The Rural and Regional Guide to commerce · Chapter 7 Marketing 193 A note on market research 194 Branding your business and your products 194 Attracting visitors to your web site

Belon

gin

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o the Series

RIRDC’s Internet Guides

Commissioned by the Rural Industries Research and Development Corporation

by Robert Parker and Franco Papandreaecommerce-

The Rural and Regional Guide to

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© 2002 Rural Industries Research and Development Corporation

This publication is copyright. Apart from any fair dealing for the purposes of research study, criticism or review as permitted under the Copyright Act 1968, no part may be reproduced in any form, stored in a retrieval system or transmitted without the permission of the Rural Industries Research and Development Corporation.

ISBN 0 642 58402 8ISSN 1440-6845

Publication Number 02/003

Published in May 2002

Printed by Union Offset Printing, Canberra

Rural Industries Research and Development CorporationLevel 1, AMA House42 Macquarie StreetBARTON ACT 2600

Telephone 02 6272 4819Facsimile 02 6272 5877E-mail [email protected] http://www.rirdc.gov.au

Telstra Country Wide540 Swift StreetALBURY NSW 2640

Telephone 1800 687 829E-mail [email protected] http://www.telstra.com/countrywide

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ContentsForeword xiPreface xiiiAcknowledgments xvAbout the Rural Industries Research and Development Corporation xviAbout Telstra Country Wide xviiPart I Introducing e-commerce 1Chapter 1 The story so far 3

The birth of a new economy 3What is all the hype about? 4What is e-commerce? 5

The consumer 6The business 7DHL Connect and E-track 8Majestic Merino 11

Who can participate in e-commerce? 12How is e-commerce significant for rural and regional communities? 12

Benefits common to regional businesses and consumers 16The Gippsland portal 17Significance of e-commerce for regional business 17Reynolds Wine Company 18Mick’s Whips 20Significance of e-commerce for consumers 20

The inevitable march of e-commerce 21Massey Farms 22

ecommerce-The Rural and Regional Guide to

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Part II Where e-commerce is today 25Chapter 2 Gearing up for e-commerce 27

A telecommunications overview 27What equipment do you need to connect to the Internet? 28Dial-up connections to the Public Switched Telephone Network 29

Equipment you will need for a dial-up PSTN Internet connection 29A computer 29A modem 30A technical note on modems 31Your telephone line 32Internet software 33The Internet Service Provider (ISP) 34Understanding pricing 35The importance of bandwidth 36Redundancy 36What to look for in your ISP 37Customer support 40What information you need from your ISP 41Your ISP configuration work sheet 41

Integrated Services Digital Network (ISDN) 42Asymmetric Digital Subscriber Line (ADSL) 42

What is ADSL? 42Equipment you will need for an ADSL Internet connection 45

Satellite 45Equipment you will need for one-way satellite Internet connection 46Equipment you will need for two-way satellite Internet connection 47System Requirements comparison 48

Crispin Bennett International Horse Transport Pty Ltd 49

Chapter 3 Play it smart, play it safe 53E-commerce security and the Internet 53

Firewalls 54Encryption 54Secure Sockets Layer (SSL) 55Digital certificates, digital signatures and certification authorities 57What is a digital certificate? 60

Contents

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What is a Certification authority (CA)? 60RSA SecureID 62Consumer protection and e-commerce 62Secure e-commerce payment methods 65Credit cards 69Invoicing 71

Computer security and the Internet 71Computer access 72Hacking 72Password protection and integrity 73Your ISP account and credit card 74Insecure software 75JAVA, ActiveX and plug-ins 75Cookies 76E-mail 77Viruses 78Virus scanners 79Potential virus sources 80Downloading software 80

Innovative Business Resources 81

Chapter 4 How can I participate in e-commerce? 85Companion web site 86

Portals 87National portals 87iyb—It’s Your Business ™ 88Local community portals 90Shopping 93Online shopping malls 94Independent retailers 96Computing and electrical 96Music 97Ticketing 98Automotive 99Agricultural 99PremiumWeather™ 102


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General auction sites 103Agricultural auction sites and markets 103Classified advertisements 104Banking and finance 105

Banks 106Stockbroking 108General finance 113

Insurance 115Health insurance and health services 117

Real estate 119Government services 120B2B e-marketplaces 122Freedom Pools Pty Ltd 125

Part III Establishing an e-Business 129Chapter 5 Look before you leap 131

Adoption of Information Technology and e-commerce participation 131Reasons for going online 133Defining your strategy 135

First things first - where to go for help? 137Developing a strategy 139E-commerce business models 142Olives Australia 143Petals Network 145Developing your plan 149Your budget 151Benefit-cost analysis 152

Posh Pots World 155

Chapter 6 Taking on e-commerce 159The e-journey 159

Internet active business (no web site) 160Business with a basic web site (information based) 161Business with an interactive web site 162Toorallie Australia 164Transaction and integration based web sites 165BGF Co-operative Limited Supply Chain Management. 168

Contents

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E-marketplaces 169E-WOOL Electronic Market 171

Building your web site 173Content 174Categorisation and display of content 174Design and layout of your web site 175

C.R.A.P design rules 177Development options 178Building your own site 179

Using HTML? 179Using HTML editors 180Some WYSIWYG HTML editors 180Some HTML code-based editors 181E-commerce packages 182

Leasing space on a web portal or shopping mall 182Web development agencies or Application Service Providers (ASPs) 183

Custom-made web site 184Hiring consultants 185

Registering a domain name 186Putting your site on the Internet 187Do you need your own web server? 188Davis Engineering Pty Ltd 189

Chapter 7 Marketing 193A note on market research 194Branding your business and your products 194Attracting visitors to your web site 194

How search engines work 195Maximising referrals from search engines 196Optimising page titles 200Optimising the page text 201Optimising meta tags 202Optimising hyperlinks 204

