Cross border ecommerce: a digital europe at the heart of trade

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Although approximately 40% of European consumers purchase online, only 10% purchase from sites located in a different country to where they live.
Why and what challenges are ahead. The European ecommerce landscape described in this report from Acsel.

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Cross border ecommerce: a digital europe at the heart of trade

  1. 1. Cross-border e-commerce> a digital europe at the heart of trade <
  2. 2. Under the direction of Jean-Rémi Gratadour, Vice-President of ACSEL Cross-border e-commerce> A DIGITAL EUROPE AT THE HEART OF TRADE < Preface by Michel Barnier European Commissioner in charge of the Internal Market and Services Editorial team Paul Soriano Jean-Rémi Gratadour Olivier Plat We would like to thank the following people for their contributions to this document: Patrick Flamant, Marc Jamet, Alexandre Mouci and Marie Giroud
  3. 3. 2 Cross-border e-commerce/A Digital Europe at the heart of tradeE lectronic commerce and online services are now an inte- gral part of everyday life of consumers, businesses andcitizens all across Europe. For this reason, the way peoplecompare, buy and sell goods, the way in which they searchfor and provide information, as well as the manner in whichthey manage payments or data and exchange or share thingshas been totally revolutionized. The digital economy is trig-gering new growth, however the potential for progress isstill huge and could well benefit every economic sector andregion in the European Union. The Internet economy gen-erates 2.6 new jobs for every job lost and helps reduce theeffects of isolation for a number of rural areas. However the digital economy’s contribution to global activityremains minor. Although it is rapidly growing on a national scale,e-commerce still only represents a marginal share of Europeanretail. In addition, national borders continue to be an obstaclefor online services and limit the development of cross-borderactivity. Europe’s Internet economy is a patchwork of differentrules, standards and practices that hinder its development andundermine the confidence of existing or potential users, on boththe supply and demand side. The rapid growth in online servicesacross Europe therefore requires decisive action. With this in mind, on 11 January 2012 the EuropeanCommission adopted a green paper on “A coherent frameworkfor building trust in the Digital Single Market for e-commerce andonline services” [COM(2011) 942]. The aim of this ambitiousaction plan is to double both the share of e-commerce in retailsales and that of the internet sector (less than 3% at present) inEurope’s gross domestic product, by 2015. © Acsel - L’association de l’économie numérique.
  4. 4. Preface 3 Five priority areas have been identified: to develop the supplyof legal and cross-border online goods and services; to improveoperator information and consumer protection; to encourage thedevelopment of more reliable, efficient and affordable paymentand delivery solutions; to counter abuse and resolve disputesmore effectively and finally, to deploy high-speed networks andadvanced technological solutions. Each of these programmes willinvolve a number of concrete measures in the upcoming months.This publication reiterates the problems that we already iden-tified and I agree with the main findings of ACSEL as well aswith the majority of the recommendations that the associationputs forward. In addition, it is clear that the various testimoniesprovided by “pioneers” in cross-border e-commerce in ChapterV provide a perfect illustration of the challenges with which weare faced. We must now unite our efforts to boost the develop-ment of a sector which represents not only one of the keys to thecreation of a genuine Single Market but which will also be amajor source of growth, innovation and job creation in Europein the coming years. Michel Barnier European Commissioner in charge of the Internal Market and Services© Acsel - L’association de l’économie numérique.
  5. 5. 4 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  6. 6. Foreword 5I n 2008, ACSEL published a report entitled Europe, an opportunity for e-commerce. This new book offers a dif-ferent perspective in light of the fact that we have since seensignificant progress in the basic principles governing e-com-merce. The results are clear for all to see, the figures providethe proof and so do the high number of company successstories. Nonetheless, today’s European e-commerce still remains con-fined within national strongholds, even though it can play a rolein Europe’s construction by contributing to the development ofthe economy and digital society at Union level. This is the reason why we want to go beyond simply remov-ing the obstacles which currently prevent border crossing. Ouraim is also to describe the channels and measures required for agenuine ecosystem for European e-commerce. In truth, some ofthese channels have already been explored by the pioneers whoseexperiences and testimonies feature in this document. Why do we talk of cross-border rather than borderless e-com-merce?Firstly because we are realistic, and secondly because a borderis also a crossing point and a place where exchanges take place,and which can provide a new means of boosting Europeane-commerce: instead of destroying the strongholds, we plan toconquer them. Learning from past experience, retailers and service providerswill be better prepared to cross new frontiers, both within theEuropean Union and much further beyond. For ACSEL, this document represents a new phase in its workto understand the requirements of its members and to assistthem. I would like it to play a key role in helping French compa-nies develop their activities on an international scale. Pierre Alzon President of ACSEL© Acsel - L’association de l’économie numérique.
  7. 7. 6 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  8. 8. 7 SummaryI n 2008, ACSEL published a report entitled Europe, an opportunity for e-commerce. This new document aimsnot only to update data issued three years ago, it also pro-poses to look at it from a different perspective. The reasonbeing that since that period, the fundamental elements ofe-commerce have significantly changed: more people use theInternet, they are better equipped and now also surf onlineusing smartphones and tablets... with a lot more confidencetoo. The results are clear for all to see, the figures provide theproof and so do the high number of company success stories.And this is despite the current crisis, or because of it, if youlove paradoxes. We therefore decided to not simply update the information andfigures, but also to describe the major changes and draw lessonsfor the future. We also wanted to share in the experiences andtestimonies provided by the pioneering figures in this form ofe-commerce in the process of internationalization. Finally, weneeded to identify which obstacles prevent commerce from cross-ing the borders, but at the same time we wanted to discover howwe can work together to build a European e-commerce ecosystem. Why do we talk of cross-border rather than borderless e-com-merce? Firstly because we are realistic, and secondly because aborder is also a crossing point and a place where exchanges takeplace. Instead of destroying these strongholds, we plan to con-quer them. Learning from past experience, retailers and service provid-ers will be better prepared to explore new frontiers, both withinthe European Union and much further beyond. Although themessage is an optimistic one, it does also include a warning: ifyou do not believe in the European market, competitors arri-ving from elsewhere will be more than happy to convert you.© Acsel - L’association de l’économie numérique.
  9. 9. 8 Cross-border e-commerce/A Digital Europe at the heart of tradeEuropean e-commerceWhat is the current state of European e-commerce and whatdirection is it expected to take? Both in terms of results alreadyobserved and future expectations, the situation is still quitecontrasted and particularly attractive. In 2011 it represented aturnover volume of almost 200 billion Euros, or over a third ofglobal e-commerce! Of course there are disparities among coun-tries, but these are all reasons for the least developed countries totry to catch up and a source of hope for growth for all involved. Already, European online business has outpaced that ofthe United States, in terms of volume and growth: 20%increase expected for the European Union, and still a two-figure rate of growth in the leading countries, namely theUnited Kingdom, Germany and France. Europe is thushot on the heels of the United States in terms of its share inthe e-commerce segment of global retail business. However, thisnotion is becoming more complicated due to the fact that thedifferent distribution channels are constantly overlapping.Cross-border e-commerceEurope is well equipped for cross-border e-commerce, if we takethis term to describe how between the different forms of com-merce, boundaries are less clearly defined. Several major European countries have extensive experiencewith distance shopping, their logistic capabilities and postalservices are finely tuned and they offer a broad and diverse rangeof payment solutions. The storm clouds lingering over the economy and doubts con-cerning the Euro have an impact on household confidence, butto a lesser extent that of players involved in e-commerce, con-sumers and retailers. There is a storm cloud that is undoubtedlymore worrying and that is network congestion and correlatively,a possible delay for Europe in terms of high speed internet con-nection and the damaging consequences for network neutrality.And as some people fear the build-up of a second Internet bubble, © Acsel - L’association de l’économie numérique.
