The Dot-Com Explosion
By Melissa Roglitz
July 2000
It's really quite humorous to think that two three-letter syllables sum up the entire future of business: dot-com. Usually some intellectual or some government bureaucrat or some business entrepreneur creates a seven- to 10-syllable word to describe something so phenomenally important to the way we do anything, in this case business. But not this time. No. Just dot-com. Say it out loud three or four times in a row. Sounds funny, doesn't it? Dot-com stands for an estimated $106 billion in revenues worldwide. Dot-com stands for a forecasted $634 billion to $2.8 trillion in electronic transactions between U.S. businesses in 2003. Dot-com now also stands for a new way of doing business in aviation.
Dot-com aviation businesses are popping up like dandelions in spring. But they're not all covering the same lawn and they're not all yellow. Different aviation areas are addressed and each dot-com company goes about their business in a slightly different manner. Some companies provide directory services, some offer a suite of services for your maintenance records - making them available anywhere anytime by logging onto a web site, and some offer aviation search engines. Emerging as the most popular, though, (and the focus of this article) seem to be the sites that offer a meeting ground for buyers and sellers of parts and, or services. And more than several of these currently exist.
Where it all began
The idea of bringing buyers and sellers together using an interactive service is not a new one. In fact, the notion is over 20 years old. Inventory Locator Service®, Inc. (ILS) has been offering online buying and selling services since 1979 - before "online" was even a global concept - using a dial-up service.
As Vice President Rick Greenwald of ABDOnline.com, a free online searchable part number database, noted, "ILS is sort of like the grandfather - it's been around for 20 years. They did a very admirable job because when they started out, most people still had their inventory on a manual card system."
To where it has evolved
With competition already there, ILS is now making the move to the Internet; however, the company is still offering its original dial-up service and isn't forcing users to switch to the Internet service.
ILS President Bruce Langsen said, "We've introduced a whole new set of services for the Internet that seem to pull them across (from the dial-up service). About 40 percent of our customers now access us via the Internet."
Other dot-coms haven't copied ILS, but they have spun off of ILS' original concept. And they all have a plan to get your business and keep it.
The different ploys
For free or not for free, that is the question
ABDOnline.com's Greenwald believes his company's no-cost services will capture users.
"Free is going to beat paid every day of the week. I think this is how it's going to shake out and it seems logical. There will end up being two or three major services like in any segment of the industry. But I don't think any of these will be able to charge suppliers to list their inventory because we're not doing it. And I don't think they'll be able to charge the buyers to access it . . . because we offer it for free. They're [other dot-com businesses] going to have to survive off the advertising, like we're doing."
On the other side of that is Langsen of ILS: "Most of our customers are more oriented to value than price. We do have some very price-sensitive customers, but they're in the minority. Most everybody else is interested in what's going to help them today, tomorrow, and next year. . . . The fact is, we charge for the service and we just set new records for inventory listed on the service in May. While people are certainly willing to list their inventory for free in some cases, the fact is they're willing to pay for that service if they feel like they're getting good value."
Keeping the traditional methods of operation or changing them?
TradeAir.com's Director of Business Development Dean Calin says keeping business practices the same, just changing the medium in which they're done, is his company's winning approach.
"We have made our interface very simple and like transactions that are happening today. We stayed away from an auction format because that requires a buyer to do things he wouldn't normally do. We're not trying to make him shift his methods of operation. We're asking him to just do things very much like he's doing them today except by using our system it lets it work as like a personal assistant rather than some auction game show," said Calin.
Tom Toperczer, vice president of marketing for ComponentControl.com, also thinks sticking to the business basics is a benefit of his company's system.
"It's a philosophy here at ComponentControl.com. And the philosophy is that the e-commerce tools that we provide are simply an extension of the way you already do business. We're not asking our customers to overhaul everything. We're simply saying, 'Okay, you're already doing business by phone and by fax, perhaps with a little email thrown in.' We're simply extending the way you do business to the Internet - taking advantage of the Internet as a new business medium and taking advantage of the Internet to extend your business hours and to reduce your transaction costs," Toperczer stated.
Chief Operating Officer of PartsBase Andy Plyler takes the opposite view: "The B2B world is becoming very much like the B2C world. People who are buying and selling parts and services online are really consumers. They're consuming parts for their business. It's a behavioral change. It's not a new tool. It's a change in the way they do their business. They drop their pen and pencil and they're going online to do their processing."
