Speeches

The Ten Major Impacts of E-Commerce
Mr. Sayling Wen
Vice Chairman
Inventec Corporation

Ten years ago, in the year of 1990, only 1.4 million people connected their computer to Internet. Nowadays we have more than 200 million people connect to Internet. According to some forecasts, in the year of 2005, 5 years from now, the world will have more than 1.25 billion people connect to Internet. The number of 1.25 billion people is approximately equivalent to the population that already entered the Industrial Society today.

Traditional commerce is based on the Industrial Society infrastructure while the new rising E-commerce is based on the Network Society. When people connect their computers or other equipment so called Internet appliance to Internet system, and do business transaction through Internet - that is called E-commerce. The more the people use Internet, the bigger the E-commerce will grow. In other word, in next five years, when the number of people that connects to Internet equals or exceeds the industrial population, the E-commerce will have a very big impact to traditional business and our society.

Today, what I want to introduce to you is the potential 10 major impacts of E-commerce that could happen in next five years, and some of them even have already happened today.

1. Breaking through the Display Limits of Space and Time

Even now, when we discuss E-commerce, some people still regard E-commerce as just another form of mail order business. You purchase something online, and the enterprise mails it directly to you. This sort of attitude completely underestimates the power and potential of E-commerce. It is not just a new sort of mail order business.

First of all with E-commerce there are no special display limitations of space and time; thus, while the world'' largest bookstore can carry just 170,000 books, Amazon.com can carry several million books. And, the number keeps on increasing, because Amazon.com has no space limitations.

Department Stores in the Year 2005 - 10 Millions Items

Nowadays, the largest department store in the world can carry up to about 200k items.

Recently Wal-Mart bravely announced that by 2005 it would offer 10 million items for sale - a huge jump from the original line of 200,000 items.

Just think, a department store that can offer 10 million items. How much business opportunity does that add? Just think how many people go shopping around in a department store without making a purchase because they can't buy what they want to.

Nonstop Business Activity - 24 Hours a Day, 365 Days a Year

At the same time, breaking through limitations of time is ceaseless commercial activity; 24 hours a day, 365 days a year the business activity continues.

On Receipt On Demand

Today, with the online department store brought by network technology, they can increase the number of items available from 200,000 to 10 million! At the same time, the consumer can change from a passive (on receipt) position to an active (on demand) position by going online to seek exactly the thing he or she wants to purchase.

2. Direct Contact between Supplier and End Customer

Revolution in the Production and Marketing System

The second major impact is direct contact between supplier and end customer. In the past if a supplier said he knew each and every and customer, you'd not think it is possible. But, now with the Internet, Dell Computer Co. sold over 10 million computers in 1999, every one of them directly to the end customer. If we want to talk about Amazon. Com book sales, the numbers are even greater. We can say that in the past there was no way to have direct contact between the supplier and the end customer.

Nowadays, with the Internet, people around the world can make contact with the supplier. Therefore, the supplier can have direct contact with the end customer. This, then, is the revolution in the production and marketing system.

Sales Agent Role Changed to Purchase Agent Role

Every time I talk about this, people wonder whether their retail outlets and sales agents won't just end like that and afterwards they'll all be unemployed. In fact, things won't happen like that because sales agents don't just sell you their products. As a matter of fact, each sales agent and retailer makes judgments. They continuously judge what the customers want. These people will gradually become purchase agents because they are familiar with what the customers want to buy.

3. Dramatic cost Saving in "Guesswork"

Commerce in traditional Industrial Society was based on one word, that word is "guesswork."

First the factory guessed; the factory's product planning division first guessed what kind of product the customers might possibly like. Then, they would start to develop that sort of product. The retailers also made guesses; when they wanted to open an electronics shop on a certain street corner, they'd first guess whether potential electronics customers would pass by there, so they could set up their shop. Next, they guessed what part of the store would tend to attract the most customers and put a lot of products there. Next, they tried to put the products customers were likely to select in the most eye-catching locations. Sometimes we go into an electronics shop and see a whole array of TV sets on display, ranging from 20" and 35" up to 50". The retailer think that various people will have needs for each size TV, but in fact each customer will just purchase one TV. From the factory to the sales agent and the retailer, everyone along the way in engaged inn guesswork. If the guesses are off the mark, then the products have to be returned. You can imagine how costly this guesswork capital can be.

But, with the Internet, the supplier and the customer can contact directly. For example, the customer can tell the supplier how much he'd like to pay for a 30" TV set, and thus save you a lot of time guessing. Of course, we still would need a certain degree of mutual communication but it wouldn't be like the blind guesswork of the past.

The Best Cost-Down Solution - Just Produce What End Customer Needs

Why did Dell Computer make more money than any other computer company in America? Dell's technology is not particularly outstanding, but it's cost for guesswork is very low because it knows what its end customers want.

4. Customer's Changed from "Limited Choices" to "Unlimited Requests"

We always say that the customer is the king. But, in fact, the things that these kings can do aren't many. They have the right to choose, but they can only choose one of the models of goods provided. The customer is caught in a situation of having limited choices.

R&D Department to N&S Department

N - Customer Needs, S - Customer Satisfaction

With the Internet, the situation has become entirely different. The customer can go online to announce what he wants. Therefore, we say that the R&D department is not enough, we need to have N&S department. We need to find out what the customer needs and then try to satisfy those needs.

An Age with Unlimited Growth in New Products and New Services

Because customer needs are virtually limitless, we are going to enter an age of unlimited growth in new products and new services.