  10. 10. Summary 9the difficulties experienced by innovative companies in obtain-ing funding are unfortunately commonplace for all small andmedium-sized businesses, in France at least. Nonetheless there have been a number of innovations since2008 to give us cause for optimism. First and foremost, we have what is known as “multichan-nel business”, which far from setting distribution networks upagainst one another, improves their ability to monitor their cus-tomers and offer them the best adequate solutions at the bestprice at the right time and in the right place. The reason is thatthis multichannel commerce, which represents one facet of “mul-tichannel marketing” techniques widely employed since the endof the 1990s, is combined with two major socio-technical inno-vations, namely the smartphone and online social networks. These hybrid systems which are created by the widespread useof multichannel are leading to what can be seen as the end ofe-commerce, or at least the term will become obsolete, whichsome claim is too restrictive and others argue that it is too general. E-commerce is less frequently referred to as an entirely sepa-rate retail segment. How can we possibly treat online commerceas a distinct sector if we consider that the majority of businesstransactions now involve an internet connection at one point oranother? Digital technology is simply becoming increasingly partof commerce and the economy in general. Everything is becoming “multi” all around us, or we couldeven say “trans” or “cross”, as the number of combinations is end-less. One form of multi is the multiscreen, which includes desk-tops, laptops, tablets, mobile phones, smartphones and so on...With a whole range of applications, the smartphone providesuniversal access to e-commerce (unless it is taken over soon bythe tablet). It also serves as an interface between the physical andvirtual world, offering more and better than mobility, ubiquity.This present book describes how the terminal used for proximitycommerce is also of interest to cross-border commerce. In the same way, the fact that social networks are localizedin nature, in most cases involving close relations, does not© Acsel - L’association de l’économie numérique.
  11. 11. 10 Cross-border e-commerce/A Digital Europe at the heart of tradeautomatically disqualify them. If these networks play a role insocializing commerce, then a form of relocation will result andstores will be opened up to cross-border buyers. The community managers1, who are in charge of manag-ing fans of a brand or product (or the critics) need to quicklyfamiliarise themselves with multicultural issues. Not forgettingthat these same social networks enable e-retailers, and in par-ticular smaller retailers, to share their experiences and to formlarger groups capable of defending their interests. A step aheadof the economy for once, political events have provided theexample of how networks can open up to diasporas and therest of the world, as was the case with what has sometimes beenreferred to as the Arab Spring “revolutions 2.0”.A cross-border Europe?Although European e-commerce is a cause for optimism, it stillremains confined within national strongholds. Europe is made upof a thousand regions, where the motto is In varietate concordia(unity in diversity), but its borders remain extremely resistant… The European Union has a population of 500 million Europeans(800 million in wider Europe) but it also includes 27 nations, 23official languages, hundreds of regions (some of which are claim-ing the right to their own political existence) as well as thousandsof native or immigrant communities that are geographically con-centrated or scattered or even virtual. The Union has also creatednew types of border with the Euro zone and the Schengen area.This is hardly surprising if we consider that the European Unionis a variable geometry community, the perfect illustration beingAirbus, the flagship of European industry. Europe is a patchwork of both political and cultural bordersand historical and geographical borders. But 350 million net-works have opened up these borders to a certain extent by crea-ting links between fellow human beings, whether related or not.1. In truth, these managers act as mediators. © Acsel - L’association de l’économie numérique.
  12. 12. Summary 11 The heterogeneous nature of the European Union is alsomarked by the inequalities of wealth between the richest andpoorest countries, and even more so, on a regional level. Thereare also digital divides between public infrastructures andprivately owned equipment, services and applications. This isparticularly true when it comes to e-commerce. The proliferation of diversity is not necessarily a sign of failureof the process of unification which has been undertaken over thelast half century. The fact that the differences have been reducedis a sign of progress for the European construction process. Inthis regard, it is true that the EU calls on its institutions, issuescommon or harmonized standards and implements integrationpolicies, particularly in the area of trans-European networks. Nonetheless, cross-border purchases are sluggish. Whenapproximately 40% of European consumers purchase online,with the large disparities which still exist from one country toanother, only 7% of them make their purchases in other coun-tries belonging to the EU. However, cross-border offers arerelatively easy to access via search engines and price compari-son websites, and in some cases they propose cheaper prices thanin the home country. But a mystery shopper experiment carriedout in 2010 revealed that two thirds of the transactions includedin the sample taken were cancelled before being converted intogenuine purchases. There are real obstacles to crossing bordersbut they are over estimated due to fear and uncertainty. Consequently, Europe is lacking a certain number of cham-pions with continental ambitions. The leader table in each majorEuropean country also reveals that the only foreign sites in thecountries mentioned are two or three subsidiaries of Americancompanies. The moral is: the only genuinely European players intoday’s market are American.E-Commerce builds EuropeShould we be pushing to expand cross-border e-commercein Europe? A rather more subtle and realistic approach (since© Acsel - L’association de l’économie numérique.
  13. 13. 12 Cross-border e-commerce/A Digital Europe at the heart of tradeborders do not disappear, the tendency is for them to proliferate)is adopted by those involved, who prefer to stick to the notion ofcross-border, without limiting it to the borders of the EU, which areconstantly being extended and which strictly speaking do not exist. Along the way, we will meaningfully refute a few widely heldbeliefs: no, e-commerce is not growing exclusively to the detri-ment of “bricks and mortar” retail nor does cross-border com-merce take business away from local retailers. Cross-bordercommerce has a momentum of its own whereby the border itselfis a place to trade. It is even a source of stimulation, as long asthe people it separates have strong personalities and show genu-ine interest in discovering the unique identity of others. Frenchtouch, British way, deutsche Qualität or all’italiana, are just someillustrations of Europe’s different specialties. In the North,apparently the long winter months have been provided as anexplanation for Scandinavian enthusiasm for online activity;but in the South the same technological innovations are creat-ing interaction in the buzzy atmosphere of piazzas that are somuch an integral part of the Italian way of life. This is withoutforgetting the wealth of smaller nations, these small, prosperouscountries which are open because trade is essential. Identity assetshave a bright future ahead of them thanks to e-commerce! We are gradually moving towards acceptance of the idea thatcross-border e-commerce can play a role in completing theconstruction of a single market. It clearly serves the commoninterests of consumers and retailers by providing greater choiceand reducing costs: increased competition, reduced costs involvedwith market fragmentation, economies of scale, the sharing ofexperience and skills… For e-retailers, the opening of borders results in both newopportunities and new threats, with the arrival of new competi-tors in their own territories. However, it would be inappropriateto include competition in the list of obstacles to the developmentof cross-border commerce. It is good for consumers and for retailers, who alreadyrepresent a considerable number of people, and cross-border © Acsel - L’association de l’économie numérique.
