Western European Market For Internet E Commerce example essay topic

1 Sizing the E-commerce market IDC forecasts that the Western European market for Internet E-commerce will rise from ECU 900 million in 1997 to ECU 26 billion in 2001. At the same time, the number of devices accessing the Web will grow from 14.2 million by the end of 1997 to almost 58 million by the end of 2001. NUA Internet estimates that, in 1998, the European Internet population is 22% of the world-wide population. Other studies are confirming a huge growth in Internet access and E-commerce applications, which began around 1996 and will continue, at a meteoric rate until just beyond the turn of the millenium. A survey of European organisations carried out for EITO (European IT and Telecommunications Organisation) shows that 82% of those connected to the Internet set up their connection between 1996-1998, while at the end of 1998, 29% of European businesses will be using Internet based E-commerce applications - up from just 6% in 1996 and, by the end of 1999, just under a half (47%) of such businesses will be using Internet based E-commerce applications. The EC-financed CONDRINET study carried out by CAP Gemini predicts that within five years, more than 80 million Europeans will become regular network users (where network refers to interactive digital networks built upon open standards, e.g. the Internet, some online services, and some interactive television systems).

It further suggests that 500 billion Euro in annual sales will either be directly transacted across, or facilitated by, such networks. On a global level, Forrester Research forecasts that 82% of large companies will trade online by 2002.2 Types of E-commerce The E-commerce market is conventionally divided into business-to-business and business-to-consumer E-commerce. In future, these categorie will become increasingly blurred. Longer term, the distinction may well be between customer-facing and supplier-facing E-commerce, where a customer may be a business customer or consumer. The E-commerce applications marketing, sales and post-sales needed to serve both types of customer are the same.

Supplier-facing applications, such as procurement (purchasing), will only apply in the business-to-business segment, where public bodies are also included as businesses. Datamonitor predicts that Western European spend on business-to-business E-commerce solutions will grow to $11 bn by 2001, from $380 m in 1997, indicating how quickly this market segment will grow. Business-to-business E-commerce focuses on supply chain and procurement issues. Large companies, in particular, have streamlined their own internal processes through the use of technology and business process re-engineering and are looking to manipulating the supply chain for further increases in profitability. Datamonitor notes that spending on services (consultancy, systems integration) will grow most rapidly, experiencing a 92% compound annual growth rate over the period 1997 2002, compared to 66% for hardware and 85% for software. This suggests that companies whose first experience of E-commerce was to establish a Web presence will be revisiting their E-commerce strategy over the next two to three years, working out a business case, re-engineering processes onto the Web and integrating E-commerce applications with legacy systems, all of which typically require the services of external agencies.

Kpmg 1998 Research Report on E-commerce supports anecdotal evidence from other European IT consultancies that companies are beginning to realise the importance of strategy, business case and second generation Internet applications: that is transactional applications, rather than first generation marketing presence on the Web. These findings typically refer to large companies rather than SMEs. KPMG surveyed large companies (with annual turnover above 150 million ECUs; the majority with turnovers above 300 million ECUs) and found examples of companies generating at least 1% of their total turnover from electronic commerce. Around 10% of the overall sample are also generating E-commerce revenue profitably.

KPMG identified key characteristics of this leader group: they were more likely: to have board level support for E-commerce activities; to have integrated E-commerce into their supply chain; and to be concluding Internet transactions. They also had higher Internet marketing budgets than the rest of the sample, and had more positive attitudes to the benefits and necessity of the Internet. As we shall see, such characteristics are also common to best practice SMEs. Scotland' Craft Brewers Cooperative is the sales and marketing arm of the Cream of Craft Brewers in Scotland, that is, those who brew beer in traditional style, using no additives or preservatives and malt that is free of GMOs (Genetically Modified Organisms). Of the 22 SME brewers in Scotland, six and a bottling plant make up the Cooperative, the aim of which is to promote its members' product under the Scotland's Craft Brewers Cooperative brand name, to the large UK supermarkets.

