World Telecommunication Day 1999 |
The relatively simple process of purchasing products and services on-line is predicted to account for about $18.2 billion worth of sales in 1999 more than twice the 1998 figure. Even quicker home access from cable and digital subscriber lines is expected to revolutionize the world of on-line shopping in the near future.
Says Robert Shaw, Internet strategy and policy advisor at the International Telecommunication Union: ''Sales in business-to-consumer electronic commerce are currently behind the value of business-to-business sales, but that gap might close as consumers gain more experience and more confidence with using the Web for commerce. In the 19th century, there were similar consumer concerns about the use of the telegraph for monetary transfers. The Western Union company provided a secure and reliable means of transferring money between offices.''
Consumer-friendly
The United States is currently far ahead of the rest of the world in Web shopping, with estimates of $12 billion in sales this year and predictions that business could top $41 billion by 2002. Various factors have thus far inhibited e-commerce growth in other countries.
Europe has only a 9 percent penetration rate, due to the smaller number of people who have Internet access. But the region is expected to reach a 31 percent penetration rate by 2003 (compared with 63 percent in the United States). The combined effect of a single electronic market in Europe and widespread use of the euro is expected to boost the use of e-commerce in the European Union, allowing businesses and consumers to more easily compare prices and buy products across a single market.
In the Asia-Pacific region, the number of Netizens is growing at an annual rate of 99 percent. It is estimated that in China alone, e-commerce will jump from $20 million in 1999 to $230 billion by 2003
Web enthusiasts tout the benefits of e-shopping over bricks-and-mortar retail outlets - the convenience of shopping at any hour, lower property and stock-keeping costs that could be passed along to the consumer and the possibility of updating or changing inventory without having to close or refit stores.
Another advantage in many places is that cyberstores are not required to collect sales tax because they have no physical presence. This could generate a savings of more than 7 percent in some U.S. states. Cost advantages over catalogue shopping include savings in postage and printing costs.
Critics of the e-commerce boom say the downside should not be ignored: Fierce on-line competition that is forcing prices down at the cost of service improvements, difficulties of finding exactly what is wanted because of Web tangles, the high cost of building a brand from scratch, the lack of volume purchases enjoyed by large retailers (which assures top quality goods at rock-bottom prices), consumer reluctance to post credit card numbers on the Web and data privacy issues.
You've got to have faith
According to a recent report by NFO Interactive, a Connecticut-based on-line market research company, trusting a retail site to keep personal information private is the number-one attribute that would persuade people to start buying on-line (69.4 percent of 4,500 respondents), followed closely by the site offering a secure environment to purchase products (65 percent). Responses rounding out the top five of the survey include the site's being technically reliable and having up-to-date content and products delivered in a timely fashion.
At the moment, the majority of on-line consumers tend to buy low-ticket items they are already familiar with. According to research carried out by the New York-based consultancy CDB, the most common items purchased on-line are books (33 percent), compact discs (26 percent) and small gifts (20 percent), with more than half of buyers spending less than $100 in the last month. Twenty-one percent of respondents had booked an airline ticket and 13 percent computer software over the Web.
Internet advertising revenue more than doubled in 1998, reaching $1.92 billion. Forrester Research estimates that global spending for on-line advertising will reach $33 billion by 2004, with one-third of this amount being spent outside the United States. Forrester also predicts that U.S. on-line spending will grow from $2.8 billion this year to $22 billion by 2004 - over 8 percent of the total country advertising expenditure and exceeding magazine and radio spending.
According to Forrester, Europe's on-line advertising will total $5.5 billion by 2004 (over 5 percent of total ad spending), the Asia-Pacific region will spend $3.3 billion (almost 6 percent of traditional ad spending), while Latin America will grow to $1.6 billion (11 percent of regional billing).
Many Internet companies are relying on traditional media to build their on-line brand. In Britain, Western International Media estimates that major Web sites are spending about £2 million ($3.3 million) each this year to promote themselves, with 80 percent spent in traditional media. The theory is that the majority of the population is still more likely to trust traditional media when it comes to advertising credibility, and that people will seek out Internet brands when they log on.
Multilane info highway, multichannel advertising
The same trend is evident in the United States, where technology news and information Web site CNET recently announced a multimedia ad campaign running across television, radio, on-line and print, valued at $100 million over the next 18 months.
Mike Hensley, e-commerce director of the Cincinnati-based marketing communications company Hensley Segal Rentschler (HSR), says that the loss of appeal to on-line branding strategies has a lot to do with agencies' using conventional advertising approaches that are not producing results in this medium. ''We're using a process we call I-Casting, which blends Internet technology and the art of persuasion to build brands on-line,'' says Mr. Hensley. HSR uses proprietary software and databases to identify, track and monitor opportunities for brand promotion on various sites.
In its report on on-line advertising, Forrester predicts that with new return on investment tracking tools and plenty of ad inventory available, marketers will increasingly demand performance-based deals. They predict that by 2004, more than half of U.S. on-line ad spending will be based on performance.
Julia Clerk