cash-back rebates from suppliers
  • Happier vendors better positioned to support supply needs
  • Better cash flow management
  • Reduced risk of fraud

Manual Processes Create Inefficiency and Hinder Growth

Businesses still receive a surprisingly high number (25%) of paper invoices, and 47% are not using any type of invoice workflow automation solution. E-commerce is no exception. In my experience working with e-tailers and direct-to-consumer businesses, many are still making more than 50% of their supplier payments via check.

AP staff at these businesses are wasting valuable time and effort opening paper invoices, capturing and entering data, emailing or calling approvers, printing and mailing checks, and responding to questions from suppliers.

It’s a problem in any industry, but it becomes even more complicated in e-commerce where finance teams tend to manage many supplier invoices. In addition, as supply chain disruptions continue, it’s important for e-commerce businesses to do everything they can to maintain reliable inventory sources. This includes getting key vendors paid on time.

The Power of AP Automation

Modern accounts payable solutions can automate the entire invoice-to-pay process by providing a single workflow to capture invoices, automatically sync data in ERP and finance systems, simplify approvals, and send payments however suppliers prefer to receive them, whether that’s check, ACH, virtual card, or even cross-border.

These solutions can address much of what an e-commerce business needs including vendor onboarding, invoice capture, coding, approvals, and supplier management — as well as payment authorization, execution, and reconciliation.

The benefits to accounting and finance teams are obvious, but they also provide important advantages for many other parts of e-tail and direct-to-consumer businesses. Here are six examples:

1. Streamlined Invoice Workflows

Many finance teams spend the bulk of their time on manual, paper-based invoice processes. Full invoice-to-pay automation captures and codes invoices with far fewer errors than manual data entry and significantly reduces time spent processing invoices.

2. Improved Visibility and Control

Intuitive tools and centralized reporting provide users with detailed views of days payables outstanding (DPOs), pending or past-due invoices, and other category reports. In addition, specific employees can be granted access to the same level of reporting to gain real-time insights into invoice processing.

These capabilities help e-commerce businesses make the right decisions related to payment timing to maximize working capital and take advantage of early-pay discounts.

3. Reduced Costs and Generation of New Revenues

AP automation delivers where it matters for e-commerce businesses: top-line revenue growth and a stronger bottom line. Eliminating paper-based processes and manual data entry and using e-payments can reduce costs per invoice by up to 430%. In addition, rebates from virtual card payments can generate significant new revenues delivering a complete ROI while funding other parts of the business.

4. Increased Staff Productivity

The time employees spend on manual payment processes could be spent on higher-value initiatives such as optimizing receivables, providing proactive support to suppliers, or developing new internal processes.

For managers forced to multitask, it means less time in the back office and more time focused on customers. When hiring back-office help is tough, AP automation helps e-commerce businesses grow without adding headcount.

5. Empower Remote Work

AP automation allows finance staff to review and approve invoices or pay suppliers from anywhere, using any device. Similarly, month-end closing and AP audit data can be accessed remotely, further minimizing the need for staff to be in an office or store.

6. Stronger Vendor Relationships

Brands, wholesalers, and other suppliers are the lifeblood of any e-commerce business. The industry is already suffering from inventory issues; the prospect of late or missed payments adds additional risk of disruption.

Improving the ability to pay on time builds better relationships, adds leverage to negotiate discounts, and minimizes the chance of additional supply chain issues.

The Right Strategy

E-commerce is built on digital customer experiences and processes. That same thinking needs to be applied to the financial back office. Automating foundational processes like accounts payable can provide e-commerce operations with proven methods to overcome key supply-side challenges and deliver far-ranging benefits that help all facets of the business.

Matt Friend is VP, product and program management, at MineralTree, a provider of accounts payable and payment automation solutions.

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