  14. 14. Summary 13e-commerce also serves public interest. It is a corporate citizen, andeven though they are not always aware of it, European e-retailersplay an active role in building Europe. In addition to playing a role in full completion of the sin-gle market, trans-European online commerce brings along withit the digitalization of services and on a more general note, thedeployment of the digital economy and society in Europe. Indoing so, it creates and also contributes positively to activities,investments, skills and practices. It works towards European integration by multiplyingexchanges and by modernizing business structures in the lessdeveloped countries. It also stimulates the creation of efficient trans-Europeaninfrastructures and participates in economic and environmentaloptimization of freight transport at all territorial levels, from trans-continental transport to intercity deliveries. Similarly, it spreadsgood practices that have been tried and tested across the EuropeanUnion, notably in urban zones thanks to multichannel delivery. Finally, e-commerce promotes a kind of European sociabilityby providing the opportunity to exchange goods and services inparticular. Since it is a business involving people, it helps createa common European culture by multiplying exchanges betweencitizens and the various European communities, especially withthe trend towards “social commerce”. The efforts deployed by online service providers in order toovercome the language barrier and other cultural idiosyncrasiesserve as examples. The extended catchment area is thus trans-formed into an area devoted to broader social exchange. Cross-border e-commerce also increases the importance ofEuropean influence. Strengthened by cross-border selling experiencewithin European borders, players in the e-commerce sector are set-ting their sights on other areas: those bordering the Union (Turkey,Ukraine and Russia…); language communities outside of Europeand much further beyond, notably in Latin America and Asia. In addition, cross-border commerce promotes the emergenceof players capable of operating on a continental and global scale,© Acsel - L’association de l’économie numérique.
  15. 15. 14 Cross-border e-commerce/A Digital Europe at the heart of tradein response to the current American predominance. And this iswhere the issue at stake is extremely important if we considerthat the digital economy is gradually transforming every sectorof the economy. Those who have mastered the art in these kindsof transformations have a better chance of gaining control in theother sectors too. With large numbers of flagship companies, Europe still needsto position its leaders at the major crossroads of the digitaleconomy.Ways and meansWhether the person involved is a retailer, service provider, con-sumer or even a citizen, cross-border commerce would appear tobe an absolute obligation. But the key issue remains: we need toexplore the ways and means to achieve the objective. Like Europe, e-commerce is heterogeneous in nature. The pro-fessions involved are extremely diverse, but in particular, companysize is an issue: hundreds of thousands of small and medium sizedbusinesses are being set up, with players operating on a nationalscale and to a much lesser extent, those with European or globaloperations. However, company size is not simply limited to itscatchment area: cross-border commerce is suitable for small busi-nesses on condition that it has access to the services required forcross-border exchange and at a reasonable price. There is indeedanother barrier which needs to be lowered, that of access to inter-national markets. The principles are turned into reality in the form of trans-European platforms, which can be generalist or specialist innature and which represent the operational side of the Europeane-commerce ecosystem. What remains to be done is to specify the “development pro-jects for cross-border e-commerce”, the software solutions for thedifferent markets as well as the various stages of the e-commercechain, with a concrete example to illustrate them: – selling, paying and delivering across-borders; © Acsel - L’association de l’économie numérique.
  16. 16. Summary 15 – organizing a marketing strategy taking into account culturalidiosyncrasies; – tackling legal differences in Europe’s Member States; – implementing suitable payment systems; – learning how to propose different delivery options (homedelivery or at pick-up locations) and managing return products; – deploying a universal parcel service at European level. In addition to this, there are the different e-services: informa-tion, analysis of legal and taxation issues; consulting and train-ing; sharing of best practices; litigation procedures; certification(labels); etc. All of these services can be provided by Europeanassociations such as ACSEL, whose aim is to provide greaterinternational coordination.HarmonizationThe institutions which regulate this activity could not possi-bly be excluded from the list of e-commerce stakeholders. TheEuropean e-commerce ecosystem is a regulated one. It is notsimply part of the socio-technical environment, it helps producedecisions taken by institutions, the implementation of standardsand public policy such as the Digital Agenda for 2020 and otherpolicies on trans-European networks. The Union’s activities tiein with national policies (with the transposition of Europeandirectives), and even at regional and local policy level, for exam-ple with standards relating to public delivery facilities in urbanareas. The European institutions have specifically included cross-border online commerce in a political action plan with an ambi-tious list of objectives aimed at doubling the share of e-commercein retail sales (currently 3.4%), and that of the internet sector inEuropean GDP (currently only 3%) by 2015. It is quite true that players involved in online commerce, facedwith various different legal and taxation systems, dread a legalvacuum almost as much its complete opposite. Among otherpossible options, they recommend better coordination between© Acsel - L’association de l’économie numérique.
  17. 17. 16 Cross-border e-commerce/A Digital Europe at the heart of tradecommon law and contract law, between the Charybdis of self-regulation and the Scylla of technocracy. Considering the very nature of the Union in an increasinglydiverse Europe, it seems that harmonization is still a better optionthan standardization – but there is not much hope. The objectiveis legal security, transparency and above all consumer confidence.StrategiesCross-border commerce offers a larger market for retailers toimplement their strategy and sales tactics within the plannedtime frame and the various stages of deployment. The retailerfaces an array of possible options, and is responsible for choos-ing which markets will take priority and deciding which techni-cal solutions to adopt. Decisions made will depend on the sizeof the company, the activity sector, the objectives and the avail-able funds, where operations are based and the new markets tobe conquered. If we can claim that e-commerce is an ecosystem, it is preciselybecause it enables players to act and interact, whatever their size. Some of those involved in online business draw a compari-son between the construction of the Union and that of Europeane-commerce. “Combining the advantages generated by focusing means (pub-lic and private) wherever required size is a critical element (research,technology, infrastructures…) with the ability that small structureshave to innovate and adapt”. It is both a challenge for Europe and the strategy it proposes.This formula is almost exactly applicable to e-commerce. Wealso know that the information technology sector is now wor-king towards achieving this combination. In the same perspective of “maintaining the delicate balancebetween what must remain common to all and what must bedone to allow singularity”, a suitable resolution exists for those incharge of regulating e-commerce and the rest. *** © Acsel - L’association de l’économie numérique.
  18. 18. 17 IntroductionDiversity in the single marketThis publication provides an update of the information publishedin the 2008 edition2 and analyzes the situation from a slightlydifferent angle. The main aim is to convince players in the onlinebusiness sector that cross-border trade offers a host of opportuni-ties for development. It performs an analysis of the obstacles toborder crossing which result in reluctance on the part of retail-ers and consumers alike. This reluctance is excessive, but doubtsabout whether a transaction being successfully completed lead tothem opting out. While acknowledging that European diversity is indeed asource of difficulty and at the same time offering the possibi-lity for new momentum, the book explores the various ways andmeans of developing trans-European online commerce. Hencethe paradoxical challenge of building diversity in the singlemarket. The previous book rightly focused on the barriers, such asthe difficult “Europeanization” of marketing campaigns and theheterogeneous payment and delivery processes. There was a clearmessage to the institutions: “Give us Europe and we will takecare of European e-commerce”. But as long as in a reciprocalmanner, e-commerce also contributes in its own way towardsbuilding Europe, the combined initiatives by private and publicstakeholders need to create a “virtuous cycle” and adopt a colla-borative approach in sum, to borrow the expression often used todescribe networking.2. Europe, an opportunity for e-commerce, ACSEL (2008). © Acsel - L’association de l’économie numérique.
