The Worldwide Sell

The Worldwide Sell

Information executives ready to step into the worldwide e-commerce marketplace need to know more than whether their infrastructure is readyExecutives at multinationals in search of funding for e-commerce often study US trends, extrapolate data and wait for the money to roll in. But when success fails to materialise, they blame the immaturity of both the technology and the "worldwide" online marketplace rather than their own use of inappropriate information. The technology may be immature in many respects, but technology isn't holding up the development of e-commerce. If anything, the possibilities for e-commerce that have opened up through technology in the last two years or so underscore the non-technology limitations that are inhibiting e-commerce.

Nevertheless, business-to-consumer e-commerce in Europe is expected to grow from $US126 million in 1997 to more than $US5 billion in 2002, while business-to-business e-commerce will expand from $US1 billion in 1997 to more than $US30 billion in 2001. It is the CIO's responsibility to provide top-class technology support for an organisation's e-commerce effort. But it would be irresponsible of the CIO to proceed with a major technology initiative without assessing the environment within which the investment is made, and, if necessary, pointing out to the business any areas it may not have considered in sufficient detail.

Organisations frequently fail to acknowledge real-world obstacles that stand between the realities of their business and their dream of global commerce. Few assess whether their goods or services appeal to a global customer base and, if so, whether their products can be marketed, sold and shipped cost-effectively.

Many refuse to plan for the differences between business-to-business e-commerce and selling directly to the consumer. But worldwide e-commerce is most often limited by a narrow world-view that sees all countries at all times the same.

No company can hope to shape a true global e-commerce environment without embracing commercial and cultural diversity.

The Dangers

First, companies frequently approach Europe as if it were a single entity. Too many look at the 15 countries of the European Union, throw in Switzerland and Norway, see an economic area roughly equivalent to that of the US and then apply local trends and experiences to that marketplace. But it's crucial to understand the differences among those countries. For example, the vast majority of German catalogue retailers will not sell to customers who do not have a delivery address in Germany or an account with a German bank. Free movement of goods and services may be enshrined in European Union law; however, freely and easily obtaining the goods is often a different story, especially when the purchaser is the end consumer. In many instances, e-commerce does not introduce the need for a change in commercial behaviour; it merely highlights the necessity for greater harmony among European consumer legislation and banking systems as well as a less nationalistic approach to conducting business. Second, companies pay too little attention to the differences in Internet penetration in the various European countries. The differences in telecommunications environments are a major determining factor in the development of online markets.

And third, organisations underestimate the extent to which existing legal and commercial frameworks can inhibit e-commerce, both within a given country and in cross-border trade. The real world has yet to catch up with the wide open feel of cyberspace. It is good that a consumer can select an item from a Web site anywhere in the world and pay for it securely -- but the three weeks it takes to get the goods cleared through customs, complete with the payment of import duties, will likely discourage repeat purchases. Many a small merchant's delight at having access to a global marketplace has turned into horror at the realisation that the costs and complications of actually getting the goods to the purchaser either wipe out profit margins or force the goods to an unattractive price point. Small merchants in most countries do not have one-stop agencies that can help with customs formalities and other import-export regulations.

Border Crossing

Language and culture increases the cost of engaging in cross-border e-commerce. The need to present national-language Web pages, potentially with different designs, can be a barrier to entry into the ranks of successful e-commerce ventures. English may be the language of the Web, but it can only go so far. Further, the World Wide Web is not meeting with the same level of acceptance everywhere. In many countries, Internet adoption has been slow because of a combination of low levels of PC ownership, high telecommunications costs and inferior Internet infrastructure. In others, there is active resistance to the Internet; many French consumers, for example, don't like the English-language dominated, anarchic Web -- they feel they already have what online commerce they want with Minitel, the ubiquitous system run by France TŽlŽcom, that connects more than 6.5 million French households to a range of more than 22,000 online services via a dumb terminal. Since France TŽlŽcom gets a cut of every Minitel transaction, it has no incentive to take any initiative that will wean customers from that system.