Registering with search engines and directories 204Search engines 204Web directories 205

Establishing reciprocal links 208


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Other types of online promotion 212Online advertising 215Banner advertising 215Webrings 218Affiliate programs 219Joining an online mall or a portal 220E-mail advertising 220Newsletters 222

Offline marketing 222Tracking visitor information 225

Hindmarsh Valley Stone 227

Chapter 8 Customer service and support 231Identifying customer needs 232

McMahon Global Foods 234Meeting expectations 235Competitive services 239

Easy Orchids 240Building customers’ trust 241

Security 241Privacy 242Pricing information 244Product guarantees 244Delivery information 246Tracking orders 247

Building ongoing relationships with customers 248Learning from visitors to your web site 249Bulb Express Pty Ltd 251

Appendix A: NOIE e-commerce ready reckoner 255A) Costs of e-commerce Implementation 255B) Benefits from e-commerce Implementation Year ended 256

Appendix B Internet connection troubleshooting guide 259Turn off Call Waiting 260Check your dial tone 261Remove sources of interference 261Check for line noise 261

Contents

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Install the latest modem drivers 262Turn on modem error correction 262Why am I not connecting at 56k? 262Turn off ‘disconnect if idle’ option 263Check your guaranteed connect time 263Avoid multi-tasking 263Browser cache settings 263Automatic redial 264Charges for engaged tones 264Why did I achieve a faster speed at a previous location? 264Port speed 265Adjusting port speed - Windows 95/98/ME users 265Adjusting port speed - Windows 2000 (Professional) users 265Setting line speed 266Internet Assistance Program (www.iapselfhelp.com) 267Lightning Strikes 267Electric Fences 267Configuring your electric fence 268Constructing your electric fence 269Locating Telstra Cables 271Ongoing maintenance of your electric fence 271

Appendix C Some useful Internet resources 273Glossary 279Telstra BigPond™ Internet starter kit inside back cover


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Foreword

The growth in the take-up of the Internet in regional Australia has been phenomenal. The percentage of adults outside our capital cities going online rose from 25% in 1998 to 44% by the end of the year 20001, a 76% increase in just two years. This growth has delivered significant benefits to regional communities and businesses through cheaper and faster communications.

Just as the Internet has grown in popularity, the use of electronic commerce is becoming more mainstream. As e-commerce technologies continue to improve and gain acceptance within the Australian community, we are witnessing the emergence of vibrant new industries, opening up a myriad of commercial opportunities for consumers and merchants alike, irrespective of their location.

The Rural and Regional Guide to E-commerce has been written specifically for rural and regional Australians as an introductory guide to e-commerce via the Internet. The guide aims to assist those rural and regional Australians already familiar with the Internet to learn more about e-commerce, and to provide food for thought as to how they might use e-commerce in their businesses and day to day lives.

The guide also contains a number of case studies highlighting regional businesses at the forefront of e-commerce development. These businesses are adopting cost-effective online solutions resulting in cost-cutting, giving them a competitive edge. Practical advice on where to go for help and some strong basic principles are clearly outlined to provide practical answers to many of the questions consumers and businesses have about e-commerce.

1 National Office for the Information Economy, Current state of play, June 2001.

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Telstra Country Wide™ and the Rural Industries Research and Development Corporation (RIRDC) are committed to facilitating the transfer and adoption of appropriate and beneficial information technology solutions for regional Australians.

It gives us great pleasure to commend The Rural and Regional Guide to E-commerce to you as you set out on your e-commerce journey, and we wish you every success in your e-commerce ventures.

Peter CoreManaging DirectorRural Industries Research and Development Corporation

Doug CampbellGeneral Managing Director

Telstra Country Wide

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Preface

Can you remember the first time you heard about electronic commerce? Chances are it was through media reports relating to the stock market boom in e-commerce start-up companies (dot-coms) as soaring company valuations generated headline news. And unless you were an avid participant in the tech stocks game, you may have felt that watching the evening news was the closest you would ever come to the brave new world of e-commerce.

However, as each day passes, e-commerce becomes more accessible to, and useful for, Australians everywhere. Rural and regional Australians in particular stand to reap significant social and economic benefits from e-commerce as it helps to overcome ‘the tyranny of distance’ which so often isolates rural and regional communities from larger domestic and international markets.

With this in mind, The Rural and Regional Guide to E-commerce has been written specifically for rural and regional Australians as an introductory guide to electronic commerce via the Internet.

The Rural and Regional Guide toE-commerce will:

• introduce e-commerce within the context of the rural and regional environment;

• familiarise rural and regional Australians with their Internet connection options and offer advice on optimising Internet connections for e-commerce;

• address many of the issues e-commerce consumers should consider before buying goods and service online; and

• assist prospective e-commerce merchants in becoming more familiar with a variety of aspects associated with the establishment, maintenance and marketing of an online business.

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The Rural and Regional Guide to E-commerce aims to demystify e-commerce and many of the issues relating to it, so that you will be better equipped to determine what opportunities e-commerce can offer you as a consumer or merchant in rural and regional Australia.

In Part I we look at the emergence of e-commerce, what e-commerce is, who can benefit from participating in it and why it is significant for rural and regional Australia.

Part II discusses what is required for connection to the Internet and e-commerce services, a number of safety and security issues to consider when participating in e-commerce, and the types of e-commerce services consumers and merchants can expect to find online.

Part III looks at e-commerce more specifically from a merchant point of view and aims to help familiarise you with some of the issues associated with becoming an online merchant. The discussion canvases questions relating to developing a business strategy, getting your e-business online, customer support issues, the marketing of your site, and the maintenance of good customer relations.

Complementing these discussions are a variety of case studies illustrating the implementation of e-commerce by rural and regional businesses and the outcomes of adopting this technology.