  19. 19. 18 Cross-border e-commerce/A Digital Europe at the heart of trade It is worth adding that in the face of competition from Americaand Asia, capitalizing on previous European experience is a goodform of preparation for the conquest of new territories. This ismade possible by the linguistic, cultural and historical affinitiesthat exist between the old Europe and the new worlds. Three years after the previous publication by ACSEL, the mes-sage is a more positive one and also more ambitious too, but itremains nonetheless realistic. An indication of this is in the titleitself: cross-border e-commerce was chosen as, contrary to commonbeliefs, the tendency is not towards ridding Europe of its borders,but more a case of crossing them and even benefiting from them.Such barriers also represent passageways and trade points betweenthe different nations that they are used to separate. Remaining realistic, we decided to focus on ways and meansthat have already been explored in the past by those working inthe field, providing illustrations by way of references and casestudies. Co-building of the European e-commerce ecosystem? The high-lighted term has probably been used too often, but this can alsomean that it is probably a topic we will be discussing for sometime to come. Whatever the case, it does at least signify thatEuropean e-commerce “constitutes a system”, and that this sys-tem is controlled by various players and decision makers whointeract. The message is therefore addressed not only to retailers andother service providers, but also to Internet users and consum-ers as well as all of the different public institutions involved inbuilding Europe. In reality, everybody has a role in the buildingprocess, whether as citizens, Internet users, professionals or con-sumers, especially with the existence of social networks.The prospects are bright despite the scaremongeringWhat has changed since 2008 is first and foremost the size ofthis sector of activity, which despite some uncertainty can be esti-mated at approximately 200 billion Euros for the Union’s 27 © Acsel - L’association de l’économie numérique.
  20. 20. Introduction 19Member States. This amount is much higher in absolute valuewhen compared to American e-commerce (in the United States)for a population that is also considerably higher (approximately500 million inhabitants compared to a little more than 300).One document we refer to in this book is the study carried aboutby CRR-Kelkoo, which estimates growth in European e-com-merce between 2008-2011 at 40% (expressed in current prices).To the extent that the market share for online commerce in retailsales is almost 7.8% (7% in the United States in 2010), with apeak figure of 12% in the United Kingdom. For the patchwork of European states, the e-commercefigures, like for any economic activity, vary significantly from onecountry to another and from one major geographical region toanother (North and West, South, East). In terms of market share,Poland and also Spain represent approximately 3.1%, four timesless than the United Kingdom, and Italy with 1.3%. However,what is common to all European countries, is the high levelof growth, that is in two figures in each case, and significantlyhigher than the average in those countries “lagging behind” themost (33.5% in Poland between 2010 and 2011 according to theaforementioned study). It would therefore seem clear that theyare catching up. The overall perspectives for European e-commerce do there-fore seem to be quite encouraging. It is true to say that thechanges that have taken place since 2008 are moving in the rightdirection. This is the case for the elements which make up the socio-technical environment of e-commerce: technology, infrastruc-tures, equipment of private individuals, services and applications,and to a lesser extent institutions and regulatory policy. In thisrespect, we have already pointed out two major innovations.Among other things, the smartphone can be seen as an e-com-merce terminal, which can be taken along with you anywhere.Already e-commerce is no longer synonymous with distanceselling and even less so with home shopping, and expressionssuch as “proximity e-commerce”, which seemed a paradox not© Acsel - L’association de l’économie numérique.
  21. 21. 20 Cross-border e-commerce/A Digital Europe at the heart of tradeso long ago, are now perfectly meaningful. Some may object thatthe contribution of smartphones is irrelevant to the subject weare dealing with, but it is worth noting that the majority of cross-border retail transactions are carried out by tourists and businesstravellers, and more and more of these people are using smart-phones. Once again, e-commerce even when it is cross-bordercan produce surprises. Most well informed observers believe that social networks willhave a considerable impact in many ways, to the extent that it isalready producing new terminology, such as s-commerce (S as insocial, as if all forms of retail are not already “social” in nature)and even f-commerce (F as in Facebook). But it is difficult toestimate the real impact – and even more so in the case of cross-border e-commerce. Although we willingly emphasize the“global”, planetary and borderless nature of the Internet, it canbe said that the communities that are brought together bysocial networking are strongly localized. There are, how-ever, a few exceptions such as the numerous diasporas scat-tered across Europe. Therefore is would be hasty to claim thatsocial networks are scarcely relevant to trans-European retail,but rather that e-commerce can contribute to their reloca-tion, producing a broader catchment area for more extensivesocial exchange. The result is an increasing number of Internet users who arebetter equipped, with greater experience and confidence: every-thing seems set for an increase in the number of e-consumers,who will be purchasing more frequently and spending more. Atthe same time, this population is almost certainly better informed,choosier and more volatile, but doubtless more open to cross-border retail too. Of course progress on the socio-technical environment frontas well as acquiring the necessary experience and skills also con-cern the e-retailers themselves. We are seeing the development ofonline retail tools and “e-commerce solutions” and platforms, notto mention the different operations that make up the e-commercesupply chain (marketing, payments and delivery…). © Acsel - L’association de l’économie numérique.
  22. 22. Introduction 21 In all of these areas, we will pay particular attention to changesthat may contribute significantly to the development of tradebetween the different countries and regions of Europe. If the overall perspectives for e-commerce are quite positive, cau-tion is required and we need to pay some attention to what thescaremongers have to say. Their argument is that an economic cri-sis could affect household confidence, consumption and retail ingeneral. They also mention the possible reconsideration of the sin-gle currency which would obviously not be very beneficial to cross-border exchange. And finally the threat of a new Internet bubblewith some companies which have far from delivered the goods findtheir shares over valued, whereas many others, starting with e-com-merce, are experiencing difficulties funding their future growth.They underline the risks faced by Europe if it falls too far behindin high speed Internet, as this is a crucial factor in the develop-ment of online retail, at least for some types of goods and ser-vices. Finally, much uncertainty surrounds changes to regulations(consumer rights, environmental protection…) and ultimately oncosts borne by companies in the sector, bearing in mind that lowerprices are an important reason for online shopping. Nonetheless, the leaders in charge of the digital economy remainvery optimistic, as shown in the ACSEL-Ifop barometer publishedin France at the end of March 2011: 93% of leaders were confi-dent about the future, this is a record without a doubt. However,it does not prevent them feeling concerned, in particular (for 81%of them) about the difficulties experienced in funding their invest-ments that are indeed essential for international development. Others doom mongers are more subtle and remark that if growthin e-commerce is achieved at the expense of traditional forms ofretail, in the same way the development of cross-border e-com-merce will lead to the dealing out of a new hand of cards (betweenexporters and national players) rather than increasing the stakes.This reasoning is questionable, since it does not take into accountthe dynamic that cross-border trade itself generates. But the fact remains that from the point of view of the ratio-nal e-retailer, the opening of borders is ambivalent: on the one© Acsel - L’association de l’économie numérique.
