European E-Commerce Update
Web Commerce Today, Issue 9, April 15, 1997
The next two years are set to bring dramatic changes in Europe: not only are most European countries going online at an unprecedented rate, but eleven countries of the European Union are phasing out their own currency and accepting a common currency (the Euro) during 1999 and 2000. The combination of these two factors is widely thought to give strong stimulation to e-commerce.
Overview
Several countries in Europe have been doing online shopping long before the Web became popular. Their various teletext systems have had varying degrees of success in e-commerce, with the French Minitel leading the pack (20% of the French adult population have made purchases by Minitel, in comparison with 3% of the same population in the U.S.). There are 18 million people using the Minitel in France, the English and Dutch have teletext systems, and 2 million people use T-Online in Germany. It will take some time to migrate their habits onto the Web, as well as invest in online stores on the Web (which mirror what they already have on Minitel and T-Online). Once the French and Germans migrate to the Web, their online spending habits should naturally follow and e-commerce should see a bonanza.
Furthermore, it is becoming clear that the Euro (Europe's new currency that is being created Jan. 1 next year) will have wide ramifications on e-commerce. Last month 11 European countries were admitted into the "Euro" club, which means that they will phase in the Euro as legal tender starting in January, and phase out their own currency by sometime in 2000. The European central bank will be established next month in Frankfurt. There are many articles appearing in the local press around Europe to prepare their citizens for this major currency shift.
The implication is that Europe suddenly becomes a single market by the end of 2000, and people can purchase from another country as easily as they can from a store across the street. The same currency will be used; only the language issue remains. Opinion in Europe is that, as more of the population goes online (the numbers of those online now are expected to double by this time next year), and as Europe starts using its new single currency, online shopping will experience a tremendous growth.
Most of this growth, of course, will be internal to the European Union (EU), not between Europe and the rest of the world. However, there is no reason why companies located outside the EU cannot also take advantage of the burst of e- commerce that is expected and sell to them. However, it will require localizing a Web site's offering and promoting to each country, which is just how European vendors market their products.
In France alone, notice how developed Minitel's online clients are: online purchases last year in France totaled $3.3 billion (60% of which were travel tickets and hotel/theatre reservations). In the same period, the worldwide e-commerce over the Web totaled only $9 billion.
On a recent visit to the Greater Paris Chamber of Commerce, I was told that French businesses mainly uses e-commerce for export purposes, since there are only some 1.4 million French citizens online now, whereas there are some 80 times that number online outside of France. The Chamber even teaches courses on using the Web for export sales. An example of how the French are using Web sites to export was illustrated by a recent price for the "Best Designed Website," attributed to a company who sells black truffles online. (They sold nearly a ton of them on the Web last year, much of which went to Japan.)
The state of France has even allotted $3.3 million to assist businesses finance Websites oriented towards export (http://www.finances.gouv.fr/commerce_exterieur/). Of course, a principal service France sells to the rest of the world is tourism (there are more tourists coming to France than to any other country in the world). What better way to find new international clients than by advertising on the Web? (See http://www.euromktg.com/gbc/fr/tourism.html for many of these Web sites.)
Each country in Europe is starting to establish its own shopping Websites and payment mechanisms.
Payment mechanisms
United Kingdom
There are three ways for a virtual shop to collect moneys online in Britain:
- Emporia: http://www.emporia.net (costs $2,400 setup costs and $100/month)
- NetBanx: http://www.netbanx.com
- DataCash: http://www.datacash.com
DataCash is officially approved by and permanently connected permanently to the following Acquiring Banks: NatWest Streamline, Girobank, American Express, Barclays Merchant Services, Royal Bank of Scotland. U.K. merchants using DataCash is able to trade in more than 150 currencies and to have the funds credited to their account in one of 16 currencies (settled).
British Telecom (BT) proposes a 6-month trial for a new payment service - BT Array -created for small value purchases (between a few pence and a few pounds). The service is simple to use. It only requires a once-and-for-all secure SSL (Secure Socket Layer) registration, complete with credit card details, and an account name and password. Users are then able to purchase items from any merchant displaying the BT Array micropayment logo from any WWW access device. BT Array consolidates the account and charges it to the customers¹ VISA or MasterCard periodically. BT, which is acting as an intermediary between merchants and customers, takes a percentage from every purchase. http://www.btarray.bt.com
Germany
E-cash software was just put into beta-test last October by Deutsche Bank (Germany's largest bank: http://www.deutsche-bank.de/wwwforum/e-cash/). Many German people do not use checks and credit cards to pay for merchandise or services they purchase; they use bank transfers instead. E-cash had to devise a secure method for customers to fill out a form on a Web page, which debits their bank account for the amount of the purchase. This is the only such application for debit payments in Germany.