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Acknowledgments

Many thanks must go to the Rural Industries Research and Development Corporation for its support of this publication and the ongoing commitment to online services for rural industries. In particular we would like to thank Peter Core, Roslyn Prinsley, Carol Reeve and Cecile Ferguson for their assistance in producing this book.

We would also like to express special thanks to Telstra Country Wide™ for its sponsorship of The Rural and Regional Guide to E-commerce, the assistance in producing this guide, and the ongoing dedication to rural and regional telecommunications services. In particular we would like to thank Rosie Simpson, Rob Lomdahl, David Dart, Scott West, Joe Bourke, Rhonda Griffin, Julia Staines, Linda Harrington and Craig Windus.

Thanks also to Crispin Larratt for providing us with his insightful and humorous illustrations.

Many thanks to Kevin O’Keeffe at the National Office for the Information Economy and the NOIE case study participants who kindly allowed us to reproduce their stories:

Kelvin Dyson Bulb Express Pty Ltd Crispin Bennett International Horse Transport Pty Ltd Michelle Massey Massey Farms Terry Davis Davis Engineering Maxine Dale Freedom Pools Paul Skinner HV Stone Bruce Gibbons Posh Pots Julie-Ann Harper, Regina Gaujers and Jennifer Browne Innovative Business Resources

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The Rural Industries Research and Development Corporation (RIRDC) is an agency of the Commonwealth Government. It was established in 1990 to facilitate industry and government investment in industry-directed and market-focussed R&D. RIRDC has three core businesses:

1. fostering the development of new industries, both prospective and emerging;

2. managing research and development investments for established industries; and

3. addressing strategic cross-sectoral issues facing the rural sector.

Research commissioned by RIRDC to gain a better understanding of the information technology needs of rural Australia is at the leading edge of work in this field.

Outcomes of this work include support for two editions of The Australian Farmer’s Guide to the Internet and The Rural and Regional Guide to E-commerce. Through its Human Capital, Communications and Information Systems Program, RIRDC is facilitating innovation in the agricultural sector by improving the use of communication and education processes and appropriate information systems.

You can find out more about RIRDC from its web site (www.rirdc.gov.au).

About the Rural Industries Research and Development Corporation

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The Telstra Country Wide™ business unit was launched in June 2000 to provide better communications services to regional Australians and to increase Telstra’s business performance in regional Australia.

Telstra Country Wide is a strategic business decision, with its commercial thrust designed to improve Telstra’s service levels and business performance.

Telstra Country Wide is making a difference to regional customers by putting customer responsibility and decision-making into regional Australia. Telstra Country Wide has 28 Area General Managers (AGMs) established in area offices in regional locations nationally. These AGMs are Telstra’s face in regional Australia, with responsibility for overall aspects of sales and service in each region.

AGMs and their staff work with communities to improve service delivery and to identify product solutions to meet local needs. To find out more about Telstra Country Wide, visit www.telstra.com/countrywide or call your local Area General Manager on the number provided in the front pages of your local Telstra White Pages™ directory.

About Telstra Country Wide

Part I

Introducing e-commerce

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Chapter 1

The story so far

The birth of a new economyAs our history illustrates, it seems a fundamental rule of human nature that, wherever people congregate to form communities, some form of barter, trade or commerce is sure to follow. And the Internet has proven no exception to this rule.

Thanks to the global reach of the Internet and its many applications (e.g. the World Wide Web, e-mail, newsgroups, Internet relay chat etc), people once separated by geographical or cultural divides are now regularly interacting with one another. And with this interaction comes the formation of countless dynamic virtual communities and the irresistible human urge to market and sell goods and services within these communities—hence the emergence of electronic commerce (e-commerce) and the birth of the ‘New Economy’.

However, the emergence of e-commerce has not so much created a new economy as brought about the creation of a new marketplace. Just as the telephone opened up new markets for sales and support in decades past, so too the Internet (and in particular the web) has enabled new markets for commercial intercourse through rich media content and interactive functionality.

‘I‛m pleased to let you know you‛ve given birth to a new economy‛.‘I think I‛ll call him E-commerce, doctor‛.

Chapter 1

The story so far

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What is all the hype about?The dot-com boom brought a lot of attention to e-commerce in the late 1990s as the prospect of new, largely untapped global markets accessible via the Internet sent investors scrambling to invest in technology companies and dot-com start-ups (i.e. new web-based companies). In short, the idea was to invest in those companies most likely to successfully bring together a saleable commodity and a global consumer base through technological innovation and effective business strategies. The trouble was, in such a new and rapidly evolving environment, it was difficult to pick the likely winners from the also-rans. So investments in listed technology companies soared as investors hedged their bets trying to identify those companies most likely to succeed. Also adding to the hype were the large numbers of initial public offerings (IPOs) for new dot-com start-ups coming into the market.

It eventually became clear, however, that the tech stocks sector had over-heated and the market would have to correct—which it eventually did in April 2000, when the NASDAQ1 plunged from a high of more than 5000 points to a low of just below 1600 points. This correction confirmed the long awaited implosion of the Internet bubble, and has become infamously known as the ‘dot-com bust’ or ‘tech wreck’, the ramifications of which are still being felt today.

From afar, it may have appeared that the dot-com bust served only to prove e-commerce was all hype, as evidenced by the seemingly endless procession of failed dot-com ventures. However, tech stocks crashed because company valuations rose for the wrong reasons—i.e. on the promise of what e-commerce could offer, rather than what the companies were actually delivering, not because there was little merit in e-commerce.

In fact, there are tremendous opportunities for e-commerce on the global, national and regional levels, for enterprises small, medium and large alike, and many companies have survived and are profitable.

