Regulatory Issues for Global E-Tailers: Marketing Implications

Academy of Marketing Science Review, 2001 by de B, Heiko, Little, Michael W

Traditional "brick and mortar" U.S. based retailers have recently entered the e-commerce foray with e-tailers such as Amazon.com. After significant inroads in retail markets at home, traditional retailers are now attempting e-commerce opportunities abroad. One of their most daunting challenges is one that has received very little attention so far - the regulatory issues involved. The legal framework for Internet transactions is at present incomplete and often unclear or contradictory.

Regulatory Issues for Global E-Tailers:

Marketing Implications

The Internet's commercial potential for e-tailers is growing steadily despite a competitive environment that fails to show signs of sustained profitability. For the year 2000, however, the U.S. Census Bureau reports net sales totaled $25.8 billion, a 67% increase from the year before (Census Bureau 2001). More reluctant traditional retailers have only recently realized that as their revenues increase they gain new efficiencies through their newly implemented e-commerce channels. Expanding global opportunities through e-commerce appears especially inviting when traditional brick and mortar channels are too expensive or prohibitive due to numerous foreign country restrictions. This may especially be the case if the retailer can reduce costs in their global supply chain, enhance global customer relationships or build a stronger and more consistent global brand (Vida, Reardon & Fairhurst 2000).

Large U.S. retailers such as Wal-Mart, the discount general merchandiser, Costco the warehouse club or Circuit City, the electronics superstore often bring important advantages over competitors such as dominant brand equity, large fulfillment operations, supply chain management capability and customer service. These advantages may be applied to their retail Web operations as well. At the same time, service providers such as Yahoo and AOL are enablers for many small and medium-sized businesses that may offer products and services globally (Berthon, Pitt and Katsikeas 1999). For example, U.S. small businesses are also embracing the Internet and have generated $33.1 billion in retail sales in 1999, and are expected to increase (U.S. Small Business Administration 2000). For U.S. retailers of all sizes, the European market is attractive given its growing interest and use in e-commerce.

The Internet online universe for e-tailers is increasing after a slow start. The number of Europeans with Internet access is about 14 million households or a 9 percent penetration rate in the 15 European Union (EU) nations compared to a fifty percent penetration rate in the U.S. Members from the EU, however are expected to reach a 31% penetration rate level by 2003, while the U.S. rate is expected to double (Forrester 2000). Notably, online users in the Netherlands, Germany, France and U.K. offer the most promising developments for consumer goods with their high income and savvy technology populations.

The Internet presents itself as an ideal vehicle to reach the global marketplace reflecting a confluence of styles, taste and products. There however, are a number of key marketing and regulatory issues facing e-retailers in the U.S., as they consider expanding their markets from their own backyard to become global players. Most notable are those encountered by the increasing number of non-U.S. Internet users. These issues are becoming more prominent as more e-tailers develop local and foreign web sites with their attendant problems relating to content, language and technology. Clearly, foreign customers are more likely to buy a product if its benefits are communicated to them in their own language and cater to local tastes. Beyond localization and personalization issues other global challenges are leveraging company assets to include which products and services to employ, brand strategy, and good web site design and administration (Smith, Bailey and Brynjolfsson 2000; Gulati and Garing 2000; Novak, Hoffman, and Yung 2000). Notwithstanding, there are considerable regulatory and jurisdictional barriers to these fundamental marketing practices (Richards 1997; Miyzaki & Fernandez 2000). These include: privacy, taxation, security and liability to name only a few. These legal and environmental issues are the focus of this paper.

Recent academic research of e-commerce has focussed on consumer behavior issues to provide insight to marketing strategy (Hoffman and Novak 1996; Alba, Lynch, Weitz, Lutz, Sawyer and Wood 1997, Bakos 1997, Szymanski and Hise 2000). Retailers' primary objectives are to attract customers to their web site and encourage people to buy (Griffith & Krampf 1999). Once a consumer arrives at the web site, however, problems arise with navigation, finding products or simply completing the purchase (Lohse and Spiller 1998; Burke 1997; Burke 1999; Palmer and Griffith 1998; Hogue and Lohse 1999). It is essential that e-tailers have a clear understanding of the role of the Internet in their retail mix (products and services provided, promotion and so on) while their brick-and-mortar counterparts need to fully integrate their Internet strategies with their traditional store offerings (Cowles, Kiecker and Little 2001).