europe.com

Europe Business Review, Oct-Dec, 1999

The use and concept of e-commerce is growing rapidly in Europe and Australia, following the American lead.

According to a new report by analyst Datamonitor of London, American transactional web sites now receive average annual revenues of US$50,000 - while European sites generate US$11,000.

Online shopping is more mature in the US, and on average US online shoppers spend more per purchase. In Europe, generally Internet connection is not only slower but also significantly more expensive.

Almost one-third of transactional sites in Europe (and the US) generate non-sales related revenues. A growing number of retailers in Europe are generating non-sales revenues such as advertising and subscriptions from their sites.

Many European retailers are integrating their online operations with their existing sales and supply systems, according to the Datamonitor report.

E-commerce solutions are becoming more sophisticated, allowing retailers with transactional sites to register site use, handle orders, gather customer information and contact databases.

Thus selling online can enhance existing operations. The optimal solution is the linking of data generated from a web transactional site to a company's existing system, but this is an expensive process.

Nevertheless, integration is already underway for 34 percent of European online retailers. About 70 percent of those surveyed stated that they aim to integrate by next year.

Fax - which may now seem old-fashioned - is nevertheless still the most popular ordering mechanism for online retailers. Many European retailers have several ordering mechanisms, such as fax, e-mail, phone, mail and online. Ordering by fax is the most popular method (33 percent) used by buyers who shop on the Internet.

Many online shoppers regard fax as being `safer' and at the same time legally binding. However, direct online ordering is gaining ground, according to Datamonitor, and is used by 23 percent. Efficient handling of orders is crucial to keeping online customers and sales by fax and telephone can be lost by busy lines.

Analyst Caroline Magnusson says that as competition increases among e-commerce providers, the online ordering facility is becoming more important.

Sweden is an online leader. Internet penetration in Sweden is among the world's highest, and Internet stock trading by Swedish investors is growing rapidly.

As Scandinavian consumers take to the Internet for services such as banking and shopping they are also starting to buy more stocks over the web.

About half of Sweden's 8.9 million people - the highest proportion in the Western world - own shares. Of these, about 150,000 trade online.

Online brokerages such as Germany's net.IPO, use the Web to sell IPOs (initial public offerings) to private clients.

NetIPO, with 25,000 subscribers and US$16 million in capital, has taken part in eight online IPOs in 1999.

Sotheby's, the art auctioneer of London, is investing US$25 million to begin an upmarket segment of online commerce by entering into an alliance with bookseller Amazon.com of the US to sell art and collectibles.

The arrangement merges Amazon's online expertise and customer reach with the reputation of Sotheby's as an authority in the selling of fine and decorative arts.

Under the agreement, Amazon.com is making a US$45 million investment in the auction house.

Sothebys.amazon.com will offer collectibles from coins to porcelains. The only sellers will be professional dealers. They will be responsible for guaranteeing the objects they sell.

Another site, Sothebys.com, will sell traditional auction items such as paintings, furniture and decorative objects.

The Internet generated about US$301 billion in revenue in the US last year. One component of the American Internet economy - electronic commerce - generated US$102 billion of revenue and is growing faster than many previously estimated.

The US Internet economy grew at a compounded annual rate of 174 percent between 1995 and 1998.

Eleven thousand US companies are selling directly over the Internet. "Anybody who thinks this is still about geeks and young people, is living in the dark ages," said Jack Staff, an economist at Zona, an Internet research company.

Internet retailers recognise the importance of integrated shopping - combining stores, the Internet, catalogues, telephone and eventually television.

Multi-channel retailers account for 62 percent of e-commerce, selling high-value goods such as computers, tickets and financial services.

Most mainstream retailers have been slow to go online. Only the Website of Barnes & Noble, a bookseller, and Ticketmaster are among the top 10 most visited sites in the US.

But analysts expect multi-channel retailers to generate 85 percent of online revenues within five years. The biggest of them, Wal-Mart, is teaming up with a catalogue distributor, and Tiffany, having sworn never to sell diamonds and pearls over the Web, will do so.

The biggest real-world retailer, Wal-Mart (sales US$138 billion) is greater than all electronic retailing combined and keeps prices at rock bottom.