1 NASDAQ stands for National Association of Securities Dealers Automated Quotation System and is the world’s largest electronic stock market. NASDAQ operates through a highly sophisticated network of computers, operated by the National Association of Securities Dealers, which transmits real-time quote and trade data to more than 1.3 million users in 83 countries. NASDAQ’s ‘open architecture’ market structure allows a virtually unlimited number of participants to trade in a company’s stock. Over 5,000 stocks (including a significant number of technology stocks) are traded via NASDAQ. See http://nasdaq.com.

There are tremendous opportunities for e-commerce on the global, national and regional levels.

Chapter 1

The story so far

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The National Office for the Information Economy suggests that the net effect of e-commerce on the Australian economy could add 2.7% to the national output, enhancing consumption spending by $10 billion2 over the next decade. In the following chapters we will explore how e-commerce is set to become an increasingly valuable way of doing business as long as e-businesses remain faithful to business fundamentals, adopt the appropriate technologies for their needs, and effectively service their customers’ requirements.

What is e-commerce?Electronic commerce generally refers to:

All forms of transactions relating to commercial activities, involving both organisations and individuals, that are based upon the processing and transmission of digitised data, including text, sound and visual images.3

By this definition, e-commerce can incorporate a wide range of activities, as long as commercially related transactions are taking place through electronic means, and can include such technologies as:

· the fax machine;

· e-mail;

· file transfer and sharing applications;

· SMS (short messaging service)4;

· video-conferencing;

· electronic data interchanges (EDI)5;

· EFTPOS6;

· Internet banking; and

· online shopping.

2 National Office for the Information Economy, What is e-commerce?, 16 October, 2001, (www.noie.gov.au/projects/ecommerce/sme/whatisecommerce.htm).3 OECD, Electronic Commerce: Opportunities and Challenges for Government (the Sacher report) 1997, (www.oecd.org/pdf/M00002000/M00002803.pdf).4 SText/data messages sent from one mobile phone to another.5 Facilitates the controlled transfer of data between organisations via established security standards and private telecommunications networks.6 Electronic Funds Transfer Point of Sale system, such as those used in retail outlets.

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The story so far

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It is beyond the scope of this guide to consider e-commerce in all its forms, so we will limit our discussion of e-commerce to its implementation via the Internet and its associated applications.

E-commerce can manifest itself in a variety of ways through the Internet, with varying levels of cost and complexity, depending on business or personal objectives and the resources available. As such, it can mean different things to different people, depending on how they choose to participate and what they hope to get out of it.

Exactly what e-commerce means for you will largely be determined by whether you decide to engage in it as the purchaser of goods, services and information online (a consumer) or whether you will be the seller of these services (a business)—or a combination of the two.

The consumerPerhaps the most common (but by no means the only) understanding of e-commerce from a consumer point of view is that it involves the purchase of goods or services online, with financial transactions completed electronically via the Internet.

As time goes by, consumers are becoming increasingly familiar with the concept of completing transactions online, and becoming more confident in doing so. However, while online transactions are a significant component of e-commerce, they represent just one of the many advantages e-commerce can offer consumers. For example, some of the other ways the Internet can offer consumers direct and indirect e-commerce opportunities are:

• access to financial institutions and services (e.g. online banking, BPay and personal investment/broking services);

• external study opportunities, with education and learning at all levels being available and paid for online;

• a wealth of research material for business or personal use;

• payment of taxes, rates, fines and other local, state and government charges;

• a greater variety of prices and range of goods and services;

• the ability to buy goods and services beyond the confines of the local or regional marketplace—to reach more distant markets in less time; and

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• the ability to use the Internet for price comparison shopping before finalising purchases online or offline.

The businessParticipating in e-commerce as a business operator essentially means creating opportunities for increased revenues through electronic means and/or achieving efficiencies in business communication and supply chain processes. And the key to realising these objectives is largely determined by how you choose to implement business-to -consumer (B2C) and business-to-business (B2B) processes within your e-commerce activities.

At a fundamental level, e-commerce is about efficient communication and effective management. The faster, more efficient flow of information via technologies such as e-mail and the web can be used to speed up business processes, facilitate better management and reduce costs, all at the same time. At the other end of the spectrum, e-commerce can represent a highly integrated business system offering administration efficiency, streamlined communications between suppliers, business associates and customers and fully e-commerce enabled web sites offering online sales and transaction facilities.

The spacious shopping aisles of the online shopper

E-commerce is about efficient communication and effective management.

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The story so far

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DHL Connect and E-track DHL Worldwide Express is a global leader in the international air express industry, with a market share of 37%. DHL has over 1 million customers globally, serviced by 6,000 offi ces in more than 220 countries, processing a total of 162 million shipments per year.

In order to meet the demands of processing such high volumes of traffi c, DHL has been a driver of innovation and technological development within its fi eld. As such, DHL offers its customers fast, responsive, and cost-effective express deliveries in addition to e-commerce fulfi lment and intelligent logistics solutions.

Two of the innovative products DHL offers its customers are DHL Connect and E-track.

DHL Connect provides a full set of automated shipping procedures that give its customers total control over their international and domestic shipping management—all undertaken via their personal computer and the Internet. With DHL Connect, customers can:

• initiate a shipping consignment using an automated address book;

• prepare all required shipping documentation;

• obtain an estimate of shipping costs;

• book a pick-up;

• track a shipment with real-time information;

• notify the recipient that the shipment is on its way;

• print shipment reports; and

• order supplies from DHL.

E-Track is a free service that allows DHL customers to track shipments via e-mail. All customers need to do is send an e-mail to a designated e-mail address with the shipment consignment number in the subject fi eld. A reply e-mail is returned within seconds containing a tracking report detailing the exact location of the shipment at key stages of its journey. E-Track is available 24 hours a day from anywhere in the world, has no limit to the number of shipments that can be tracked in each e-mail, and allows tracking results to be copied to the person receiving a shipment by simply typing their e-mail address in the cc fi eld.

