MPR: The E-commerce Race

The E-commerce Race
By Mark Zdechlik
November 30, 1999
Part of MPR's "Minnesota in the .Com Age" special

Minnesota may not be on the cutting edge of the Internet revolution when it comes to developing the needed technologies. But Minnesota businesses have been quick to embrace the Internet to become more efficient and responsive to customers and suppliers.

It's hard to believe as little as five years ago the Internet was a non-issue for most companies.

Lenza: In late 1994, we put out our site for the first time.

And at that time Northwest Airline's Vice President of Distribution Planning Al Lenza says convincing fellow decision makers the World Wide Web would quickly become an integral part of Northwest's business was a challenge.

Lenza: There was a lot of skepticism. Things like only a propeller-head will ever buy anything over the Internet. And if you look at the forecasts from that time, they have all been smashed by reality.

The best way to understand how the Internet is changing the way Northwest does business, is to look from a couple of directions. What's different for customers? How are internal operations changing? Most visible from the outside is Northwest's Web site where customers can check flight schedules and buy tickets, all the while saving the company travel-agent commission costs along with the expense of paying its reservations agents to handle those functions.

Northwest, through its Cyber Fares program, is also increasingly using its Web site to sell last-minute deeply-discounted seats that would otherwise be empty.

Lenza: It's a very cost-efficient way of distributing our product. It's a lot less-expensive way to sell and communicate with our customers than traditional vehicles.

Lenza says Internet technology is also changing Northwest behind the scenes. With more than 50,000 employees worldwide, he says the Internet allows for better communication and is simplifying the onerous task of scheduling flight crews. Perhaps more importantly, Lenza says, are Internet-related opportunities to cut supplier costs.

Lenza: As excited as we are about the business to consumers, which is what our Web site is about for the public, the business to business which allows companies to do business more efficiently between themselves is projected to grow even larger than the business to consumer.

E-commerce researchers estimate U.S. business-to-business Internet transactions will surpass $100 billion this year, and that within three years it'll blast beyond $1 trillion. It's the potential to streamline all kinds of business transactions and reduce expenses that's the cutting edge of Internet technology.

About 30 minutes north of St. Paul in Wyoming, Minnesota one of "Premier Marine's" 140 employees screws down the deck of a 25-foot boat. Another worker welds a gigantic aluminum float tank. Human Resources Director Lori Obar is also in charge of the company's computers. Five years ago, Obar saw the Internet as an opportunity to showcase her company's line of high-end pontoons to new potential customers. She came up with www.pontoons.com.

Obar: We get all kinds of inquiries for different things.

Among the potential customers coming to Premier Marine are many who, Obar is certain, would not have run into the central-Minnesota company without the Internet. Even Disney Productions came calling, looking for floating movie props. But the job was too big and Premier had to turn it down.

As is the case with many companies who got on the Web initially for marketing reasons, Premier Marine is forging ahead to take advantage of emerging Internet opportunities. Already, all of its business with a major motor supplier is done online. That means no longer are employees typing out invoices and faxing or mailing them. When Premier needs motors or replacement parts now, employees simply log onto the supplier's Web site, point and click. Obar expects that'll soon be the case with other business partners as well.

Obar: It cuts down on our bottom line. I'd say we are ahead of the game compared to most of our suppliers. We're ready; they're not, but I think that will change drastically in the near future.

While the Internet is revolutionizing the way many companies do business, for some, its technology offers more of an evolution. Take Minnetonka-based Fingerhut, which for years has run successful mail-order catalogues and is now applying its direct-marketing experience to online retailing. Senior Vice President Allen Bignal's job is to ensure Fingerhut is taking advantage of technology to boost business.

Bignal: We can sell stuff on the Internet that is not economically viable in a catalog. The second is the speed. In our catalog business, it takes several months to get together a catalog, create it and mail in. In our Internet space, we can decide we want a new product and we can have it out there tomorrow.

In addition to its own retail ventures, Fingerhut's mail-order background - its ability to not only take orders, but to manage inventory, ship merchandise, handle returns and all of the financial transactions - set it apart from newcomers to direct merchandising, which litter the World Wide Web. Earlier this year, Federated Department Stores, owner of Macy's and Bloomingdale's, bought Fingerhut largely for its "fulfillment" expertise. And Fingerhut is parlaying that backside experience into major contracts handle the behind the scenes e-commerce operations of several companies including Walmart and E-Toys.

Bignal: The Internet has the impression of being cheap and quick. It's actually pretty hard and pretty expensive to do it right. I mean, I could have a Web site up here while we sit and it would take orders and credit cards. No problem. But then where would you find the stuff you were selling? Where would you put it? What would you do if people wanted to return it? What would you do if the credit-card company wouldn't pay? What would you do if the customer wanted to talk with someone?

Identifying and implementing the increasing number of Internet-related business opportunities is particularly challenging for small companies which do not have technology staffs. Minnesota Technology, is a non profit organization funded by the state and charged with helping small and medium sized businesses. Craig Bride is Minnesota Technology's e-commerce specialist.

Bride: Minnesota businesses need to participate in this economy or they won't have a role. It's inevitable. You may as well start learning how to do it now. You may as well start installing the systems and getting your people up to speed as soon as possible.

Burdie says a good way for a company even a small business to begin moving beyond the marketing side of the Internet is to start buying from online suppliers.

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