5. Impact on Real Estate for Business Use

The Empty Business Districts?

The author of "The Third Wave", Dr. Alvin Toffler likes to use a certain sentence in his book, "People will vacate the big cities."

We have already entered the Network Society. Our transactions are done online, plus delivery. The middlemen are becoming fewer and fewer. The products go directly from the factory into the hands of the end customer. Consequently, it won't be necessary to have so many office buildings, shops and department stores. The consumers will even be able to pay less for the same service. Under these circumstances, real estate for business use and the associated service operations (restaurants, parking lots, beauty parlors, etc.) may have to move out. The relative value of real estate might well fall and real estate for business use might experience a degree of impact.

New Modern Communities?

Naturally, things won't turn out exactly like this. Some people say the new network civilization will produce new real estate demands because we will need new communities designed to meet the needs of Network Society.

We all believe both of these possibilities might be realized. It won't happen all of a sudden, but we shouldn't underestimate the impact that large-scale development of E-commerce will have on real estate business use.

6. International Trade between Individuals (C to C)

New International Trade is Developing Vigorously - Substantial Gains in Growth of World Economy and Development of an Evenly Affluent Society

In the past, when we talked about E-commerce, we discussed computers, the Internet, etc. People tended to think that only large companies could do e-commerce. In fact, that's not the case. In the Network Age, international trade can be conducted between one person and another (C to C).

Just think, in the future, even in a poor, remote place, a backward village just needs to have one person who knows how to use computer, and with a computer connected to the telephone line to begin to engage in one to one international trade for the whole village.

This kind of new style international trade will grow vigorously. The global economy will grow greatly too. Moreover, the key to an evenly affluent society is also on the way because we are no longer limited by those large groups and enterprises. Today, by going online, we can undertake one to one international trade. This is the sixth major impact of E-commerce.

7. Marketing Revolution of Digitized Products and Services

Anything can be transformed completely into digital electronic data signals and be transmitted through the telephone wires - things called digitized products. All media can be made into digitized products, such as books changed into electronic data signals, and transmitted as email through the telephone lines. Such "books" can be called digitized products. On the other hand, TV sets can't be transmitted through the telephone lines. You have to move them yourself. They aren't digitized products.

Media related products that can be transmitted through the Network all can be digitized - so, books, records, and videos all can be digitized products.

Now money has become a digitized product, too. When we go to a department store to buy something, we just bring our credit card (whether IC or magnetic). We don't need to pay in cash, but the other side still has to give us the product we purchased because we are using data signals to pay.

What's more surprising than this is that now they have digitized service. Consider the buying and selling of stocks and currency at such large amounts. E-money also goes through the Network and can be received. This whole sales revolution is so vast. We live in an age of great release of creativity.

Great Release of Creativity

Transforms of Traditional Banks

Metal Currency to Paper Currency to E-Money

The eighth impact brought on by E-commerce will be the need of the traditional banks to transform. Thinking of banks involves thinking of the history of money.

After entering Industrial Society, we started to use paper money instead of metal coins. Then we have the banks.

The Function of Traditional Banks: for Depositing, Withdrawing, Safeguarding, and Transferring Paper Currency

Functions of Network Banks - to Speed up the Efficiency of Money Circulation and Improve Security of E-money

Next, as soon as we enter into E-money, network banks makes its appearance. In this new age, money changes into a form of data signal. And it can speed up the efficiency of money circulation.

For example, when people use their E-money card to make a purchase, the bank will automatically deduct money from the account earning the least interest. These benefits of digitized money will speed up the transformation of banks. And in the future the security of E-money could be higher than paper money because of technology improvement.

9. Telecommunication Fees Will Become the Greatest Revenue Source of Local and Nation Government

Tax Levied on Sales Amount and Profit

Nowadays, in a certain city I the world, the city's revenue from telecommunications fees has already surpassed the revenue from city taxes. This situation is only going to become more serious. Even the function of government supervision of commerce will have to change. Today, the taxation theory of our government ins constructed on sales amount and profit.

In Network Society, how can a country collect taxes? If you live in America and go online to purchase a notebook computer in Taiwan, the enterprise might want you to transfer payment to a tax haven account, then it sends you the goods directly. In this way the company has no business revenue and neither the American nor the Taiwan government can collect any tax. But, the goods have already been shipped out. Under this sort of situation, with no business revenue, what is the tax base? How is the government going to collect taxes?

Tax Levied on Telecommunications Times and Duration?

In the future, most likely there will be a new tax base theory. E-commerce is going on all around the world. There is almost no way to control transaction amounts or profits. Hence, the tax base theory might well change such that tax will be assessed on the number and lengths of times one uses telecommunications. This is more practical than searching around for people's cash holdings hidden in other countries, which is almost unworkable. Whenever you go online, no matter whether you use satellite, wireless or cable, you have to go through the telecommunications system. Therefore, the telecommunications system very likely will become this century's main tax base.

10. New Laws and Games Rules Are Needed Urgently

National-Market Sales to Global-Market Stage

Also, because of this, we urgently need new laws and game rules. Because this world has already changed, a national market scale of the past has already ascended to global market stage. In the past, we had the distinction between domestic and foreign sales, now everything is global sales.

This shows that we urgently need new rules of the game. The past traditional rules of the game like regional or country sales agent system and laws for import and export are already ill-suited to the times. These all need to be replaced by new laws to plan these forms of global E-commerce. At the same time, enterprise moral and business regulations both need to have new rules of the game.