Clear Goals

Companies need to be absolutely clear on their objectives for an e-commerce project. Is the aim to reach your existing customer base through new, potentially more cost-effective channels or to open new markets? If you wish to expand your customer base, are you aiming at your national market, or do you intend to extend your reach beyond country boundaries? Is your target market other businesses or consumers? If you are a CIO charged with taking the business global via the Web, carefully analyse the countries you expect to add to your portfolio. Go through complete transaction scenarios, from product selection to delivery and after-sales service. Just because you are able to reach your potential customer does not mean you can sell or deliver to them at a price point and level of convenience acceptable to both of you. Analyse carefully what happens if you receive an order from a country that is not on your intended target list. Another important question to consider is when does your company expect or need to make money from your online ventures? Most Web sites are unlikely to return a profit immediately. In countries with low PC penetration (such as Spain), high telecommunications costs and consequently inferior Internet infrastructure, any e-commerce activity should be regarded as an investment that may take more than three years to deliver any return. Each country must be understood separately.

If you and your company rely on market research for e-commerce planning, ask the research provider some searching questions about the data behind the projections. Be sure the research is up to date: many people who are confused by what looks like conflicting market data are in fact looking at information that is past its shelf life. One look at Germany shows how quickly markets can change: until two years ago, Germany lagged behind the United Kingdom in PC ownership at home, Internet access at home and at work, and intranet deployment by businesses. Within a year, Germany had drawn level on all these measures and now looks set to lead in some of them. But that's the present. If we look a little further east and a little into the future, today's common wisdom that Eastern European nations lag in connectivity will no longer be true. These nations are working hard at leapfrogging an entire generation of infrastructure and setting themselves up for a bright online future. Knowing this, an alert CIO can help colleagues exploit valuable business opportunities for gaining strategic advantage -- and prevent the business from making costly mistakes.

Martha Bennett, VP and senior analyst at Giga Information Group, based in the UK, can be reached at mbennett@ gigaweb.comYou Can't Sell There from Here European e-commerce problems can be beyond business' power to solve Advertising and competition laws. In France, any Web site that is specifically aimed at the French consumer must, by law, be in French. In Germany, two-for-the-price-of-one offers and gifts with purchase offers are illegal. In Sweden, toy advertisements may not be aimed at children.

Payment systems. In the United Kingdom, paying by credit card or debit card is common and widespread. In Germany, cash-on-delivery is a popular payment method. Eurocheques are common on the European continent but almost non-existent in the United Kingdom. Any cross-border payment transaction that is not carried out using either a credit card or a eurocheque involves a lengthy and costly procedure. For most low-value consumer goods, the cost of paying may exceed the value of the item. For goods that cost more than $25, payment by credit card is currently the most common payment method. But in cross-border transactions, people don't know the final price of their goods until the payment has been converted into their local currency and charged to their credit card account. The impending introduction of a single European currency, the euro, between January 1, 1999, and December 31, 2001, is going to remove this element of uncertainty for cross-border transactions within participating countries. But apart from that, the euro is not going to make much difference to e-commerce in the near term: country-specific and proprietary payment systems will take time to harmonise and adapt.

Legal uncertainties in cross-border trade within Europe. Who is liable if a product is faulty? What are the consumers' rights if they don't like what they've bought and want to return it? Which country's value added tax (VAT) rate applies? Not only do VAT rates differ in the various European countries but also the rate applied to certain types of goods may differ. For example, the United Kingdom has a fully competitive book market whereas in Germany book prices are fixed.

Delivery of consumer goods. Within the European Union, it may no longer be necessary to complete a customs declaration at every border, but it is still more costly to ship an item 30 miles across a frontier than to ship the same item 300 miles within the same country. And if that wasn't complicated enough, there are issues with insuring shipments and liability for damage. -- M Bennett

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