While the size and scope of the DHL operation may seem to be of scant relevance to small and medium-sized enterprises operating in rural and regional Australia, the scale of the operation is not the main issue here. What is of greater relevance is how DHL has implemented Internet and e-commerce technologies to achieve administration effi ciencies and streamlined communications with customers, while offering a higher level of customer service.

Source: www.dhl.com.au.

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The story so far

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Naturally, the needs and objectives of your particular business will play a major part in determining exactly how you choose to adopt e-commerce practices. And, thankfully, not only can e-commerce services be tailored to suit the size of any business, they can generally be implemented in a considered and incremental way, effectively allowing businesses to ‘test the water’ with some basic services before committing to anything more substantial.

The incremental adoption of e-commerce practices can be described in the context of an evolutionary e-commerce journey (the e-journey) and broken down into a number of broad stages.

• an Internet-active business;

• a business with a basic web site;

• a business with a transactional web site; and

• a Business with fully integrated e-commerce facilities.

An Internet-active business. Even if your business does not have a web site offering online services itself, your company can still benefit from getting online and using the e-commerce services offered by others (e.g. banks, stockbrokers, employment agencies, airlines etc) as well as e-mail, the most commonly used Internet application.

Integrated facility

Transaction web site

Basic web siteInternet-active business

E-commerce services can be tailored to suit the size of any business.

HandyT I P

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The story so far

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Many companies have found that using e-mail to communicate with customers and suppliers is faster and cheaper. Using the Internet has also improved business research and allowed the purchase of goods and services online.

A basic web site. A basic web site for a business can act like an advertisement in a business directory such as the Yellow Pages®. More scope is available with your own web site, however, as it can include more information about the business, such as a product catalogue that can be updated regularly.

An interactive web site. In addition to the facilities provided on a basic web site, an interactive web site typically encourages greater interaction between the business and its client base through facilities such as bulletin boards, chat rooms, feedback forms, and ‘frequently asked questions’ pages.

A web site with transactional or integrated e-commerce facilities. A transactional web site allows sales to be processed automatically either through a third party clearing house or through secure facilities established by the business operating the site. Operational costs can be substantial and viability depends on the level of business transacted over the facilities. Taking transactional web sites a step further, a fully integrated e-commerce operation might also facilitate the streamlining of internal business processes, business -to-business processes and/or business-to-customer processes.

All of these stages of the e-journey are discussed in more detail in Chapter 6.

A business may enter any stage of the e-journey outlined above. Businesses need not evolve progressively through each stage; however, it is common for businesses to approach e-commerce in this incremental manner.

The e-commerce experience of Majestic Merino, a long-established wool grower and seller of wool yarns and other wool products, illustrates a progressive approach to e-commerce business development.

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Majestic Merino (www.majesticmerino.com)

This is a long-established family partnership operating two wool-growing properties in Denmark, Western Australia, and a retail outlet selling a variety of wool yarns and other wool products. The retail outlet was established as a sideline to the farming activities a decade ago at a time when the greasy wool market was experiencing diffi cult times. It now represents some 40% of the total business turnover. The Majestic Marino web site was fi rst established fi ve years ago to extend the company’s market reach for yarns and woollen products and now generates some 10% of its sales.

Initially, the main purpose of the web site was to provide product information, a price list and a point of contact for inquiries. However, the owners believed that wool yarns were diffi cult to assess online and the company chose to answer customer inquiries received through the web site by mailing a samples catalogue. Orders were then placed by faxing or e-mailing the order form contained in the catalogue back to the company. Thus, the operation was similar to a ‘mail order’ arrangement, using the Internet to promote products to a wider market (domestic and international) than could be reached via the retail outlet. The approximate value of a typical sale is $100.

Main benefi tsThrough the web site, the business has been able to reach many more customers in Australia and overseas. ‘It has created a lot of interest overseas and it has got us an American distributor.’ Also, quite often people visiting the Majestic Merino stand at craft shows say they found out about the display from the information on the web site. E-mail has become an essential tool for Majestic Merino’s sales and marketing operation. The business often uses the Internet to search for information and research. It has also used online wool sales sites in addition to traditional auctions to sell its greasy wool.

Web site developmentThe initial basic web site was designed by a local webmaster, did not have its own domain name, and was hosted by a local ISP. However, it quickly outgrew its original purpose and was redeveloped and updated. By operating a web site, the owners gained some in-house expertise that facilitated dealings with the new web site developer located in Perth. The new web site has its own domain name, is considerably more sophisticated than the original site, has several product pages and an online order form that can be submitted electronically or printed for fax or ordinary mail. While orders with credit card payment are accepted online, the site does not offer a secure transaction facility.

Source: Papandrea, F & M Wade, 2000, E-commerce in Rural Areas: Case Studies, Rural Industries Research and Development Corporation, Canberra. (www.rirdc.gov.au).

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Who can participate in e-commerce?Basically, anyone who has access to the Internet can choose to participate in a variety of e-commerce activities. The National Office for the Information Economy (NOIE) estimates that, as of June 2001, 52% of the adult metropolitan population and 44% of adult non-metropolitan population had Internet access7. This rate of Internet connectivity ranks Australia around fourth in the world behind the US, Canada and the Scandinavian countries, and means that as a nation we are in a strong position globally to take advantage of the economic and social benefits of e-commerce.

E-commerce offers both commercial enterprises and individual consumers never-before-realised levels of convenience, flexibility, and choice about how to live, work, communicate, learn, buy and sell —irrespective of whether they are in the city or the country.

How is e-commerce significant for rural and regional communities?E-commerce is presenting rural and regional consumers with new ways of purchasing goods and accessing information and services online. Consumers are increasingly able to buy goods and services quicker, cheaper, with greater choice, and with the added convenience of using these services at any time of the day or night.