  23. 23. 22 Cross-border e-commerce/A Digital Europe at the heart of tradehand it offers the possibility of broadening catchment areas andreducing costs by eliminating the additional expense that resultsfrom border crossing. But on the other hand, it provides the“promise” that better prepared competition can be expected andnot only of European origin. But e-commerce still has a long way to go to reach the stagewhereby protectionist measures could be required: betweenopportunities and threats, let’s say that cross-border commercealso broadens the scope for e-retailers to deploy their salesstrategy and tactics.Cross-border commerce: when in doubt, they abstainWhat situation does European cross-border e-commerce facetoday? It appears relatively weak and in particular, there does notseem to be much progress: although approximately 40% ofEuropean consumers purchase online, only 10% purchase fromsites located in a different country to where they live, and it isalso worth underlining that roughly 4% of them purchase innon-European countries, mainly the United States. It wouldseem that the share of cross-border retail has hardly increased:this type of online sale is certainly increasing in absolute terms,but not faster than e-commerce in general. We will analyze the different reasons for this relative stagna-tion, and we will discover that they can be broken down intothree categories: the linguistic and cultural differences withinthe Union; inadequate trans-European service infrastructures(notably for payments and delivery); lack of coherence betweenthe legal and taxation systems of the member countries of theEU, which themselves are a result of the Union’s complex poli-tical structure. In addition, as we already mentioned, these genuine obsta-cles combined create a degree of reluctance that is irrationalbut fuelled by uncertainty. Moreover, if these obstacles wereto be removed and their directly related costs thus eliminated, © Acsel - L’association de l’économie numérique.
  24. 24. Introduction 23this could have a cumulative effect by allaying fears and lead totrade development, enabling those who have the potential toforget their doubts and join in. In the meantime, obstacles and reluctance have an impact onthe different elements of the e-commerce supply chain. Before the systematic exploration of the economic Eldorado,as we are told, that represent social networks, marketing ispropping up other proven solutions. International develop-ment must also face linguistic and cultural differences, espe-cially when they have “hard” legal protection: for example withthe protection of personal data and intellectual property legis-lation. As far as delivery logistics are concerned, there is currentlymore choice since the emergence of the “fast delivery” stan-dard, the arrival of new players in e-logistics and a number ofleading e-retailers who provide logistics on behalf of third par-ties. But trans-European delivery is still experiencing problemsoperating in certain countries or regions, as well as the addi-tional costs of border crossing and even difficulties with returnmanagement. Again, consumer preference and habits remainpart of cultural diversity. The payment sector is also experiencing unrest becausethe various technical innovations (smartphone used as a pay-ment terminal, contactless payment …) are poised for use.Competition is getting stronger between the traditional players(banks and financial services) and new players, which includeInternet service and telecommunications operators. Everydaypayment methods differ greatly from one country to another,which further complicates the equation. Enough choice, but not spoilt for choice: in these three keysegments of e-commerce, the market is expecting a number ofconsolidations to safeguard competition and innovation and tolimit the effects of heterogeneity across individual countries. Consolidation is taking shape with the increased presence ofplatforms and other marketplaces capable of managing all orpart of the e-commerce supply chain, working for players (and© Acsel - L’association de l’économie numérique.
  25. 25. 24 Cross-border e-commerce/A Digital Europe at the heart of tradenot only small businesses) who lack the necessary resources orwho prefer to concentrate their efforts on their own business.Without question, these platforms, which in most cases areoperated by companies that are used to international trade, arethe key means of access to cross-border retail.MultichannelMultichannel is another source of diversity, which initiallydescribed the combination of marketing communicationchannels before being extended to include retail distribution,thus breaking the dichotomy between e-commerce specialistsor pure players (home delivery) and bricks and mortar retailshops. Now everything claims to be multichannel (includingpayment systems). Apart from a few niches, e-retailers whoplan to develop their activity now need to substitute the “and”for “or”, and even more if they want to sell their productsabroad, where they risk facing other options. But consumerchoice is limited by economic “sustainability”, and environ-mental issues in the case of delivery. This results in anotherform of consolidation where multichannel is implementedover time, like the different phases of a strategy: a pure playerwaits until reaching a certain critical mass before setting upa physical form of business in the targeted country, indepen-dently or by building partnerships with local retailers.Regulations and policiesThe public, European and national authorities and even regionaland local authorities (for delivery in urban areas for example)intervene in our area of business by implementing standards andintroducing policies and specific programmes which sometimesconcern public facilities. At European level, e-commerce has a directive (2001) andsince March 2011 a special parliamentary work group. Apartfrom the single market, online retail is also concerned by con- © Acsel - L’association de l’économie numérique.
  26. 26. Introduction 25sumer rights and intellectual property, as well as by standardsand policies relating to environmental protection. E-commerceis also part of the European Digital Agenda (A digital strategy forEurope). Without a doubt, it is within this domain that we have seenthe least significant progress since 2008, an illustration of thisis the stagnation of cross-border online purchases. But thingsshould start to change in the years to come, since politicianshave reiterated their intention to develop trans-Europeantrade by doubling the share of e-commerce in retail sales (cur-rently 3.4%), and that of the internet sector in European GDP(currently only 3%) by 2015. It is worth noting that in 2011 a draft directive on con-sumer rights caused much stir in the e-commerce community.The e-retailers were afraid that they would be forced to acceptboth a longer period for withdrawal and goods returns, pay-ment of the shipping fees for returns as well as the obligation todeliver orders from any member country of the EU. The text inquestion has since been amended, but what is important toremember is that certain forms of rigid, “top-down” regulations,which apply the strictest standards to all involved, withouttaking into account the high degree of diversity and the vulne-rability of many companies, in particular small and medium-sized businesses, can be counterproductive3. We will end this introduction by underlining that this bookis divided into five parts. The first part focuses on characterizing the European Union,by pointing out the most significant elements from a point ofview of identifying the barriers and opportunities for cross-border e-commerce. The second part presents the state of play with statisticsregarding e-commerce in Europe, without concealing the diffi-culties experienced when drafting such an evaluation as even the3. From our point of view, the regulation of e-commerce and more generally any public, national andEuropean policy initiatives must take into account the very specific logic of an ecosystem whose invol-vement in technology makes it difficult to accept any form of technocratic interference. Single market,that is certainly true, but it must be pointed out that there is diversity in the single market. © Acsel - L’association de l’économie numérique.
  27. 27. 26 Cross-border e-commerce/A Digital Europe at the heart of tradedefinition of e-commerce has become quite uncertain, but alsoby providing full details regarding the various growth factors. The third part focuses on cross-border e-commerce, with ananalysis and in particular an evaluation of the obstacles to itsdevelopment. The fourth part sets out the different arguments in favour ofdevelopment of cross-border e-commerce and explores the meansof achieving such development. The concept is both descriptive(with an already identifiable ecosystem) and prescriptive (deploy-ment conditions), and suggest two main principles of action,with an example taken from the European construction sectorand the other from the world of Internet and social networks. Finally, the fifth part is devoted to the pioneer figures in cross-border e-commerce, who represent a whole panel of differentcases that will enable us to go into detail with practical illustra-tions. *** © Acsel - L’association de l’économie numérique.