Customize it
Giving his customers several options and letting them choose what works best for them is the draw to Avolo.com, according to Chief Executive Officer Andrew Fedak. "We offer levels of participation to our customers. Some customers need more applications than others. Avolo is deploying a suite of services that reflect the individual nature of all of our customers' needs. The ability for our customers to choose which applications suit their business needs enables us to adequately address the highly fragmented nature of the industry," Fedak said.
Being efficient
SparesOnline.com President Jeff Swain points to efficiency as a benefit of using his company: "We have worked hard to make SparesOnline.com very user-friendly, very efficient, and very economical. By utilizing creative technology, we have developed a very high-quality, low-maintenance system. It eliminates the expense and the time previously spent sending and receiving faxes or phone calls. Efficiency is the key word in aviation - we work hard to build on the efficiency of SparesOnline.com every day."
An established trusted relationship
Vice President of E-Commerce for CAMP Systems International Ken Gray explains the benefits to AviationBid.com of being a product of CAMP: "People will use the product because they know it will be a quality product because it comes from CAMP, and they've been using CAMP for years. So it'll be a built-in trust factor. They know it's not a service that could disappear. It's not a dot-com company that is going to run out of funding. CAMP is going to be here for a very long time. That really gives us a step up on everybody else. There's trust built already and there's customer relationships so that they would be much more willing to try a service from us than to try a service from someone they don't know."
What users need to look for in a dot-com
The companies mentioned thus far were also asked what they believed was the No. 1 feature a dot-com company needed to have in order to stay in business the next five or 10 years. Their answers equate to characteristics users should look for when choosing a dot-com company for their business to use.
• Affordability or free of charge
• Dedication from the company and its employees
• Profitability - "At the end of the day you've got to provide a service that provides sufficient value that someone's willing to pay you enough to make a profit and pay your payroll," says Langsen of ILS.
• Offers services to enhance the workday of the buyer
• Reliability
• Reach
• Neutrality
• Agility - "The companies that can maintain the agility to scale rapidly and seize new opportunities will survive and flourish," said Fedak of Avolo.com.
• Building upon existing technology
• Establishing customer relationships
• Industry knowledge - "Without naming a company, one of the Internet companies approached me at the recent show in Tampa and said, 'I understand this AviationBid thing, but who is CAMP?' And to ask that - and this is from the senior executive of company - well, the lack of knowledge of the industry will be a downfall to a lot of those companies," said Gray of CAMP.
• Functionality
• Quality of site participants
Here to stay
Unfortunately for those who prefer the phone interaction and the personal relationships built when procuring parts or services, the dot-coms are a growing and permanent force in the aviation industry. However, they do offer incredible advantages, such as saving time, the ability to instantly see pricing, a virtually hands-free approach to selling parts, no sales calls eating into your day, and saved expenses on long-distances charges.
Using the Internet as a business tool is becoming a necessity to being profitable. It will take some getting used to, just as the phone did when it was first invented, and the fax machine. But we will adapt. We have to.
Those two little syllables - dot-com - are the future of business.
"Explosion" Is a Double Entendre
In the ever-evolving, ever-moving, ever-changing business environment called the Internet, e-commerce companies have to give it their all just to get noticed, much less survive. And very few survive, bringing to the forefront the other meaning of "explosion" - blowing up in your face.
According to the report "Digital Economy 2000" released by the U.S. Department of Commerce (D.O.C.) in June of 2000, more than 300 million people use the Internet worldwide. This is a dramatic increase over 1994's 3 million users - showing just how rapidly this medium is growing as a viable and accessible marketplace. The problem is, everyone wants a piece of the pie.
The D.O.C. report also estimates that over 1 billion web pages are viewed by Internet users every day. Three million new web pages are added daily. With this vast number of web pages in cyberspace, it is no wonder that many are never seen and many e-commerce marketplaces don't survive.
The U.S. Census Bureau reports that, in 1998, there were 155,100 business starts in the United States. For every 10,000 of these, 76 businesses failed. (Unfortunately, no data exists outlining the fate of strictly e-commerce.) It was hard to survive the first years of business before the massive e-marketplace of the Internet existed. It is even harder now. Approximately 20 percent of firms fail in their first or second year after start-up. So how many e-commerce sites come and quickly go? No one seems to know, not even the government.
What is known is that it's a dog-eat-dog cyber-world out there. Mergers of small and small and buyouts of small by big companies will happen and some companies will get chased out by the big dogs in the middle of the night, never to be heard from again. The Internet provides unlimited money-making opportunity for any industry, but it also provides unlimited opportunity for money-losing. So as fast as e-commerce sites appear, some will disappear just as quickly - here today, gone tomorrow. That is why researching a company before using its services is so important - so if it blows up in their faces, yours doesn't get splattered too.