Similarly, e-commerce is allowing regional businesses to improve productivity, revenues, and competitiveness by being more efficient and flexible in how they conduct their internal operations, how they work with suppliers, and how they meet the needs and expectations of their customers—both in the real world and in cyberspace. Or, as Dave Pottruck, CEO of Charles Schwab (providers of investment and financial services) puts it:

We don’t believe the future is about the physical world verses cyberspace. It’s not bricks and mortar verses the Internet. It’s about integrating both—putting together the best of what’s available through physical distribution with the best of the web world. At Schwab, we call it building a company with clicks and mortar.8

7 National Office for the Information Economy, Current state of play, June 2001, (www.noie.gov.au).8 Dave Pottruck, Internet Summit Speech, 17 July 1999.

E-commerce presents consumers with new ways of purchasing goods and services.

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Among many rural and regional Australians, the prospect of adopting e-commerce is often greeted with scepticism. There are fears that it will hasten the decline of regional and rural communities, as local businesses struggle to compete with larger national or international companies that local customers now have access to over the Internet. And often these fears are compounded by the daunting challenge of adapting to change in a continually evolving e-commerce marketplace.

Realistically, e-commerce is unlikely to sound the death knell for rural and regional communities, however, it is likely to present a range of threats, as well as opportunities, to these communities—neither of which should be ignored.

Significant economic and social opportunities will be gained by anyone who can position themselves to take advantage of e-commerce, while those who choose to disregard it may face an uphill battle in an increasingly competitive Internet-connected world.

At the local community level, the impact of e-commerce will vary from one community to another, depending on demographic factors; variations in industries, trades and professions; and the aggregate skill level of each community. Employment opportunities may wane in regions, industries or businesses where remaining relevant and competitive in the technological age is problematic or where the competitive advantages of e-commerce are ignored. On the other hand, other regions and enterprises will expand through e-commerce, creating new job opportunities and new industries within their community.

Sectors of the economy that are more amenable to e-commerce are likely to expand further and faster through the adoption of e-commerce practices. Service-based industries such as hotels, tourism, entertainment, banking and finance, and air travel are expected to fare well through e-commerce, as are professionals in health, education, business, information technology and law.

Agricultural industries, which are economically reliant on bulk commodities, are more likely to achieve e-commerce efficiencies from an information and supply-chain management point of view. Among other things, e-commerce presents opportunities for agricultural industries to:

• access a wide range of pertinent information;

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• overcome the distance divide through more cost effective communications;

• procure goods and services online;

• realise efficiencies and reduce intermediaries in supply chain processes; and

• gain greater access to markets and market information.

On the whole, it is not unreasonable to assume that rural and regional communities will benefit from e-commerce. Internet and e-commerce technologies are helping to break down the geographical barriers, which have for so long been an impediment to economic development and prosperity in the bush. It is unlikely that removing these barriers will have anything other than a positive effect on the economic and social wellbeing of rural and regional Australia.

Some of the benefits rural and regional communities might expect to gain from e-commerce in conjunction with Internet connectivity include:

• reduced social and economic isolation;

• enhanced information and communications services;

• the growth of new industries that can operate from any location;

• employment opportunities through teleworking (i.e. working remotely from employers via the internet);

• attracting more professionals to country areas thanks to improved access to services and resources;

• greater business and economic development opportunities through improved access to national and international markets;

• better access to educational resources;

• greater professional development opportunities and peer support networks;

• greater community development opportunities through more ubiquitous communications; and

• potential for earning higher real incomes (e.g. through cost savings on business overheads or online purchases).

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E-commerce has the potential to provide significant commercial advantages for those individuals and communities that proactively seek to bolster economic development and improve their standard of living. Those communities which stand to gain the greatest benefit from e-commerce will most likely be those with:

• a well-trained, progressive business community which can provide support services for new business operations within the region;

• the ability and willingness to actively seek out, and embrace their own e-commerce opportunities;

• a sound telecommunications infrastructure, capable of maximising the potential of the internet; and

• favourable lifestyle options to attract businesses and/or teleworkers to the region.

Rush hour for telecommuters

E-commerce can provide significant commercial advantages and bolster economic development.

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Benefits common to regional businesses and consumersUtilising e-commerce, a business is no longer tied to conventional business hours or to a physical location. Orders can be accepted via web sites or through e-mail 24 hours a day, seven days a week, without the overhead costs normally associated with opening a physical shop front. By the same token, consumers can shop online, at a time and place convenient to them.

E-commerce can also facilitate access to wider national and international resources, providing new opportunities for rural consumers to buy from distant markets, and for rural businesses to sell to distant markets. Through the ‘globalism’ of e-commerce new suppliers are becoming increasingly accessible to regional buyers, and new customers are becoming more accessible to regional businesses.

The global reach of e-commerce offers particular advantages to regional businesses and consumers in the area of niche marketing, as the ubiquitous nature of the Internet makes it easier for the buyers and sellers of unique goods and services to find each other and do business.

Not so hyped, but just as significantly, e-commerce also offers the power and convenience of ‘localism’. As attractive as a global customer base may seem, or as exotic as shopping on the other side of the world may sound, consumers will not necessarily shop outside their local community just because they can. If local businesses can reduce operating overheads through e-commerce and provide competitively priced goods and services, backed up by reliable customer service and support, local consumers will have little reason to shop elsewhere unless the products they require cannot be sourced locally.

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Local businesses will also have a cost advantage on shipping that distant suppliers will be unlikely to match, and local consumers will generally feel more comfortable dealing with local enterprises that are well known within the region.

Embracing and participating in e-commerce, be it through local or global channels, can have positive spin-offs for local rural and regional communities. Successful local e-commerce enterprises inject capital into the local economy through industries such as transport, retail, accounting, banking and information technology; while global e-commerce can offer wider lifestyle choices for consumers and greater marketing opportunities for business. Overall, e-commerce has the potential to generate higher real incomes (much of which is likely to be spent in local businesses) and raise the standard of living for rural and regional communities in general.

