E-commerce taking off, but not a high flyer

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Research by Deutsche Bank reveals a number of peculiarities in shops, shoppers and goods traded in business-to-consumer e-commerce.

Innovative digital technologies have wrought fundamental changes in the trade in goods and services. Digital web portals provide greater transparency in business-to-consumer (B2C) e-commerce as a more sophisticated form of global distance trading. This transparency is making B2C e-commerce popular across broad sections of the world’s population. It is striking that shops that are new to B2C e-commerce are, on the one hand, seeking to strengthen existing customer relations through online marketing and, on the other, looking to attract new customers. Many shops have realised their need to catch up, especially in cross-border trade. Currently, two-thirds of all German shops offer their goods and services via web platforms. The cross-border share of total sales is less than one-tenth at four in five of these shops.

  • As regards the goods traded, the bestsellers of classic mail-order business also dominate B2C e-commerce. At the top of the list of items traded over the internet are physical goods (such as PCs, books and clothing). Trailing far behind are offers from the following three categories: web services (eg dating agencies, classified ads), digital goods (software, computer games, videos, music, audio books) as well as events and travel (hotel reservation services, tickets).
  • E-shoppers are quoted as giving major consideration to security issues. However, sensitivity regarding security issues differs widely depending on the e-shopper’s sex, experience with B2C e-commerce and age. As a rule, men attach greater importance to technical security than women. Besides, inexperienced e-shoppers tend to have more confidence in websites with an apparently trustworthy design. Also, one in two senior shoppers have very strict limits on their e-shopping activities and only rely on well-known and thus confidence-inspiring brands.

While the internet is being recognised as a sales channel by a growing number of companies and consumers, the market share achieved by B2C e-commerce as a share of total sales is still relatively small. The quite modest progress is attributable to the fact that online shops still fail to respond to the special requirements of distance-trading in the anonymous digital world. In particular, there is a wide gap between delivery and payment, both in terms of location and time in B2C e-commerce. The risk inherent in the payment transaction, which has to be borne by one of the two – mutually unacquainted – business partners, is seen as a great challenge. So it is particularly the conventional payment systems that stand in the way of success for B2C e-commerce, as they cannot adequately meet the special demands in performance settlement. Smaller e-shops in particular, which lack adequate financial and personnel resources or their own invoicing department and make up the bulk of online providers in B2B e-commerce, are struggling with the lack of tailor-made payment systems.

Despite these obstacles, turnover in B2C e-commerce in Western Europe looks set to grow at double-digit rates up to the end of the decade. This respectable growth is from a relatively modest base, however, the current annual turnover is roughly €130 billion or one-seventeenth of total retail sales in western Europe. So, in absolute figures B2C e-commerce will remain some way below potential on a medium-term horizon.

Source: Deutsche Bank Research

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