IT Focus - Web stores get into gear.

Dishing out advice on e-commerce to clients reportedly helped KPMG’s fee income pass the #163;1bn barrier last year. For the firms’ partners, it contributed to very acceptable sounding salary benefits and bonus packages averaging almost #163;400,000. Is there scope for professionals working with small and medium-sized firms, and finance specialists within them, to clean up similarly, albeit on a smaller scale? Certainly, those smaller businesses who have tried e-commerce seem to be benefiting. For example, Newcastle-upon-Tyne based Mordue Brewery, established by brothers Garry and Matthew Fawson in 1995 in the tradition of a 19th century brewery of the same name and sells award-winning beers like the exotically named Radgie Gadgie and Workie Ticket. Setting up an online store (www.morduebrewery.com) has helped the company to consolidate a cult following in the US, and turn that into a steady flow of international orders. This type of e-tailing, or retailing on Web stores, is one of the more obvious manifestations of e-commerce, and one that has appeal for small businesses. There’s a famous New York cartoon of a computer-using dog, with the caption: ‘On the Internet, nobody knows you’re a dog.’ And small businesses with a good website can be just as impressive as a large one. (Although Mordue Brewery’s site makes a virtue of its modest sizes, and the presence of a dog on the payroll as head of security. Although they didn’t have programming skills or prior website experience, the Fawson brothers were able to set up their own website using Home Page Creator, a tool that IBM gives away free (IBM then makes a small monthly charge for hosting the resultant system). Garry Fawson says: ‘We set the site up ourselves without any technical support apart from the Home Page Creator online support. We did get some advice from a designer friend about how to make the site look good.’ How to get started Small businesses often start by setting up a non-interactive website – for publicising their products and services and letting people know how to get in touch (you can, for example, include a form for e-mailing enquiries). The next step is to collect orders via the website, as Mordue Brewery does. There are several arguments for progressing to that stage sooner rather than later. It’s an easy way to reach a wider market – in fact a global one. For companies that already do mail order, very little extra work may be involved in taking orders over the Internet. Not all smaller companies are geared up to trade internationally, but for those that are, e-commerce eliminates some of the usual costs, such as those of setting up local offices or agencies. And for local and international customers alike, it makes it possible to place orders at any hour of the day or night. There’s more than one way to set up a Web store. Some Internet service providers, like Freeserve, and other Internet companies such as portal providers like Yahoo! offer users the ability to set up a basic store, which often involves keying product details in online. The store is then hosted by the service for a monthly fee. A slightly more sophisticated way of creating a store is to buy a specialist package which enables the site to be created offline. These packages may generate a site that allows product details to be regularly uploaded and updated from an existing system. Again, most users will pay a service provider to host the site for them. To squeeze out all the theoretical benefits, the website must be fully integrated with those in-house systems: that way, transactions can be automatically fed into financial systems without any re-keying, customers can check whether the item they want to order is in stock, and so forth. Many smaller businesses don’t find that level of integration necessary at first, and are happy to use the website as a way of collecting orders which they then re-key into their normal order-processing system. Integration will get easier, however, as vendors of accountancy packages add e-commerce capability to their products. Navision, Access Accounting and Pegasus are among those that have recently made announcements in this area. Generating extra income Some small businesses find that the Web can be a money-spinner in its own right as well as an additional sales outlet. Singletrack Bikes had had a basic advertising website since 1997, but in 1999 upgraded to a fully fledged online store (found on www.singletrack.co.uk), using a package called Actinic Catalog. The package costs about #163;350 +VAT and the total cost of re-implementing the site was about #163;3,500. The work was done in conjunction with Web design specialists Fletcher Associates (www.fassoc.net). Proprietor Rob Stephenson estimates that just six months after he acquired the ability to sell online, 15% of his turnover was coming from the Web, despite the fact that he also has two high street stores in Gloucester and Worcester. The website has enabled him to expand his customer base nationally and internationally. ‘That’s important for us because as a specialist business we have only so many potential customers in our local catchment area. We’re set up to send goods to any country in the world, and we’re getting quite a lot of business from Scandinavian countries.’ Stephenson evidently sees his Web activities as a business interest in their own right. ‘We sell advertising space and we’ve also become an Internet Service Provider.’ (Although companies like this offer free Internet access, they can make money because the telephone companies pay them a share of the cost of users’ phone calls.) One of the attractions of the service is that it offers bike enthusiasts what they regard as a glamorous free e-mail address. ‘People who have a rather untrendy e-mail address can become ‘[email protected]’,’ he explains, noting that football clubs are offering their fans a similar facility. In future, there’s the possibility of providing Internet services to other businesses. ‘We could sell almost anything from the site, with the goods shipping directly from the supplier.’ Stephenson believes he could offer a particularly worthwhile service to businesses with related specialities: ‘A surfboard shop, say, would have the same kind of socio-economic mix among its customers as we do. If a business like that was thinking of getting on to the Internet, instead of building their own site from scratch, they could use us as a host.’ This, Stephenson says, could offer such businesses an easy way to attract visitors to their site. ‘We’re getting an average of 5,500 visitors to our site each week, each staying 10 minutes on average. And we’re included in all the main online shopping sites because we’re regarded as the best bike site. But it’s taken us three years to get to this point; it’s not something you could do overnight.’ More to e-commerce Although the idea of Web stores seems to be firing up the enthusiasm of small businesses, pundits say it will only represent a relatively small part of the value of e-commerce. Far more important, they say, will be business-to-business activity. Analysts have predicted that business-to-business transactions will be worth three times as much as business-to-consumer transactions by 2002. Some business-to-business e-commerce will involve purchasing via Web stores in a similar way to business-to-consumer, but increasingly it’s likely to be a case of two (or more) computers talking to one another over the Web. Some of this activity will be analogous to traditional electronic data interchange, only over the Internet. Another aspect of business-to-business e-commerce is the emergence of specialist firms like Ariba and Commerce One who promote e-procurement – a streamlined way of identifying and doing business with suppliers, designed to be integrated with in-house enterprise resource planning and other systems. Paul Druckman, deputy chairman of the Faculty of Information Technology at the Institute of Chartered Accountants, and MD of Navision reseller Aston Dit, is an advocate of business-to-business e-commerce. He says: ‘In an ideal world, when a supplier produces an invoice, it shouldn’t involve any paper – an electronic invoice should come through over the Internet. That’s already happening, though not yet to a great extent.’ To speed things up, a number of financial software houses, under the umbrella of BASDA, (the Business and Accounting Software Developers Association) are working on getting their packages to exchange standard messages over the Internet using a formatting technique called XML (eXtensible Markup Language) and there are other similar ideas floating about. The role of the accountant Whether it is business-to-business or business-to-consumer, there is plenty of activity and, one would think, a role for the accountant. Yet, at the SME end of the business community, one hears suggestions that accountants are being less proactive than they might be. ‘Some of the accountants we work with are, let’s say, conservative about e-commerce,’ complains one technologist. There could, of course, be good reasons for that conservatism. One accountant who advises SMEs on software says, ‘Yes, my clients are interested in the Internet, but it’s mainly from the point of view of finding, and perhaps disseminating, information on it, and using e-mail. Very few have got to the point of thinking about engaging in e-commerce.’ Access Accounting’s business development manager Ian Little, himself a chartered accountant, concedes that accountants may meet some resistance if they try to alert SMEs to the benefits of e-commerce. ‘It can be hard enough to persuade smaller clients to invest in basic accounting software – adding e-commerce could make it even harder. However, bearing in mind that anyone buying a PC now gets an Internet connection with it, the additional cost of starting to get involved in e-commerce doesn’t have to be prohibitive.’ Of the small businesses that have become ‘early adopters’ of e-commerce, most seem to have looked to technology companies, rather than accountants, to advise them on their Web activities. ‘My accountant is very good on accounting software, but to be honest it didn’t even occur to me to ask him about this,’ says one e-entrepreneur. Druckman believes that this could be an opportunity for the profession to reclaim some ground. ‘In the 1960s and 1970s, it was accountants who bought the cashbook and ledgers for our clients. In the 1980s and 1990s, we allowed the IT and business management people to take over what had been our business. Is it going to happen again in the Internet age?’ Accountants cash in Certainly, accountants have something to contribute. There are areas of e-commerce where small businesses sometimes appear a little hazy. For example, if they’re accepting credit card payments, how can they limit their liability for fraudulent transactions? Another area of vagueness is the interface between the Web store and the internal accounting and order processing systems. Many businesses print out and re-key their Web orders, which may be acceptable when volumes are low – but do they have the right checks in place to ensure that orders are correctly processed? If, on the other hand, there is an electronic interface between the Web and the internal financial systems, are the appropriate safeguards in place to ensure that no unauthorised transactions get through? The financial adviser or internal financial expert is arguably ideally placed to advise on all of these matters. David Gurney, Pegasus’ advisers’ programme manager, argues: ‘There’s really nobody better placed than the accountant to help companies integrate e-commerce into their businesses in a safe and controlled manner.’ Sioux Ceramics proprietor Sue Allsopp is one small-business person who did receive encouragement from an accountant on setting up her website (www.dbscsoft.com) – her son happens to be an accountant who works for Access Accounting. ‘He talked me into it. I was a bit wary at first, but once I gained the confidence I realised that it’s very easy to use. With the right encouragement, a lot more small businesses could take advantage of this.’ She estimates that a year of trading on the Net has increased her turnover in products by as much as 50%. The products – as well as the activities in ceramics studios like the one she publicises on her site – appeal not just to traditional hobbyists but increasingly to business people looking for a way to overcome stress, she points out; the Internet could be a way to reach the workaholics of the world. If accountants would like to offer advice on e-commerce, then they need to invest some non-fee-earning time in familiarisation. ‘They don’t need to be able to implement the technology, but they should understand how it’s used,’ says Druckman. Accountancy-software vendors active in this area seem only too keen to help accountants learn about e-commerce by providing seminars and so forth. Jointly with its resellers, Pegasus has been running a series of e-commerce seminars for members of its advisers’ programme, and Gurney says that the response has been positive. Hands-on experience is even better than training. The Internet is a rich source of free information for the accountancy community, with sites like Accountancy Age’s own www.accountancyage.com coming along to supplement the general business information that was already plentiful. And accountants can, of course, engage in some e-commerce on their own behalf. Apart from setting up websites to attract new clients, some accountants already use e-mail to exchange financial data with their clients. And now there’s talk of accountants becoming application service providers, hosting accounting applications on behalf of their clients and making them available to those clients over the Internet. Now that would be hands-on experience. MORE WEBSITES – www.access-accounts.com/ecommerce/ecommercebutton.html – Access Accounting site giving details of AccessweB which allows a remotely hosted website to be integrated with an accounts package run in-house. Access Accounting also offers a booklet, ‘E-commerce Made Simple.’ – www.sagesoft.co.uk – announcements about Sage’s tools and services to help SMEs create and run websites. Hosting will be provided by IBM Global Services. – www.navision.com – details of Navision Web Shop, a new product integrated with Navision Financials and aimed at mid-size organisations – www.actinic.com/index.htm – Actinic Catalog, as used by Singletrack – mypage-products.ihost.com/uk/en_US/ – IBM’s Home Page Creator, as used by Mordue Breweries – www.freeserve.co.uk/businesscentre/e_business.htm – free ISP offers small businesses several tools for creating a website, together with facilities for registering a domain name – www.pegasus.co.uk – Pegasus has integrated its Opera accounts package with e-commerce software from Dragnet – www.ariba.com and www.commerceone.com – e-procurement information – www.basda.org – for details of the eBIS initiative for using XML messages to exchange data between applications SOME ARGUMENTS FOR E-TRADING – Retailers can reach a wider (international) customer base – Setting up on the Web can eliminate some of the costs of expansion (no local agents or branches) – By creating the right links to a Web store, it’s possible to target specific demographic groups – It allows a smaller company to look as impressive as a larger one – It provides 24×7 service at minimal cost – There is an opportunity for better customer service at lower cost – e.g. customers can be given ability to track progress of their order online – It is a defensive move against online competitors who may otherwise make inroads into your market – If integrated with in-house systems, it eliminates some of the costs of processing transactions (no keying) – If integrated as above, it can reduce or get rid of keying errors – It allows companies to share information with suppliers and partners, making the supply chain more efficient and reducing stock levels – It is an efficient way to find the best deal.