Signifi cance of e-commerce for regional business E-commerce can provide opportunities for businesses to streamline administration practices, to better integrate B2B and B2C processes and communications, and to target new markets for the fi rst time.

The Gippsland portal (www.gippsland.com)

This is one of a number of regional portals throughout Australia, established with the express aim of serving the local community. The portal helps to strengthen community ties by providing a range of community-based services such as entertainment news, a classifi eds section advertising goods for sale, a job advertisement section, tourism and accommodation information, an events calender, weather updates for the region and lots more.

An extensive business directory is also provided, which lists many of the businesses within the region. Each company listed in the portal provides its name, contact details, physical location, Internet address details (if available) and a description of the goods and services they offer.

Through the provision of these services, the Gippsland portal provides an additional channel through which the local community can interact, while also facilitating greater networking and trading opportunities business-to-business and business-to-consumer.

More information is available on portals in Chapter 4.

E-commerce has the potential to generate higher real incomes.

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Administration processes which have traditionally taken up valuable time during business hours—such as dealing with banks, government departments, utility suppliers, landlords, accountants, lawyers, insurers, superannuation funds and workers compensation —can in many cases be conducted online at any time of day or night. Taking administration activities online can not only save time, but can also reduce paperwork, lower overheads (e.g. postage and phone costs) and free up staff resources during business hours to spend on customers. The Massey Farms case study at the end of this chapter offers a good example of how these effi ciencies can be achieved.

E-commerce can assist B2B partnerships in becoming more effi cient and profi table by helping to streamline business processes between manufacturers, suppliers/wholesalers, retailers and customers. And because the importance of physical location is greatly diminished through e-commerce, regional businesses have greater opportunity to consolidate existing business partnerships or to forge new relationships through cheaper, more fl exible communications.

Reynolds Wine Company (http://users.hunterlink.net.au/~madjr/)

Reynolds Wine Company is located in the Upper Hunter Valley of New South Wales and produces a range of wines from grapes grown in both the Hunter Valley and the Orange district. The Reynolds brand is distributed nationally, but is also exported to the UK, Switzerland, New Zealand, Thailand, Taiwan, Singapore, Japan, China, Belgium, The Netherlands and the US.

Reynolds has operated a web site since 1997; it is used primarily for product awareness overseas, but also:

• offers secure e-commerce facilities for the sale and delivery of wine;

• enables distributors around the world to download tasting notes, images and general information concerning the business and its wines, which are used for promotional purposes; and

• helps to attract prospective importers who best fi t their requirements for representation with a view to generating volume sales through them.

Reynolds has also come to rely on e-mail as it:

• provides considerable cost savings over alternative modes of communication;

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From a B2C perspective, e-commerce can be used to track customer details, purchases and delivery. Orders can be accepted, confi rmed, processed and paid for within an electronic environment, and customers can be kept informed about the progress of their order and expected delivery (or pick-up) date. This process can provide greater effi ciency in the receipt and management of orders and offer greater convenience to consumers, be they ordering from a local, national or international supplier.

Through e-commerce, many regional businesses may fi nd themselves facing competition from outside their region for the fi rst time. However, they will be able to embrace new global opportunities for the fi rst time as well. Individual businesses will need to make their own choices about how they adapt to these circumstances. For instance, many businesses will see their local customer base as critical to the future prosperity of the company, and so will concentrate their marketing and e-commerce efforts toward more effectively servicing the needs of these customers. This can not only raise customer service levels and consolidate customer loyalty, but serve to stave off external competition as well.

Once these businesses feel that they are providing an optimal service to their core client base, they may then choose to broaden their e-commerce horizons to a wider audience.

Other regionally based businesses, on the other hand, may fi nd that due to the nature of their business, they are better off concentrating their marketing and e-commerce efforts at a national or international audience. Again, the obvious example here is the supplier of niche products, where the demand for these products within a single community is insuffi cient for the business to remain viable by selling to that community alone.

• puts them more in touch with their customers ‘at the coalface’; and

• is used by overseas importers to place orders for wine.

Based on their experiences to date, Reynolds expects to increase its use of the Internet, particularly in the area of business-to-business communications. The Australian Wine and Brandy Corporation has developed an online system for the lodgment of export applications and documentation, and Reynolds has plans to make use this system.

Source: Papandrea, F & M Wade, 2000, E-commerce in Rural Areas: Case Studies, Rural Industries Research and Development Corporation, Canberra. (www.rirdc.gov.au).

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There is little doubt that e-commerce provides an effi cient and inexpensive means for rural and regional businesses to market their wares to customers, whether they live around the corner or half way around the world. Internet-based marketing is cheaper than traditional marketing methods (press, radio, TV, billboards etc), has a potentially far greater reach, and can be much easier to generate and maintain than traditional approaches. This is not to say that traditional marketing methods should necessarily be abandoned in favour of online marketing. Chapter 7 has further discussion on marketing.

Signifi cance of e-commerce for consumersIt is easy to appreciate how the online delivery of information, goods and services can enhance the social aspects of life in regional Australia through information sharing, skills development, community building and consumer choice. For example, the development of e-commerce has given consumers greater access to an enormous previously unavailable range of:

• the latest news and current affairs nationally and internationally (with selected material available for a fee);

• extensive medical, legal and research information that can be subscribed to or accessed for a fee;

Mick’s Whips (www.mickswhips.com.au)

Based in Noonamah in the sparsely populated Northern Territory, Mick’s Whips is renowned for its high-quality whips, leathergoods and assorted merchandise, including belts, books, boots, earrings, hats, keyrings, skins, straps, wallets and videos.

Given the company’s remote location and specialised product range, Mick’s Whips focuses its marketing efforts towards the broader Australian and international audience rather than catering solely to the local community.