Individual brewers did not have the capacity to sell into these on their own. In order to reach a larger market and to export beyond the UK, the Cooperative has developed a web site, which is already breaking new ground that would be difficult to do through conventional marketing means. for example, SCB-Cooperative products are being sampled by the Canadian Liquor Board. Product can be ordered via the site and paid for by credit card using the Netbanx clearance system. The beers bear a generic label which can be customised by the purchaser to reflect an image, name, or both. The image and words are digitally transmitted to the Cooperative and the customisation service applies to orders as small as three bottles. Delivery is anywhere in the world, coordinated by ParcelForce, and customers are able to use ParcelForce's Internet-based tracking service to check the status of their delivery.

As a very small business, SCBC did not think it had the skills or funding to run a business on the web. However, by using the IBM HomePage Creator service, it was able to go live within a couple of days at very low cost. Because the service simplifies set-up, SCBC was able to focus on its business without worrying about the technology. As a result of its growing success on the web, the Cooperative is forecast to create 75 new jobs within a year and to build a brand name rivalling better-known traditional brewers on a world scale. The Cooperative will continue to develop its brand and the market for its product. It expects other brewers to join the Cooperative, in order to compete in a world market. (web) Datamonitor has also produced forecasts for the business-to-consumer market: it predicts that total revenues from online shopping at European sites will grow from 111 m ECUs in 1997 to nearly 5 billion ECUs in 2002.

It predicts that travel products will experience greatest growth, from 7% to 35% of the total online product mix over the period 1997-2002: however, this finding is at variance with the EITO survey, which found travel one of the slowest sectors to take advantage of Internet E-commerce. Insurance will also grow, according to Datamonitor, from less than 1% in 1997 to 9% in 2002. All other product categories will experience falling shares of the overall product mix. The business-to-consumer market is widely expected to take off when the Internet can be accessed by large numbers of low-cost and ubiquitous devices, such as mobile phones and digital televisions.

This means that despite the numbers of users online, companies in this sector will have to compete for relatively small numbers of customers over the next three years. However, they will gain valuable experience, and potentially brand recognition and market share, that will help them to capitalise on the growth in online numbers once access through devices other than PCs becomes widespread. 3 E-commerce applications The trend is very much toward significant growth in transactional E-commerce applications over the next five years, and particularly those that are customer-facing, such as sales and post-sales (customer support, customer monitoring and feedback, electronic delivery / delivery notification applications). According to the EITO survey, an average of 46% of companies across European countries have web sites for marketing purposes, while the averages for those that currently support different types of transactional applications are much lower. Supplier-facing applications have the lowest penetration, probably because suppliers tend to be smaller companies, with less technology expertise and E-commerce awareness, and are therefore highly resistant to doing business electronically with their customers. Men@work: the aim was to create the multi-media information system and tele-service men@work, an important virtual marketplace for people in the office.

The system is a made-to-measured and comprehensive electronic business solution for the presentation, marketing and distribution of products and services related to the office. It offers everything from office equipment, accessories, art and design to the technical equipment of a teleworker. The marketplace represents a forum for industry, trade and services in Europe. The vision of the owner of the consulting company Office Media Consult (Altdorf, close to Nrnberg) is to become a major provider for E-commerce of products and services for the office in the Internet. The know-how and the technology which is required for an electronic marketplace is provided by a single entity. The aim of the business solution is it to bundle the competence of individual companies and to create a target group orientated information forum that leaves enough room for the presentation of the individual companies.

Each supplier can rapidly benefit from a low cost distribution channel combined with improved customer relationship. The offer to the companies comprises logistics, hotline with Internet call center, offer and data update as well as Forum and membership care of the marketplace men@work. (web) Deloitte Consulting has concluded, from its annual survey of around 500 Chief Information Executives of large companies worldwide, that this situation will very shortly change. It suggests that customer-facing transactional applications will pass the critical 50% mark within two years, increasing their penetration by around 38% overall (29% in Western Europe); while supply chain applications (procurement) will increase their penetration by almost 45% (42% in Western Europe) in the same period, to encompass 70% of the large businesses surveyed. The EITO survey is more explicit, and also less sanguine, possibly because it surveyed a range of companies of different sizes. EITO predicts that while marketing applications will reach critical mass across all sectors by 2000-2001, sales applications will reach this point faster (by 2000) in business-to-business-oriented market sectors, such as utilities, manufacturing and business services, though post-sales will lag slightly, in a 2001-2002 time frame. Procurement applications will reach critical mass unevenly across European countries and sectors, from 2000 through 2002.