Global Marketing Program (MAS) Electronic Commerce A Global Perspective

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Global Marketing Program (MAS) Electronic
Commerce A Global Perspective

• Professor Jacques Nantel, Ph.D HEC Montréal
  Canada

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E-commerce and RetailingSeveral myths, one
reality
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The e-sky is falling!(Amazon.com)
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Yet.

• There are more consumers surfing
• Who stay longer on the net
• And who buy more and more

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• global marketing information from a global
  research company, with unequalled expertise and
  experience in internet issues

Taylor Nelson Sofres Interactive
- Global eCommerce Report 2001
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What it all comes down toeCommerce is growing,
and the future looks bright for e-businesses

• Between 2000 and 2001, the proportion of internet
  users that shop online has increased by 50.
  From 10 of all Internet users globally in 2000,
  to 15 globally in 2001.
• Integrated offline and online shopping activities
  continue to contribute to revenue opportunities
  for businesses fully 15 of all Internet users
  globally have shopped offline for goods as a
  result of information they found online.
• Online security is the biggest single concern for
  those Internet Users who have not shopped online.
  However, over 60 of non-shoppers did not state
  this reason.
• Younger internet users are not being persuaded to
  spend as much online as older users.

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Key findings 2001...
GeR

• Internet usage
• Scandinavian countries continue to lead the way
  in the adoption and use of the internet. Norway,
  has 63 of the total adult population using the
  internet in the past 4 weeks, and Denmark (at
  62) have both pushed ahead of last years
  leader, the USA.
• Although growth has varied considerably across
  all countries, it is still universally true that
  under 30 year olds are driving the adoption of
  this medium.
• Online shopping
• The USA retains its position as the nation with
  the greatest proportion of Internet Users being
  online shoppers - at 33. This compares with the
  global average of 15. Germany and Great Britain
  have also seen a big increase in this area over
  the past year.

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Key findings 2001...
GeR

• To shop, or not to shop...
• Last year saw more online dropouts than shoppers,
  but this year 15 of internet users are still
  dropping out and 15 have actually shopped
  online.
• 55 of internet users have done none of the
  following bought online, dropped out, bought
  offline or plan to buy online in the future.
• Total Internet related shopping behaviour
• Over a quarter of internet users globally have
  actively engaged in either online or offline
  purchases in the past month.

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GeR

• Offline shopping
• 15 of all Internet users have bought goods or
  services outside the Internet as a direct result
  of information found online.
• Younger peoples (under 20) offline spending is
  not being influenced by information found online
  as much as the older internet users.
• While it may be possible to convert offline into
  online sales in the future, this result
  emphasises the need for integrated online and
  offline business models. This is evident in the
  commercial success of established offline brands
  in the online world.
• Future online shopping
• 17 of all internet users plan to shop online in
  the next 6 months. However, of these, a quarter
  have already purchased online.
• Confidence in eCommerce therefore appears not to
  have diminished despite media attention
  highlighting security problems.

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GeR

• Products purchased online
• Books and CDs continue to be the most popular
  items to purchase online. However, smaller
  proportions have purchased both when compared to
  last year.
• Clothes have become the third most popular
  category to be purchased online.
• There appears to be a broader spread of product
  categories purchased in 2001, as people become
  more confident in purchasing different items
  online.

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GeR

• Reasons not to shop
• The biggest reasons for not purchasing online are
  security related. 25 of abstainers stated that
  they didnt want to give credit card details and
  21 citing general security concerns. (Please
  note that 8 highlighted both of these as
  reasons)
• Germany was the most reluctant nation to provide
  credit card details (71), and was only surpassed
  by the Czech Republic when it came to general
  security concerns.
• In addition to security, the tangibility and
  physical experience of shopping offline was
  identified as a barrier to online purchasing. 19
  of abstainers stated it was easier / more fun to
  buy in a store.
• Only 6 did not buy online for price related
  reasons.

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GeR

• Mobile phone penetration
• Almost 2 out of 3 people represented in this
  study have access to a mobile phone.
• This figure would have been higher but for the
  fact that 64 of over 60 year olds stated they
  did not have access.
• Finland leads the way - with 85 of the total
  adult population having access to a mobile phone.

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Mobile phone usage Although access figures are
high - only 46 use a mobile for speaking to
people. The second highest usage type was for
receiving text messages, followed closely by
sending them. Finnish mobile phone users were the
most active text messagers, with 71 of the adult
population receiving text messages.
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Key numbers 2001...
GeR
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Internet users across the world 2001
GeR
Percentage of total adult population
Percentage of the population who have personally
used the Internet during the past month
Japan results 68 (data collected in the TNS AP
M-commerce study) China results 23 (data
collected in the TNS AP M-commerce study)
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Internet users across the world 2000/2001
GeR
Percentage of total adult population
Percentage of the population who have personally
used the Internet during the past month
Japan results (2001) 68 (data collected in the
TNS AP M-commerce study) China results (2001)
23 (data collected in the TNS AP M-commerce
study)
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• The USA retains its position as the nation with
  the greatest proportion of online shoppers at
  33. This compares with the global average of
  15.
• In India, the Philippines,Thailand and Turkey, 2
  or less of the online population shop online.

GeR
Percentage of Internet users
Percentage of Internet users who have bought
goods or services online during the past month
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GeR

• As spending power increases with age (up to 40
  years of age), so shopping online becomes a more
  popular option.
• The youngest age group is so unlikely to shop
  online that even the oldest (age 60), internet
  users surpass them. This is likely to be due to
  the non-availability of credit (and cards),
  rather than any difference in attitude and
  willingness.