As part of Mick’s Whips international marketing focus, all the products for sale through the site are listed in US dollars, while a currency converter is available for dozens of other currencies including the Canadian dollar, British pound, Japanese yen, and the Swiss and French franc.

Source: www.mickswhips.com.au

E-commerce provides an effi cient and inexpensive means for businesses to market their wares.

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• online tuition and training material for courses not readily available locally; and

• greater choice about what you choose to buy and where you choose to buy it from.

Essentially, the more regional consumers are prepared to explore and learn about e-commerce, the more aware and better equipped they will become to capitalise on the social and economic opportunities that e-commerce can offer them.

The inevitable march of e-commerceIt would be a mistake to believe the Internet and e-commerce are merely a ‘flash in the pan’, and not worth pursuing in any meaningful way. On a global scale the Internet is still in its infancy, but is maturing rapidly as users adopt the Internet at an accelerated rate. In fact, it is anticipated that between the years 2000 and 2005 the number of Internet users will more than double, from 400 million to 977 million.9

Or, to look at it from another perspective, we can get a better understanding of just how rapidly the Internet has been embraced by comparing the rate of US Internet penetration with the penetration rates of some of its other major services and utilities in the chart below.

YEARS TO REACH 30% PENETRATION IN THE USA

Internet 7 yrs Telephone 38 yrs

Electricity 46 yrsTelevision 17 yrs

Source: US Internet Council 1999

Years0 10 20 30 40 50

30%

Pene

tratio

n

9 2001 eWorld Survey, IDC white paper, (www.idc.com.au).

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Massey Farms(www.andalusian-australia.com.au/MasseyFarms)

The businessMassey Farms is a stud farm situated out of Geelong in Victoria, specialising in breeding Spanish Andalusian horses, with a smaller dog-breeding business. The stud was established by Michelle Massey and partner Garry Vaughan in 1997.

The ideaMichelle and Garry began exploring the opportunities associated with e-commerce in 1999. They believed e-commerce use was set to grow and that it was important for their business to have an Internet presence.

When the business was first established, Michelle researched the genetic pool of Andalusians in Australia and found it difficult to locate other breeders. Few breeders were members of the Andalusian Horse Association of Australia, which left Michelle to search for breeders in the Yellow Pages®.

This difficulty locating Andalusian horse breeders led Michelle to develop a co-operative web site for all Australian Andalusian breeders, where they could register

Although based on the US market, this example reflects similar trends in the Australian market, and illustrates how the Internet is quickly becoming just another part of our everyday lives.

In much the same way the telephone and fax machine have entered our lives and we have reaped the benefits, so too the Internet and e-commerce services are entering our lives, offering their own significant benefits. And, although the Internet and e-commerce services may take some getting used to, they should not be feared or loathed, but actively embraced to enhance the quality of life for all rural and regional Australians.

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links to their individual sites. This central site greatly improved communication between breeders and made them more accessible to their customers.

The investmentIn the initial phase of development, Michelle and Garry studied several good horse breeding sites, incorporating the best features of each into the design of Massey Farms’ web site.

Michelle initially developed two web sites. The first was a site for Australian Andalusian breeders and the second was a site for Massey Farms. Michelle was conscious of keeping costs to a minimum. With the assistance of a local web designer both sites were established for a total cost of $2,260.

External web site design expenditure amounted to $900 and Michelle spent 40 hours on the project, with her time worth an estimated $1,000. Other smaller costs included the purchase of a modem for $180 and $180 for Internet domain name registration.

HurdlesAs Michelle and Garry lacked technical knowledge they had to rely on the advice of a local web designer and the assistance of a local computer retailer.

ResultsAs a result of e-commerce, the business sold an additional five horses in 2000 generating additional revenue of $25,000. The average cost of maintaining horses to point of sale is approximately $200 per horse.

The company’s investment in e-commerce has stimulated cost savings of approximately $2,666 per annum. These savings are due to increased office efficiencies. Michelle estimates these efficiencies save her, on average, 45 minutes per enquiry. Based on an estimated 120 enquries that have been satisfied through the web site, the cost savings amount to $2,250 at Michelle’s hourly rate of $25. In addition the business saves on postage and printing costs as it no longer needs to print and mail out brochures. Printing costs are 80 cents per brochure while postage costs are $1 per brochure.

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The introduction of e-commerce has reduced the number of outgoing phone calls, which saves about $200 a year based on 200 phone calls at $1 each (international and national).

The largest ongoing e-commerce cost is web site hosting, which amounts to $680 per year. Other ongoing costs include an ISP bill of $228 per year and telephony of $52 per year. The web site is maintained by the web developer which cost $300 in 2000.

FutureThe benefits from e-commerce for Massey Farms are expected to increase and further improve the company’s profitability as more potential horse and dog lovers

Reproduced courtesy of:The National Office for the Information Economy (NOIE)Advancing with E-commercewww.noie.gov.au.

2000 actual $

Revenues from e-commerce 25,000

Less: Direct costs (1,000)

Gross profit from e-commerce 24,000

Add: e-commerce savingsPostagePrintingTelephonyMarketing and administration

12096

2002,250

Total e-commerce cost savingsGross benefit from e-commerce

2,66626,666

Less: Ongoing e-commerce costsInternet service ProviderMaintenance of web siteWeb site hostingTelephony

(220)(300)(660)(52)

Total ongoing e-commerce costsOperating benefit from e-commerce

(1,260)25,406

Less: e-commerce establishment costsWeb Development (cash)Web Development (non-cash)Internet domain name registrationModem

(900)(1,000)(180)(180)

Total e-commerce establishment costsNet benefit from e-commerce

(2,260)23,146

Documents

The Rural and Regional Guide to commerce · Chapter 7 Marketing 193 A note on market research 194 Branding your business and your products 194 Attracting visitors to your web site