CIO Forum: E-Commerce Means Choice

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September 22, 1997

CIO Forum:
E-Commerce Means Choice

By Dawn Lepore
IW 500 slug uring my travels around the country late last year, I met a number of executives who asked how Charles Schwab & Co. could think of doing a significant portion of its business on the Internet. After all, they pointed out, no one had proven that consumers-in our case, investors-would really embrace the idea of doing business on the Web. And wouldn't a new channel of distribution simply cannibalize the technology-oriented investors from within our existing customer base?
It's too late to worry. Electronic commerce is with us, like i t or not. Consumers have embraced the Internet enthusiastically, forcing companies to either keep pace with this electronic revolution or risk falling by the wayside.
One of the most important discoveries for many businesses is that the Internet has not been a divider, separating consumers into the "those who do" and "those who don't" camps. Instead, E-commerce has given businesses the opportunity to attract more new customers, while giving existing customers more choices than ever.
It's those choices that present the strongest and most exciting opportunities for businesses today. Keep in mind that E-commerce does not have to be an either-or situation-in a world where the customer is given more choice, the outcome can be more customers and more business. For the many companies that have shied away from doing business on the Internet out of concern for the potential channel conflict it creates, the key to success is managing each channel in a way that adds unique value.
The solution is to make e ach channel compelling in its own competitive environment, drawing additional business from other businesses rather than from existing customers-or even better, creating a new customer base.
When Schwab introduced its Telebroker and E-Schwab services, for example, we had similar concerns that these new channels would conflict with our existing ones. By managing the channels properly, we were able to realize a net gain.
Since instituting Telebroker, we now handle 80% of our phone calls electronically, but have also managed to increase our total call volume significantly over the same period, keeping those live service representatives very busy. The process has given customers more choice: high touch when it's needed, high tech when it's not. The goal is to build the best version of each.
Expanding your channels of distribution lets you maximize the strengths and value of each channel. For example, branches are ideal for high-touch interactions where personal relationships are paramount. Taking simp le transactions out of the branches-impossible without the electronic channels-allows investment specialists in the branches to provide better service.
Today, sophisticated traders continue to enjoy the power and broad functionality of online portfolio management. But many other customers don't use online services frequently enough to install and learn a traditional PC-based client application. For them, the Internet has been the solution.
In fact, the real power of E-commerce on the Internet lies in how easy it is for even casual users to perform electronic transactions. This makes it possible for a new group of customers to transact their business this way.
The bottom line is that the Internet is providing a rich alternative for today's consumers. Companies shouldn't fear potential channel conflict that might arise by adding this capability. When E-commerce is properly managed, the biggest benefit customers receive is choice-and more choice means more customers.
Dawn Lepore is executive VP and CIO of Charles Schwab & Co., a San Francisco brokerage.

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