CORDIS Archive

June
2004

Europe switches on to e-commerce

E-commerce is here to stay.Despite the economic hush that followed the dot.com boom,nearly €100 billion changed hands electronically in 2001.Firms like Amazon, eBay, and lastminute are just some of the trailblazers thronging the digital highways.

This is the conclusion from E-commerce and the internet in European business (2002), just published by Eurostat, the European Commission’s statistics office.The €95.6 billion figure excludes France, whose Minitel videotex service would make the volume of e-commerce transactions even more impressive.

The study was carried out against the backdrop of the European Union’s ongoing drive to make Europe the world’s most competitive knowledge-based economy by 2010. A key aim of this strategy is to promote ecommerce and to use broadband technologies to deliver public and private sector services on-line.

SMEs at the fore

The research benchmarks the use of information and communications technologies (ICTs), such as personal computers and networks, for business purposes in the then 15 EU Member States in 2001. It found that, despite an average penetration of PCs into businesses of 94%, only 27% connected to private electronic data interchange (EDI) networks or the public internet.

Just 24% of companies bought and only one in ten sold over the networks. The value of goods exchanged via the internet, at 1% of total sales, was a quarter of that exchanged via EDI networks. There is clearly room to grow Internet-based trade.

The research reveals relatively small differences in uptake and usage by country, industrial sector, business size and application. In general, it shows Scandinavian countries as the most connected and the most willing to use the networks for business. But it also reveals that, despite below average PC penetration, access to networks and use of the technology, Britain’s e-commerce value was €35.5 billion, more than one-third of the total reported.

The report shows that suppliers of business services and accommodation,most of them small and medium enterprises (SMEs), have led the e-commerce charge. Manufacturers have been more conservative about trading on-line, and in general prefer private EDI hubs.

Even so, eight out of ten of firms, especially large companies, have a website. This is mainly to market the company and to provide product catalogues and price lists. Germans also like to use it to provide after sales services. Big corporations are more likely to monitor their markets through the web, while small firms’ favourite on-line application is e-banking.

Despite the bias towards marketing, companies are more than twice as likely to buy than to sell over the internet. Even then, a quarter of deals are likely to go through EDI or e-trading hubs. This skews the customer profile: 80% of sales are to business customers (B2B) while only 20% are to consumers (B2C).

But those who sell on-line find it a good thing: 38% of them get more than 5% of their total sales on-line, with some even getting more than half. SMEs lead the way where computer-mediated sales are more than 1% of turnover, but when they hit the 50% threshold, firms are likely to be much bigger.

Boosting e-exports

Although networks open firms up to a potential world market, more than half their sales are to domestic customers. Clearly, traditional business patterns are robust, and distance from markets is still important.

Respondents said that the logistics of fulfilling orders are not a barrier to e-business. Products that are unsuitable, customers who are not ready, security, and an underdeveloped legal framework to govern transactions are more likely to put them off. It seems the potential to explore and exploit new export markets on-line is almost untouched, but the authorities must do more to secure the framework.

A follow-up survey in 2002 found that ICT penetration rose in most countries except the UK, which dropped from 67% to 57%. Across Europe, SMEs and large firms both have penetration rates above 90%. But where large firms mostly have ‘always-on’ broadband connections, SMEs prefer to dial up on ISDN (digital) lines.

However, this pattern may be changing. Telecommunications firms are cutting prices for high-speed cable-based connections, and trading companies are improving support for wireless devices, such as mobile phones, Wi-Fi and Bluetooth PCs.