It was in late 1998 that Walt Geer, a partner in an Atlanta promotional-products company, faced up to reality. His little business--which sold logo merchandise such as pens and coffee mugs (a.k.a. "trash and trinkets") to companies for handouts to employees and customers-was chugging along OK, but it was just one of about 19,000 promotional-products companies in the country. Plainly put, the 32-year-old's company was lost in that mob. So he decided to take the plunge: He cut the cord on his traditional company, dumped his existing customers and--whoosh!--put his business on the Web as eCompanystore.com.
How did it work out? Well, there were a couple months when things looked grim: "We had no revenues coming in," recalls Geer, "but we had to focus our energies on the Internet, because we didn't have the resources to do it and run our traditional business. Of course, there were scary moments." But business eventually turned around for Geer. "In just a few months, the Internet let us move from being a small company to a national player," he says. "Before, we serviced lots of little accounts. Now we have AutoNation, the country's biggest car dealership, and we're going after more big accounts. The Internet is what let us do that."
Geer's eCompanyStore isn't alone. Dotcom companies winning the most press buzz may be those consumer-oriented, high-advertising businesses like Amazon.com and eToys, but the real buzz in big money circles solidly centers on business-to-business (b2b) players like eCompanyStore. Forrester Research predicts the b2b sector will explode from an estimated $43 billion on the Internet in '98 to a jaw-dropping $1.8 trillion in 2003. Meantime, Forrester predicts that online retail (the business-to-consumer market) will also grow, but those numbers are piddly in comparison. In '99, reports Forrester, business-to-consumer e-commerce reached $20.2 billion, and, by 2004, it should hit an estimated $184 billion. Do the math, and you'll see b2b is expected to involve 10 times more cash--and that's a multiple that demands attention.
Just why the rush of businesses wanting to purchase on the Internet? Simple, says Ben Smith, a consultant in the Santa Clara, California, office of A. T. Kearney, a global management consulting firm. "This represents a fundamental change in how companies purchase, and they're using the Internet to drive out costs."
"B2b e-commerce is about streamlining processes in order to do business more efficiently," adds Tarun Sharma, chief e-business architect at EC Cubed, a Westborough, Massachusetts, provider of b2b e-commerce solutions, and coauthor of Enterprise E-Commerce (Meghan Kiffer Press).
How much value? "Shift purchasing to the Web, and a business can eliminate 90 percent of transaction costs," says Dean Whitlock, vice president and general manager of consulting firm ICL's eBusiness Services group in Dallas.
Another estimate comes from Chris Cogan, 40, CEO of GoCo-op, a Maitland, Florida-based Internet purchasing solution for hotels, restaurants and health-care businesses. "We estimate the average cost of executing a paper purchase order is $115," he says. "We get that cost down to $10. When companies buy through our system, they'll see immediate savings."
But cost savings aren't the only reason Internet b2b trade has been mushrooming, says eCompanyStore's Geer. Although he claims he provides customers with savings--"our prices are 5 to 15 percent lower than traditional solutions"--the real drivers are speed and efficiency. "And besides," he explains, "our Web store is always open. These advantages are as attractive to our customers as are the savings. The Internet is a better and faster way for businesses to shop."