  28. 28. 28 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  29. 29. 29 Chapter I Europe: Diversity in the single marketT heoretically, Internet frees commerce of a number of constraints relating to space and time and which have animpact on traditional commercial activities. For a Europeane-retailer, his catchment area would be extended if not to theentire world, at least to the “single market” that is repre-sented by the European Union. This utopian vision of things needs to be seen in perspective.The world of e-commerce is a maze of borders that are not onlypolitical, but also linguistic, cultural, legal and tax-related. Oncea transaction has been carried out online, delivery of the goodsneeds to overcome all of the territorial constraints that are part ofour physical world. And what applies to the world also applies toEurope, even if this continent has been involved in the politicalprocess of unification for over fifty years.Europe of diversitiesWhere exactly does it stand, this “European Union”? For ane-retailer setting out on his adventures to cross these borders, itrepresents a huge patchwork of different territories. Europe, even if we consider it in its reduced Union status, isin truth still a political, cultural, economical and legal object thatremains poorly identified.© Acsel - L’association de l’économie numérique.
  30. 30. 30 Cross-border e-commerce/A Digital Europe at the heart of trade We are having difficulty finding a definition for it, even thefundamental texts of the Union first of all explain what it is not,and only then do they underline its singularity: “In reality, itis unique […] a new international legal order”. It is neither afederal nation nor is it an empire, it is a kind of distinct confe-deration, in which a significant number of its nationals previ-ously refused to adopt a Constitution.DEFINING EUROPEIf we consult an official Union* site, we can see that it is initially defined in a nega-tive manner, but also with a vocation for power and influence: “The European Union(EU) is not a federation based on the model of the United States. Neither is it an or-ganisation promoting cooperation between governments like the United Nations is.In reality, it is unique. The countries that are part of it (the “Member States”) preservetheir sovereignty and independence, but exercise joint sovereignty in order to main-tain a powerful influence on the international scene, which they would not be in aposition to do if each country were to act individually”. Two rulings of the European Court of Justice describe the community as a “newinternational legal order for the benefit of which the States have limited their sove-reign rights in certain fields”.* Europa.eu, in particular: http://europa.eu/about-eu/institutions-commercebodies/index_fr.htm. This system has not yet been stabilized, it is still expanding(Croatia, the 28th Member State is expected to join in 2013),therefore no limits have really been established. The heteroge-neous nature of the EU is more a result of its history than itsgeography, even its more recent history if we remember that theiron curtain only fell towards the end of the 20th century. Majorcountries such as Turkey (a candidate), Russia (not a candi-date) as well as Ukraine are not members of the Union, but theynevertheless can claim to have a totally European dimension.These close relatives are still very much keen on building trade, © Acsel - L’association de l’économie numérique.
  31. 31. Chapter I/Europe: Diversity in the single market 31notably electronic forms of trade with a Union which itself ismade up of a number Member States that differ in size, popu-lation and wealth.u Linguistic diversityThe Union officially recognizes twenty-three languages, some ofwhich, like English are spoken by large populations outside ofEurope. This represents an advantage in terms of influence andalso as far as business is concerned. This is without forgettinga number of different dialects that are spoken too. Conversely,a number of immigrant communities that have settled in Europespeak other languages, including Russian in the Baltic countriesand Turkish in Cyprus for example.DO YOU SPEAK ESPERANTO?The ECSC which represented the foundations of the Union, was already made upof four official languages (French, German, Italian and Dutch). The EU now totalstwenty-three languages and three different alphabets. Three languages (English,French and German) are both official languages and working languages (EC RegulationNo. 1/1958 of 6 October 1958). The Grin report on The Teaching of Foreign Languages as a Public Policy in 2005indicated that the adoption of a single language (not English but Esperanto) wouldrepresent a saving of 25 billion Euros per year (17% of the budget). But why are weunable to consider that being multilingual adds value and creates jobs in the field ofintercultural exchange? From an e-commerce point of view, it is certain that an expan-sion of different linguistic areas (French-speaking, German-speaking and even Slavic-speaking communities) offers newperspectives for non-European worlds: French for the Maghrebcountries, Africa or Canada, Spanish for Latin America, Slaviclanguages for Russia… For English, the case is a little different: apart from the factthat is advantageous for companies doing business betweenthe United Kingdom and the United States (this is clear to© Acsel - L’association de l’économie numérique.
  32. 32. 32 Cross-border e-commerce/A Digital Europe at the heart of tradesee if we check the data relating to British e-commerce, whichis heavily boosted by its exchanges with the USA), English isbecoming the lingua franca of Europe, notably in the Scandinaviancountries or Holland, and it also has a tendency to be widelyused across European institutions despite the official use ofmultiple languages. But language does not totally dominate cultural diversity, evenwithin a same linguistic area. The Germans from the North andfrom the East, the Bavarians, the Austrians, the Swiss Germans,in theory speak more or less the same language but theirculture remains different nonetheless. This is confirmed by spe-cialists in localization of e-website marketing, who pay attentionto the tiniest linguistic details because the key words are impor-tant; product descriptions must be accurate and terms such as“Add to your basket” can determine whether or not an e-websiteis linked to the buyer’s country. Cultural differences are particularly noticeable in the choice ofmeans of payment: for bank cards, for example, and according tothe European Central Bank, the annual number of transactionsper inhabitant varied in 2009 from one to four between the mostfrequent users (Sweden, Denmark, United Kingdom) and usersin the countries that use it least (Italy and Germany). Although European institutions have been particularly care-ful in avoiding mentioning their religious origins, we cannotoverlook the cultural particularities (and indeed different eatinghabits) that exist because of the various religions in Europe thatare predominantly Christian, but without forgetting the nativeform of European Islam or Islam resulting from immigration.It is therefore clear that countries also show great diversity intheir national public opinion on essential issues such as the use ofnuclear energy: 20% of French and British people are against it,compared to 28% of the Spanish population, 55% of Germansand 58% of Italians (survey carried out after the Fukushimadisaster in Japan in July 2011). But all of these differences can also be a driving force forintercultural forms of trade, with demand for “identity related” © Acsel - L’association de l’économie numérique.
  33. 33. Chapter I/Europe: Diversity in the single market 33products or services, or even a form of cross-border retail aimedat serving various communities scattered across the continent. Even where the 500 million Europeans Union nationals aredivided into twenty seven nations, where they populate threehundred and fifty regions and countless numbers of commu-nities that are native or otherwise, this does not include thediasporas living on a number of archipelagos scattered across theEuropean Union (the British Iles, for example), who could finddigital networks extremely beneficial for their cultural, economi-cal and even political development.EUROPE IN THE GLOBAL VILLAGEThe graphic designer Toby Ng had a great idea of imagining and presenting on hiswebsite* a global village with a population of 100 inhabitants representing today’sworld. The village has a population of 70 adults and 30 children with 52 women. 17inhabitants speak Chinese and only 9 speak English (with 3 French speakers). 14 donot know how to read, only one person has pursued some form of higher educationand 48 people have no freedom of expression with the risk of a prison sentence ofworse. We would like to add to that 7 Union nationals (or 12 Europeans if we consi-der wider Europe) who produce over a quarter of the wealth of the entire village. Inaddition, 30 villagers use the Internet and this number increases every year.* http://www.toby-ng.com/graphic-design/the-world-of-100/.u Economic heterogeneityEuropean heterogeneity is also clear to see when we consider theeconomical situation, and in particular since Europe was openedup to the former Soviet bloc nations. Although the EU pro-duces almost 30% of GDP, significant inequalities exist betweenthe nations, and even more so across the regions: when compa-ring average European wealth (100 index), the wealthiest regionrepresented 343 and the poorest 28. There are also great differences in population count, betweenGermany (80 million inhabitants) and Malta (400,000). For a© Acsel - L’association de l’économie numérique.
