How much did you sell over the telephone today? This is a fairly
uninteresting question. Why? Because we have grown accustomed over
the past 100 years to seeing the telephone as simply one of the
pieces of our business - it is only a fraction of what we need to
create and run a business.
There are few purely virtual businesses. Electrons require infrastructure.
Amazon.corn needs warehouses. Web banks develop massive server farms.
Software glitches in the physical plant have hurt AOL, ATT, MCI,
and other "electron" companies. There are few pure brick
and mortar businesses. Telephone and computer networks have driven
business for years. Most businesses will remain a form of click
and mortar. Many that appear to be information businesses will have
physical assets, and most e-businesses will still be about moving
things to customers.
Which brings us back to fulfillment. Here's the point. Your e-business
will fail if it does not cause palpable fulfillment-both physically
and psychologically for your customers. E-business is not magic.
If any of the predictions are true - including that e-business will
carry hundreds of billions of dollars of commerce within a few years
- then we are going to face an unprecedented rearranging of the
world's physical business architecture.
Without trucks, the Internet is much less valuable. Let's take
a typical mega-retailer with about 800 to 3,000 stores - smaller
than Wal-Mart. Assume this retailer sells about 35,000 to 70,000
SKUs (unique products), and that it restocks the shelves every 24
hours. This is typical of current retailing. Depending upon its
logistics strategy, this business can create around 15 to 30 billion
restock transactions each year. Then this store goes Web and offers
250 million customers delivery to 100 million homes and offices.
Logistically, this is like adding 100 million stores to the front
end of the supply chain. This could create new delivery events of
between 30 and 100 trillion per year, depending upon frequency of
orders.
Simply put, the human race has never attempted this much physical
activity. And our typical retailer will be joined by every other
existing retailer and a whole raft of new electronic entrants. None
of us has the ability to forecast what this new world will really
look like, but all of us should consider its implications as we
think about the seemingly effortless promises of the e-world. Cute
Web sites and banner ads are surely important. But they pale in
comparison to the challenge represented by executing e-demanded
promises.
Want to make a pure Internet business investment? Invest in delivery
services that will survive. FedEx, UPS, USPS, TNT, and a host of
other companies may be the best Internet investments for the long
term. The real heroes of the e-world will be the entrepreneurs who
figure out how to deliver millions of SKUs to hundreds of millions
of addresses worldwide. Or the ones who reconfigure retail stores
and corner post office boxes to be the next century's package pick-up
points.
Want to beat Bill Gates' net worth? Find a way to do the "global
post office" IPO after the world's governments realize it's
meaningless to have fragmented local postal systems. Want the sleeper
investment of all time? Search out the several small companies that
built databases of the world's sales and value-added taxes. When
the governments of the world start drowning in e-business traffic,
these databases will be worth trillions.
Want to see where some of the next e-commerce valleys are? Pull
out a map of the worlds air routes. Look at cities like Anchorage,
Reykjavik, and some southern Asian cities. Which cities will be
world e-business air cargo ports?
Is your e-business fulfilling? If so, can you keep doing it the
same way given the massive changes the global fulfillment industry
will undergo? If not, you need to get with the physical world, or
your virtual world will get pretty narrow, pretty quickly. The real
future of e-business is in the fulfillment side - getting results
to the customer; the combined physical, information, and control
architecture that completes the click, that builds the brand, that
makes the e-world tangible for the largest amount of customers.