Percentage of total internet users
Please note that percentages given for the
different age groups exclude data from Portugal,
France, Canada, Ireland, Israel and Japan - where
different age bands are used
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GeR

• The Internet as an information channel for
  offline purchasing continues to be important.
• Hong Kong, demonstrates this well, supplementing
  online purchasing with substantial offline
  revenues.

Percentage of Internet users
Percentage of Internet users who have bought
goods or services offline as a result of
information found online during the past month
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GeR

• The most significant demographics issue is that
  those in the youngest age group, although they
  are unlikely to purchase online because of
  practical issues, are also not purchasing
  offline.
• The youth market is strong in traditional
  sectors, but the internet appears to be failing
  in attracting youth spending.

Percentage of total internet users
Please note that percentages given for the
different age groups exclude data from Portugal,
France, Canada, Ireland, Israel and Japan - where
different age bands are used
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• The future of online shopping looks healthy in
  many countries, with this metric predicting
  significant increases in eCommerce activity over
  the next 6 months.
• It should be remembered that this figure includes
  a number of people that have already shopped
  online (25 of future shoppers bought online in
  the last 6 months).

GeR
Percentage of Internet users
Percentage of Internet users who plan to shop
online within the next 6 months
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GeR
Percentage of Internet users
Internet users who have shopped online or
offline, or who will shop online in the near
future
Internet users who have never shopped online,
and who do not plan to shop online
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Products purchased online
GeR
Percentage of Internet users who shop online
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Trends
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In brief, a growing market but one has to
understand the real opportunities

• Internet will not be the revolution that some had
  predicted
• It will not be a fad
• For most retailers it will be a necessary evil

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Some dying myths

• Building a new distribution network does not
  create any new demand
• There are not two types of consumers one virtual
  the other one tangible
• forget the first movers advantage
• Technology is important but brand equity and
  bricks are key

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1- The world of retailing
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Sales trends
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Forrester Mai 2000
of total
retail
2005
2000
2001
2002
2003
2004
2005
Total US revenue (millions)
73,926
110,748
155,833
207,270
269,158
44,784
Total convenience (millions)
15,445
25,070
37,194
52,664
71,061
93,001
Media
20,529
6,670
9,807
13,019
16,513
25,817
3,814
Software
1,752
2,465
2,983
3,431
4,200
6,076
1,801
2,629
3,618
4,726
8,007
4,837
1,020
1,666
2,463
3,484
6,717
5,802
Books
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2,096
2200
3,955
4,872
6,893
4,462
350
933
1,986
3,289
5,626
2,944
760
1,266
1,812
2,384
3,560
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of total
retail
2005
2000
2001
2002
2003
2004
2005
73,926
110,748
155,833
207,270
269,158
44,784
2,626
4,148
5,916
8,227
11,172
14,874
392
631
939
1,350
1,877
2,549
828
1,524
2,567
4,117
6,181
8,733
1,406
1,994
2,410
2,760
3,114
3,591
31,955
5,040
8,915
14,461
22,251
43,124
1,600
Accessories
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547
862
1,123
1,348
1,979
21,577
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5,194
8,988
2,756
14,569
29,434
Jewelry
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1,370
2,217
3,316
4,776
6,617
8,921
2,161
8
367
642
1,035
1,559
2,792

Forrester Mai 2000
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2005
Forrester Mai 2000
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2003
2004
2005
Forrester Mai 2000
33
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3,107
6,635
12,041
20,010
31,169
48,362
Pet supplies
624
1,523
2,519
2,996
4,448
6,130
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Health and beauty aids
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1,352
2,656
4,460
6,572
8,672
10,840
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1,131
2,455
5,063
10,441
18,049
31,392
3
2,859
3,692
4,590
5,700
6,929
8,246
Forrester Mai 2000
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Different strategies for different products
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1-Digital products

• New networks
• Cost and price reduction
• Standard technology

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Sales of music on the Internet(000 us)
Source Forrester Sept 2001
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Source MediaMetrix oct 2001
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2- Services

• Travel agencies, Law, Medical services
• Cost reduction, standardization of basic
  functions
• Cross marketing and up-selling

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3- Convenience goods

• Most of them are available within 1 mile from the
  source of demand
• 80 of consumption is made by 20 of goods
  (Pareto law)

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Thus...

• Consumers will want to shop in store AND surf on
  the net
• Retailers must provide both opportunities
• Retailers must provide real time information
  including their stocks
• Sell popular product in store with low margins
• Sell products with slow turnovers on line and
  increase margins

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Make sure to play on both networks in a
coordinated fashion
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4- Specialty products

• Car, furnitures
• Inventory cost are often huge
• Yet consumers are still waiting often more than a
  month

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2- What about advertising ?
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Yet, there are opportunities

• Focus on the consumer not on the content
• Keep in mind that the consumer is active and
  searching
• Provide indication for your ROI
• Use personalization

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Current StatusB2B

• The marginal contribution of e-commerce where
  EDI was already established
• True opportunities for the standardization of
  protocols
• Winners SAP, Oracle etc.
• Important order givers gained power over small
  suppliers
• Market places
• For commodities and indirect inputs
• Verticalnet Vs Dell computers
• Changing business models
• From registration fees to transaction fees
• Volume is the key

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What have we learned ?

• Internet per say will rarely be a competitive
  advantage
• Internet should be seen as a complement to
  traditional ways of competing
• Make sure that it offer true added value, either
  as a way to improve a process (banks) or as a way
  to distribute original content (MIT on line)
• Create an exit barrier not an entry one
  (Switching cost)
• Central product must have unique value, do not
  rely on advertising alone