  34. 34. 34 Cross-border e-commerce/A Digital Europe at the heart of tradetotal of 27 countries, 4 have a population of over 60 millioninhabitants (53% of the total) and 7 have a population of over 20million inhabitants (75% of the total). According to the World Bank, the EU’s gross domestic pro-duct (GDP) exceeded 16,000 billion dollars in 2009, whichrepresented 28.2% of world GDP. In terms of purchasing powerparity it exceeds that of the United States (25% of world GDP),but the population is much higher, which means that in GDP percapita (wealth per inhabitant) the United States surpasses Europe(47,000 dollars compared to 33,700). But the very notion of per capita wealth is of little signif-icance for Europe due to the great differences between itsdifferent nations and regions. If we now refer to the Eurostatdata produced by INSEE1, again for 2009, it does indeed indi-cate that the GDP per capita in purchasing power standardsvaried between 41% and 268% of the average (EU27=100). If we leave aside Luxembourg (index of 268), the wealthiernations are between 15 and 35% above the average: Ireland,Netherlands, Austria, Sweden, Denmark, United Kingdom andGermany. Close to the average we have Finland, France (107),Spain, Italy, Cyprus and Greece. Slovenia, the Czech Republic,Malta, Portugal and Slovakia are all between 10% and 30% belowthe EU27 average. Finally, the poorest countries (other EasternEuropean and Baltic states) are between 30% and 60% below theaverage. If we take a look at the different regions, the differencesare staggering, with 343% for Inner London and 28% for a poorregion of Bulgaria and the Ile de France region is at 168%.u Outline of European categoriesIf we try to identify a number of important economic cate-gories, we can broadly distinguish three of four groups: theformerly industrialized North and West Europe; Southern Europe;1. Figures are expressed in purchasing power standards (PPS), in other words a common currency thateliminates the differences in price levels between countries thus allowing meaningful comparisons to bemade. Apart from the twenty seven Member States of the EU (100 index), they include the three can-didate countries, three EFTA countries and four Western Balkan countries (Eurostat and INSEE, 2009,extract from July 2010). © Acsel - L’association de l’économie numérique.
  35. 35. Chapter I/Europe: Diversity in the single market 35a Europe consisting of the majority of the former Soviet bloccountries – not to mention the Balkan countries of Europe, andwithout even including the major countries that are not part ofthe EU. These different groups also overlap quite well with the levelsof development in the digital economy. The result is a recurringstatistical profile for Europe: an average of the 27 (which Franceis often close to) and strong dispersion, the extremities are ingeneral the Scandinavian countries on one side and the countriesof South East Europe on the other, and added to all this, there areone or several exceptions depending on the cases measured. Thereduction of these gaps is a sign of the progress made in Europeanconstruction.u Digital dividesWhat is the state of play with European digital technology? Interms of community infrastructures and personally owned andtherefore services and applications for online business in particu-lar, the European Internet is just as diverse. Half way through 2010, the EU represented 340 millionInternet users (two thirds of the population), who are unevenlydistributed, but to a lesser extent in comparison to other eco-nomic and social indicators: 65 million Internet users in Germanybut still the same 22.5 in Poland2. But if over 40% of Europeanconsumers purchase goods and services online, the rate increaseto 70% in Scandinavia, compared to less than 25% in Spain orin Poland. A Eurostat3 survey showed that in 2011, 58% of Internet usersin the EU’s 27 countries ordered goods or services via the Internetin the twelve months preceding the survey. The largest propor-tions are observed in the United Kingdom (82%), in Denmarkand in Germany (77% for each) as well as in Sweden (75%).Refer to the figure on the next page.2. Source: Internetworldstats.com. 3. Internet Use in Households and by Individuals in 2011, by Heidi Seybert, Eurostat (2011). © Acsel - L’association de l’économie numérique.
  36. 36. 36 Cross-border e-commerce/A Digital Europe at the heart of trade Internet users who purchased goods or services via the Internet in the previous twelve months, 2009-2011 (% of Internet users). Source: Eurostat9080 2009 2010 2011706050403020100 UK DK DE SE NL LU FI FR MT EU TE AT BE SK PL SI CZ ES CY EL HU PT EE IT LV LT BG RO 27 u Digital Europe in a global context What position does Europe hold in the digital world? According to statistics supplied by InternetWorldStats4, at the beginning of 2011, for a world population estimated at 7 billion inhabitants, 2 billion (30%) were Internet users. In 2000, they were 360 mil- lion, representing a 500% increase in a little over ten years! Europe, in this case the European Union (500 million inhabi- tants) plus the countries that are not included in the EU, including Russia and Turkey (representing a total of over 800 million inhabitants), would account for 475 million users, or 58% of the population and 23% of world Internet users. With 340 million users half way through 2010, the EU has a penetra- tion rate of 67.6%. In comparison, North America (350 million inhabitants) has 272 million Internet users (78% penetration rate) and Asia 4. Source: http://www.internetworldstats.com/stats.htm. © Acsel - L’association de l’économie numérique.
  37. 37. Chapter I/Europe: Diversity in the single market 37(almost 4 billion inhabitants), slightly more than 900 millionusers (24% penetration rate). Finally, Africa (1 billion inhabit-ants) only has a penetration rate of 11% (120 million Internetusers). All of this information is to be taken with all due care, butwe can underline what is of direct interest to European e-com-merce if we adopt an optimistic point of view: a potential 340million customers, and much more if we take into account thosecountries that are not included within the EU but which remainmore or less accessible. In total Internet user terms, it indicatesthat Russia (60 million users) comes between Germany (65million) and the United Kingdom (51.5 million); Turkey (35million, is between France (44.6 million) and Italy (30 million);Ukraine (15.3 million), is between Poland (22.5 million) and theNetherlands (15 million). Top 10 Internet Countries in Europe – March 31, 2011 Source: Internet World Stats – www.internetworldstats.com/stats4.htm Basis: 476,213,935 estimated Internet Users in Europe in Q1 2010 Copyright © 2011, Miniwatts Marketing Group Germany 65,1 Russia 59,7 United Kingdom 51,4 France 45,2 Turkey 35,0 Italy 30,0 Spain 29,1 Poland 22,5 Ukraine 15,3 Netherlands 14,9 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75© Acsel - L’association de l’économie numérique.
  38. 38. 38 Cross-border e-commerce/A Digital Europe at the heart of trade According to a survey carried out by CRR-Kelkoo5 in 2010(which we will look at in greater detail in the next chapter), detai-ling 13 European countries6 (representing 400 million inhabi-tants), the proportion of Internet users is situated between 50and 80% of the population (compared to 75% in the UnitedStates). The average percentage of regular users was 66% forpeople aged 16 and over. During the period ranging from 2003to 2009, average growth was 53.7%, with 136% for Portugal,109.7% for France and 74.2% for Spain. The number of Europeans who have never used the Internetis now less than 25% (but still 45% in Italy, 39% in Poland and36% in Spain). The proportion of non users falls to less than 7%in Sweden or in Norway – the few remaining resistants. Critics could suggest that newly converted Internet usersprobably do not represent the most profitable segment for e-com-merce, which already “creamed off ” the best elements of thepopulation, or those who are both the most motivated and themost “profitable”.u High speed Internet access in EuropeAfter Internet penetration, the issue of high speed access is essen-tial, at least for some e-commerce segments. It would appear that 82% of Internet connections in Europehave high speed access (we use the conditional tense here due touncertainty regarding the high speed threshold). In 2009, only30% of inhabitants had a high speed Internet connection, butthis indicator does not mention use in the workplace, which isnot negligible. At the top of the hit parade, as usual, we have theScandinavian countries, Switzerland and the Benelux countries;Germany, France and the United Kingdom are slightly above theaverage, followed by Spain and Italy (20%); Poland is at the bot-tom of the table (13%).5. Online Trends 2011. Research Report Commissioned by Kelkoo. Based upon our analysis of trade estimates,research reports and government publications. CRR, Nottingham, 9 December 2010. 6. Here is a reminder of the countries: Germany, Belgium, Denmark, Spain, France, Italy, Luxembourg,Norway, Netherlands, Poland, United Kingdom, Sweden and Switzerland. © Acsel - L’association de l’économie numérique.