U.S. software vendor CyberCash (http://www.cybercash.de) has made deals with the Dresdner Bank and Landesbank Sachsen to provide online payment solutions, and more banks should be added to this list soon.
InternetWorld magazine (Germany -- http://www.internetworld.de) tested six e-commerce solutions in their December 1997 edition. Intershop, who makes software for creating an online store, hails from Germany (they just moved their main headquarters to San Francisco last year.) Their German operation continues to be the top supplier for this application in Germany.
A recent survey of people online in Germany and Austria showed that 40% of those surveyed have already bought something online. Most popular was the automobile/motorcycle/sport area (16%), followed by the computer area (15%). (source: Global Online magazine, http://www.global-online.de, 11/97, p. 8).
France
France Telecom offers a Web-based E-Business solution that was developed by Open Market, called TeleCommerce, in association with banks BNP and Credit Agricole. It has been installed first for Le Marche de la France, a virtual shopping mall of French luxury products. TeleCommerce is a complete buying system with a virtual basket, commands management, automatic calculation of VAT tips, customs rights, and statistics. The price for a new virtual shop is $1650 (setup), plus $150/month and 3% of the transactions. Since France Telecom has already been quite successful with the same sort of virtual shops for its Minitel (which contains today 25,000 virtual shops), this Web development is simply the next logical step. What makes it unusual is that the Web visitor does not have to give his or her credit card number to the merchant: TeleCommerce is responsible for this. The customer can shop in various shops and not have to fill out the payment and delivery form each time -- quite a convenience. Check out the progress at: Le Marche de la France, http://francecontacts.com/marchedefrance/.
Kleline software (http://www.kleline.fr) is the French leader in e-cash (similar to Digicash). Online shoppers can pay for their purchases in 20 different currencies; it is mainly for smaller amounts of money ($0.01-0.80), to purchase a magazine article, for instance. Kleline is currently testing the "millicent" feature (for spending very small amounts). Virtual shopping centers that have chosen Kleline's software for payment mechanism include Globe Online (http://www.globeonline.fr), 3 Suisses (a large French mail-order store) and BR Shopping (in Brazil - http://www.br.homeshopping.com.br). It works by means of a virtual wallet kept on the user's desktop to make purchases.
Payline is promoting itself as the top payment solution on the Internet in France for virtual store, costing $85 per month, plus setup charges.
Despite these technical solutions that work in conjunction with French banks, it is not a straightforward process for a small company to obtain bank authorization to accept credit card payments online.
Switzerland
Computer World GmbH has launched a service for Swiss companies to sell online (http://www.swisskaufhaus.ch). For a $235 setup fee and $50/month, they will host a Swiss company's Website and provide the backend services to collect credit card purchases.
Elsewhere in Europe
Finland: UUnet is working with Merita Bank to provide e-commerce. - Norway: The Norske Bank provides a platform for e-commerce. - Austria: Bank Austria provides a platform for e-commerce.
Other Payment Methods
Since each national market in Europe is much smaller than the U.S. market, with consequently more control over local currency use, smart cards were developed faster in Europe than in the U.S., where regulatory bodies bogged down their introduction. At the recent CeBIT (Hanover fair in Germany), there were several alternatives to paying for online purchases by credit card. GEMPLUS (http://www.gemplus.com) has a small input device for smart cards that plugs into a PC. It reads smart cards that have been loaded with e-currency, and can deduct amounts as one spends money online. The reader costs $70 or so now, but the price will drop to $30 late this year. This payment method may well become the most popular, since it replicates how Europe pays for its public telephone and many other commodities: through smart cards. Ideal for paying reasonably small purchases ($5-$250). The equivalent for credit card use is going to take longer to implement, however.
Conclusion
The e-commerce market is growing steadily in France and Germany, both from the technical side (back-end payment systems) and the number of online users purchasing online. As European e-commerce becomes more established, marketing will have to follow in each language, to drive more prospective customers to a given e-commerce site -- precisely the way it does in the traditional business world. There is a very strong need for companies to adapt to global marketing and to use localized approaches, country by country. This means not only translating a Web site, but also giving it the "look and feel" of other Web sites in each country that one is targeting. Furthermore, online stores need to make it easy for people in other countries to purchase from their Web site, if they do not have a credit card. As the rest of the world outside English-speaking countries comes online faster than imagined and e-commerce follows closely behind, it becomes imperative to market to each country in order to attract more visitors to these e-commerce sites.
For more information about reaching these overseas markets by using the Internet, go to http://www.euromktg.com.
