Building E-Commerce – it’s not DIY

Know why you’re embracing e-business or don’t bother. Three years ago Renaissance Corp was sole distributor for Apple New Zealand. Since then the company has become New Zealand’s first pure end-to-end e-business operator, the country’s second largest distributor of IT products, the best performing stock on the NZSE in 2000… and is now the e-business guru to the gurus within the big five consulting firms. So what happened?
Ironically, says John Hayson, managing director of the company’s recently launched e-business arm Conduit, if Renaissance hadn’t faced sink-or-swim dilemma when margins and markets were being pulled from under its then only revenue stream (software and hardware distribution), the decision to embrace e-commerce could have been entirely overlooked.
“If we’d embarked on e-commerce year earlier, we wouldn’t have identified e-commerce as such core business driver. Back then, doing the Internet thing was little more than vapour-ware. Similarly, if our charge had been left until year later, we’d have lost our first move advantage that’s still paying huge dividends,” says Hayson.
What triggered the first move was decision by managing director and major shareholder Mal Thompson to reappraise the company’s direction, internal organisation and cost structure after the untimely collision between declining margins and phase of rapid expansion.
The group was formed early in 1997 when Thompson, former CEO of Triumph Industries (a public company shell with small trading activities) merged three IT distributorships: Apple, Renaissance Software and Origo.
Sadly though, Thompson’s expansion into software and hardware distribution happened at the worst possible time.
In fact, spurred by poor results and decline in the dollar value of the PC market (that fell by 15 percent in 1997) plus numerous company failures at both the assembly and retail ends of the PC market, Renaissance looked to the Internet to help lower transactions costs and return to profitability.
“We perceived at the time that we had to lower costs and margins if we wanted to remain viable long-term. We thought that e-commerce could provide the greatest economies.”

Building the e-commerce company
The real e-commerce benefits go well beyond the 40 percent of total transactions that the online store, (launched April 1998) now delivers.
“There wasn’t any web-based expertise around at the time. We had no choice but to wade in and find out for ourselves. What we discovered was that key benefits are in the background functions.”
For example, says Hayson, giving clients the facility to order spare parts (critical to customer satisfaction) in real time has taken so much pressure off the internal organisation.
The company has around $20 million outstanding at any time, so by putting invoices online, they’ve also managed to reduce debtors outstanding considerably.
Faced with the option of changing quickly or going bust, the decision to embrace an e-commerce strategy was relatively easy, says Hayson. The subsequent skill set realignment that weeded out layers of middle management saw staff levels cut from 250 to around 100 throughout the country.
After canvassing the views of people they respected, Hayson started to understand where the value from e-commerce would come from and where it wouldn’t.
And instead of being seen incidental to the company’s overall ability to move forward, management realised that e-commerce was becoming an underlying part of the culture and toolset on which the company would continue to evolve.
“We also started to see that e-commerce wasn’t something we could simply implement and walk away from. I don’t believe any company committed to e-commerce can ever stop learning and investing time and energy in swinging the business behind their e-commerce strategy. There are no half measures in the e-commerce space.”

Sharing expertise
Up until recently, Renaissance has shared its intellectual property gratis with any company looking to emulate its e-commerce success. Then they created two services (eShop and Supplyit). These services let an e-business customer create personally branded and individualised e-commerce solution residing on the Renaissance platform.
The next step for Renaissance was to create three levels of service under the recently-launched Conduit brand. Conduit initially set out to help small businesses rapidly and cost-effectively integrate e-commerce seamlessly into back office systems. Since then, Conduit has expanded into managing and hosting websites for businesses (big and small) wishing to transact with other businesses.
A major boost to the new operation came early in 2000 after Renaissance announced that sales conducted through Conduit would be eligible for Air New Zealand airpoints.
The immediate effect? much larger percentage of sales through the Internet channel.

Asian upside
After delivering hosted B2B e-commerce solutions to 25 New Zealand and Australian companies (like Eagle Technology, Fujitsi, Unisys and Fisher & Paykel), Conduit now plans to target the high-growth Asian markets of Singapore, Malaysia and Hong Kong.
Renaissance also plans to unleash shareholder value by spinning-off Conduit from the company’s core distribution and soon-to-be-launched education business (as one-stop shop for schools) by listing it in Singapore.
What’s expected to attract Asian clients is Conduit’s deeper level of supply chain management, currently available within these markets.
Thompson says assuming Renaissance can deliver on current promises, namely: proceed with the Singapore listing, raise the necessary capital (estimated at around $25 million) and float the stock in Singapore as planned, the share price could be worth up to three times what it’s worth today.
At full year to 31 December 1999, Renaissance delivered net profit of $439,000 on sales of $122 million. But the recently-acquired (for $5.2 million) Christchurch distributor, Insite Technology, together with the continued rollout of Conduit and educational initiatives are expected to put Renaissance among the country’s top 100 earners (with combined annual sales of around $200 million in 2001).

Management confusion
So why haven’t other companies had similar success with e-commerce? Simple, says Thompson, what management throughout New Zealand are doing is confusing business to business (B2B) with business to consumer (B2C) applications.
Most organisations perceive that they should be embracing e-commerce. But Thompson says many CEOs and their boards really don’t understand why or what e-commerce does. He adds, good B2B strategy will ultimately succeed, but lot of B2C and dot-com hype has done lot of damage.
“Management who don’t realise where long-term savings can be made, risk implementing harmful short-term measures. For example, by focusing purely on procurement or tweaking manufacturing processes. I’m horrified that some of the most established businesses in New Zealand are simply using e-commerce to cut costs. E-business strategy should also cater for all the messy stuff at the back-end of the business process.”
Sadly, adds Thompson, it’s become de rigueur for multinationals to opt for quick and easy savings through e-procurement portals. But as far as he’s concerned, success in the e-business space is not about website or an e-commerce portal.
In fact, Thompson believes technology contributes only five percent to ultimate success in the e-business space. The hard yards, he says are all about changing the business supply chain from go to whoa, where huge savings are still being overlooked.
The problem, says Thompson, is that companies perceived to be operating soundly are at most risk of missing the e-commerce wave. In other words, if you think you’re doing OK, you’re less likely to stop a

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