  39. 39. Chapter I/Europe: Diversity in the single market 39SMARTPHONE: THE ITALIANS ARE LEADING THE RACEAccording to ComScore, there were 60.8 million smartphones in Europe in 2010. Ifwe study the percentage of smartphones compared to all mobile phones, the rankingof the European countries is quite unusual the Italians are the champions (32%),followed by the Spanish, the English, the Germans and the French (15.2%). For refe-rence, the Americans have a rate of 18.2%. Therefore the Italians clearly have an ap-petite for technology, with 150 mobile phone subscriptions per 100 inhabitants andfor all mobile phone types combined! But this enthusiasm is not rewarded: with fewspecific services available, they make relatively little use of their smartphones for theapplications that this device normally provides access to and in particular for ac-cess to the Internet. Elsewhere in Europe, 50% of users regularly access the Internetwith their smartphone (Ofcom 2010), to the extent that the percentage of Internetconnections per mobile is increasing rapidly: already 33 % on average, between 44%(Sweden) and 14% (Poland) and France as so often is situated around the averagefigure with 37%. The 3G connection rate is also another area where great differencesexist. With an average of 36.3 per 100 inhabitants, it hovers between 60% (Sweden)and more or less 20% in France and the Benelux countries. It is clear that these figures are very fragile and they often change. But the trendis clear, and the number of smartphones should exceed 50% of the European mobilephone market in 2012 or 2013, despite a slow-down in growth. More significantly, and according to the telecommunicationsregulator7 this time, at the beginning of 2011, 22 million Frenchhomes had high speed or super-speed Internet access (fixed net-works, mainly ADSL), but only 520,000 homes had super-speedconnection on a cable network or a fibre optic network – andhere is where we encounter the first warning sign alerting us ofthe risk for Europe of lagging behind in this field.u SmartphonesDesktops, laptops, tablets, mobile phones and smartphones, notto mention games consoles or media players: the increasing num-ber of ways in which Internet can be accessed also increases theopportunities users have to access services and online commerce.7. Source: ARCEP, quoted in the newspaper Les Échos, 3 June 2011. © Acsel - L’association de l’économie numérique.
  40. 40. 40 Cross-border e-commerce/A Digital Europe at the heart of tradeWe know that the smartphone, this universal terminal, is con-sidered as a powerful means of developing e-commerce with thearrival of m-commerce, which combines online purchases whichhave shifted from the desktop computer to the mobile phone,purchases of applications or digital content from the App Storeor Android Market, e-tickets, without forgetting future contact-less NFC8 payment.u Socialised e-commerceIt is still quite difficult to measure what impact the major devel-opments in online social networks are having on e-commerce,but the majority of experts agree that it is quite considerable, andsome would say that it is revolutionary. This has even given riseto new terminology, such as s-commerce (S as in social) and evenf-commerce (F as in Facebook), and we will soon have t-commerce(T as in Twitter)... Retailers who use Facebook and Twitter mustadopt these codes. This socialization of retail is already replacinga certain amount of commercial waffling, replaced by the libertyof expression we associate with social networking. Their impact on cross-border trade is more problematic. Althoughwe readily stress the global, planetary and borderless nature of theInternet, it is worth noting that communities which are united bysocial networks are much localized – with a few possible exceptionsrepresented by diasporas scattered across Europe. This does not meanthat social networks have little impact on cross-border issues, but itdoes mean that e-commerce can have a tendency to relocate them aslong as they are outward looking, with all kinds of specific affinities,including consumer tastes and preferences.u European e-commerce influenced by American playersThe Europeans rely heavily on Internet for email, onlinebanking services (record levels in Sweden and Norway)and for a wide range of shopping services, which does notnecessarily always result in an actual online purchase.8. For more information on this, refer to: Services mobiles, la rupture (in French), ACSEL (2011). © Acsel - L’association de l’économie numérique.
  41. 41. Chapter I/Europe: Diversity in the single market 41 We have already seen that the estimations concerning thepercentage of Europeans who purchase online can be variableaccording to their sources and the country used for thesample, and that they represent roughly 40%, with the usualdifferences between the group with over 50% (again Scandinavia,the United Kingdom, the Netherlands and Germany) and theother group of those with 20% and less (Eastern Europe and alsoSpain and Italy). But we should also underline the fact that although Europeane-commerce exceeds that of the United States in volume and ingrowth rate, Internet remains broadly influenced (if not domina-ted) by the United States. Not only in terms of technology, wheresuch names as Google and Microsoft speak for themselves, butalso as far as innovation in online applications is concerned andhere we have the illustration of the social network phenomenawith Facebook. On top of all that, all across Europe, Amazon and eBay top theleader board for the highest number of website visitors. Even inthe payment market, the duopoly Visa-MasterCard dominatesthe market, during which time the Monnet European paymentcard project is struggling to emerge9.The single market and Union policiesThe European Union is above all a political objective and its pro-cess of construction depends on these three major dimensions:its institutions, its standards and its specific policies. The threeapproaches have a direct effect on all forms of retail and in par-ticular on e-retail. The institutions are those belonging to the European Union:these political and administrative authorities hold the execu-tive power, and therefore they are often contacted by all kinds ofrights groups with a broad variety of interests, and who no longerhesitate to adopt the Anglo-Saxon tradition of lobbying.9. For more information about the Monnet project, visit the French Banking Federation website:http://www.fbf.fr © Acsel - L’association de l’économie numérique.
  42. 42. 42 Cross-border e-commerce/A Digital Europe at the heart of trade As far as implementation of standards is concerned, politicsdetermine what action is taken by institutions, legislation andother regulatory frameworks that economical activity is subjectto. Generally speaking, legislation “toughens” somewhat, it har-monizes, clarifies and proscribes standards which often originatefrom ideologies, customs and other cultural idiosyncrasies. Thelatter are so firmly rooted that they are also creeping into prac-tices in the digital society, which is presumed universal. In the European Union, the legislator finds itself facing thedifferent national legislations adopted by the Member Stateswhich remain sovereign. Although the EU may sometimes needto abolish some standards (those which include some form of dis-crimination between the nationals of Member States), more oftenits role is to harmonize them. Note that this is directly relevanthere, because harmonization may be implemented top-down (bygeneralizing the strictest standard) or bottom-up, by imposing aminimum obligation which if the Member States can “toughen”if necessary, as long as they do not introduce some form ofdiscrimination by doing so. