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E-Commerce and the Next Generation

Who Are They, and Why Are They Important?

The Net Generation has arrived! The baby boom has an echo and it's even louder than the original. Eighty million strong, the youngest of these kids are still in diapers and the eldest are just turning 20.

What makes this generation different from all others before it? It is the first to grow up surrounded by digital media. Computers can be found in the home, school, factory, and office, and digital technologies such as cameras, video games, and CD-ROMs are commonplace. Increasingly, these new media are connected by the Internet, an expanding web of networks that is attracting a million new users monthly. Today's kids are so bathed in bits that they think it's all part of the natural landscape. To them, the digital technology is no more intimidating than a VCR or a toaster.

For the first time in history, children are more comfortable, knowledgeable, and literate than their parents about an innovation central to society. And it is through the use of the digital media that the N-Generation will develop and superimpose its culture on the rest of society. Boomers stand back. Already these kids are learning, playing, communicating, working, and creating communities very differently from those of their parents. They are a force for social transformation.

Moms and dads are reeling from the challenges of raising confident, plugged-in, and digital-savvy children who know more about technology than they do. . . . Corporations are wondering what these kids will be like as employees, since they are accustomed to very different ways of working, collaborating, and creating and they reject many basic assumptions of today's companies. Governments are lagging behind in thinking about the implications of this new generation on policies ranging from cyberporn and the delivery of social services to the implications of the N-Gen on the nature of governance and democracy. Marketers have little comprehension of how this wave will shop and influence purchases of goods and services.

There is no issue more important to parents, teachers, policy makers, marketers, business leaders, and social activists than understanding what this younger generation intends to do with its digital expertise.

How Big Will N-Gen CyberCommerce Be?

Overall, the evidence shows that cybercommerce is exploding. To begin with, there is the Net economy itself--the growing opportunity for services delivered through the Net.

The question raised by many detractors, "But can you make money on the Net?" is looking pretty myopic at the time of writing this book. The question was always silly, like asking 50 years ago, "How do you make money with electrical power?" Or with roads. Or with the telephone. Increasingly the issue for e-commerce stragglers is, "How can you make money without the Net?" It's a new infrastructure for the creation of wealth, as new models of the enterprise emerge.

It is also a new medium for sales, support, and service of virtually anything, especially given that tens of millions of Net-savvy purchasers are coming of age.

For example, Chrysler is predicting that by the year 2000, one-quarter of its sales will be online, up from 1.5 percent in 1996, meaning that local dealers are going to face some stiff competition from dealers across the country as buyers use online resources to comparison shop beyond traditional geographic boundaries.

Security is not a barrier any longer but rather a manageable issue. The only major barriers left to successful online commerce are those of familiarity and availability. But when 14-year-old Eric says, "With the Internet, I can buy whatever I need and then pay my parents back when they get the bill," it is obvious that there is a growing number of people who are comfortable with online commerce and even prefer it to some types of regular shopping. Evidence shows that once customers buy a product or service online, they are much more likely to do so again.

Availability is also growing by leaps and bounds. Ninety-eight percent of corporate America is forecast to be on the Web in the next two years, and the number of people online is growing by more than 50 percent every year. Internet appliances such as WebTV might boost this number even higher.

The ease with which purchases can be made on the Net will grow substantially with the imminent arrival of digital cash. Currently, the dominant method of paying for goods or services purchased on the Net is using a credit card--something most N-Geners don't have. And because of minimum transaction costs, many merchants won't take a credit card for purchases below a certain dollar value. Digital cash will solve both of these problems. It is money stored online and spent as easily as cash is today at the local shopping center. This will enable an N-Gener to effortlessly make dozens of micropurchases in the course of one Web session, each costing just pennies. Five cents will buy him a one-time play of his favorite music group's new video. The next step will be the formation of N-Gen consumer clubs as groups of like-minded youth band together to negotiate volume discounts, special services, or unique arrangements with marketers.

Forecasts for Net-based commerce are bright. Predictions for the turn of the century range from Forrester Research's $7.1 billion for consumer retail sales, to the Yankee Group's $10 billion, to IDC's recent $40 billion estimate. The Institute for the Future foresees sales online reaching 2.5 percent of all retail sales by 2005.

Forrester predicts that business-to-business e-commerce will reach $65 billion in value by 2000, almost 10 times their predicted consumer spending levels and a 100-fold increase from 1996's $600 million. This is an astounding rate of growth. As intranets are driving the success of many Web businesses, so business-to-business commerce will drive the whole Internet-commerce field. Standards will be set, e-commerce companies will grow and learn, and workers will become familiar with ordering goods and services online. The synergy between this and consumer e-commerce will boost both areas and as the N-Gen ages and grows in purchasing power and influence, these predictions for e-commerce may turn out to be conservative.

The Reinvention of Retail, The Reinvention of Industries

The rise of cybershopping will change our thinking regarding what it means to be a retail company and what it means to sell products.

For example, an N-Gener wants to buy a leather jacket. She may try on a few in a store to choose the brand. She then goes home and lists her criteria to her software agent--style, color, measurements, designer brand, etc. The agent goes onto the Net and finds the best price. As explained in The Digital Economy, the digital market will be a commodity market, because price and availability will be the main factors in sales, just as in the commodity market for wheat in Chicago. Further, the price may change dynamically, depending on availability on the Net. A seller of jackets might send agents onto the Net to determine today's price, this hour's price, or this minute's price. Or the seller may decide that when there are 1,000 in inventory, the price is x. When there are 100, the price is y. Or there may be no inventory at all--the seller acts as the virtual manufacturer, wholesaler, and retailer for a group of companies that together could manufacture jackets on demand.

In the boomers' economy, there were many different industrial "sectors," such as retail, financial services, manufacturing, and education. But these old sectors break down in the new economy with the N-Gen as consumer.

A Force for Transformation in All Institutions

As N-Gen culture is extended into society, every institution will have to change. In technology there is a fundamental shift occurring, from relationships based on force to relationships based on mutual acceptance. Prior to open systems, computer companies "locked in" their customers with software that worked only on their brand of machine. Computer systems were also hierarchical, centered on mainframe "hosts." Today, networks based on open standards have replaced the old paradigm.

The N-Gen will transform business along the same lines. In the old hierarchical firm, employees worked for bosses who told them what to do. If they satisfied their superiors, they could advance. People were held within the walls of a given department--in management jargon, "organizational stovepipes." The N-Gen wants networks--internetworked enterprises--not hierarchies and bureaucracies.

As this openness infuses the marketplace, power and authority will shift toward the consumer, because of the ease and thoroughness with which savvy buyers can comparison shop. Customers will have the knowledge to be more demanding and will expect products and services tailored to their requirements. We will see the power of openness extending well beyond commerce into other institutions and society as a whole.

None of this means that hierarchies will vanish completely. Society still needs authority and control in areas ranging from child rearing and executive decisions to law and order. But as the N-Gen grows in influence, the trend will be toward networks, rather than hierarchies, toward open collaboration rather than command, toward consensus rather than arbitrary rule. As students, children, and consumers, N-Geners are causing upward pressure to change schools, families, and markets. As knowledge workers, educators, government leaders, entrepreneurs, and customers, N-Geners will be an unstoppable force for transformation. In the past, many of the so-called postmodern concepts were ideas whose time had not come. They were awaiting a new generation that could embrace and implement them.

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