Exploring the Growth of E-Commerce at Dell Computer Corporation
The Internet has solidly become the foundation for an entirely new approach to selling and service. The collection of websites, technologies and software applications that are delivered over the Internet through secured connections form the foundation of electronic commerce (e-commerce). Since its inception in the late 1990s through today, e-commerce is now the preferred news, shopping, travel and service channel or platform the majority of consumers rely on globally (Ho, Kauffman, Liang, 409). Figure 1 is a historical analysis and forecast of U.S. E-Commerce Sales between the years 2000 to 2010.
E-Commerce Sales, 2000 — 2010
How e-Commerce Has Evolved
Selling over websites is how many see e-commerce. Yet there is more than just creating a website and storefront to sell products or services involved in e-commerce. The need for creating an entire series of systems to support the e-commerce selling effort is critical to long-term sales and marketing success online (Weill, Vitale, 267, 268). There is also the need for creating an easy enough to use website so that prospects and customers can quickly navigate through it, find what they need, and place orders for it. The nature of e-commerce has changed significantly from simple websites that would automatically send an e-mail or alert to a company that one of their products has been sold and who to ship it to (Weill, Vitale, 267). Today e-commerce is more defined by the many systems, services and other software application programs necessary to make an online store successful. Customers have completely changed from the initial expectations of ordering a product and eventually getting it, to getting real-time updates on just exactly what is going on with their order at any time, including specifics of how and when it will ship (Ho, Kauffman, Liang, 409). One company who has excelled at e-commerce by continually improving their internal systems while also meeting and exceeding customer expectations is Dell Computer Corporation.
There are hundreds of companies who are doing exceptionally profitable levels of transactions today on e-commerce platforms. Amazon.com, many of the airlines and online shopping websites are doing well over $500M to nearly $1B a year in transactions online (Weill, Vitale, 268). In looking at what separates the highly successful companies from those that are not, key lessons or take-aways emerge from this analysis. The lessons learned from these companies who are excelling at e-commerce are defined here, with Dell being used as example of how back-end systems can be successfully used to make e-commerce a globally successful business.
First, the best e-commerce websites and systems concentrate on creating a series of systems that support transactions really well. Companies attaining the highest levels of success with e-commerce have separate order management systems that automatically take orders placed online and deliver them to customers via a buyers’ preferred shipping method (Ho, Kauffman, Liang, 413). This takes a very high level of coordination within the company to make this happen. An order needs to be accurately and securely captured first, and then transmitted electronically to a distributed order management system that automatically picks the product out of inventory. From there, a separate logistics system will take the product and ship it via the delivery service the customer asks for. All of these steps, when done well, can make a manufacturing company very profitable and successful, as the 40 inventory turns a year Dell attains selling off-the-shelf products using these systems illustrates (Jones, et.al.). Dell’s goal is to create such an automated system that the customer begins to prefer buying online vs. getting in their car and going down to the local store. This is also why many e-commerce companies today are investing millions of dollars in enterprise software, which allows them to quickly take orders and fulfill them all online and through automated systems (Weill, Vitale, 265). The best e-commerce companies realize that by having such a streamlined set of systems that the customer will trust them more, they will get more repeat business and the sales will be profitable because there is very little cost of completing an order
(Ho, Kauffman, Liang, 412).
A second lesson learned is that e-commerce can be used for creating a unique product based on customer requirements. Michael Dell quickly realized that his build-to-order PC business could grow much faster than his small shop in Austin, Texas would allow for. He chose to create one of the first product configurators that could be used on a website, making it a unique differentiator relative to all other PC companies selling through e-commerce channels before (Jones, et.al.). The product configurator Dell created has specifically designed to allow customers online to work at their own pace, and even abandon a product configuration midway through building it (Liu, Mackie, 292). Customers online could also mix and match accessories for the PCs first, and then their entire laptops as well. Soon, customers were creating dozens of laptops and then printing out the configurations and comparing them to see which best fit their needs (Jones, et.al.). Dell had been able to do what no other company had been able to accomplish using e-commerce at the time, and that was change how people buy (Liu, Mackie, 293). By changing customer behavior using a stable, secure and trusted e-commerce website combined with a state-of-the-art configurator, Dell had successfully done what many business using only storefront had been able to do (Weill, Vitale, 261). The company had been able to create loyal customers entirely online, eventually attracting an entirely different set of new customers who were willing to pay more to purchase online than to walk in stores (Jones, et.al.). Dell found that people would pay for the convenience of using e-commerce to customize a new PC or laptop and then have it shipped to them using FedEx, UPS or another other shipping provider they preferred. Dell was only able to do this by concentrating on making their suppliers immediately aware of when a new order was placed. In addition to creating systems that linked together the website and order management systems, Dell pioneered the development of supply chain systems as part of their e-commerce strategies (Newing, et.al.). This saved millions of dollars in costs of waiting for orders to arrive and also in lost orders from being out of stock on key items needed to build a customers’ PC or laptop (Jones, et.al.).
When consumers think of e-commerce, they only think of the website and the products for sale, and in the case of Dell, their world-class product configurator. When companies and IT managers think of websites, they see a series of systems supporting the selling efforts online (Newing, et.al.). When marketing and sales executives in a company see their website, they think of how to bring customers from stores to the Web to buy from them (Weill, Vitale, 268). Everyone in a company then has a different view of what e-commerce is. But all of these different viewpoints are consolidated, and united to the common goal of giving the customer control of when, where, how and why they buy online. The background systems are what make e-commerce so successful today, along with making websites themselves very user-friendly. For an e-commerce website to succeed, all of these different areas of a company need to coordinate and work with each other to make sure the customer can reliably buy from them anytime.
Ho, S., R. Kauffman, and T. Liang. “Internet-based selling technology and e-commerce growth: a hybrid growth theory approach with cross-model inference. ” Information Technology and Management 12.4 (2011): 409-420. (journal)
Kathryn Jones. “The Dell Way. ” Business 2.0-1 Feb. 2003 (article)
Liu, C., and B. Mackie. “Enabling Customization through Web Development: An Iterative Study of the Dell Computer Corporation Website. ” Journal of Information Systems Education 19.3 (2008): 291-300. (journal)
Newing, Rod. “Variety, the spice of life: ONLINE PRODUCT CONFIGURATION: One of the biggest challenges is bringing supply chains together to respond rapidly to customers’ diverse requirements: [Surveys edition]. ” Financial Times 1 Nov. 2000 (newspaper)
Weill, P. And M.R. Vitale. Place to Space: Migrating to ebusiness Models. Harvard Business School Press. 2001. (Book)
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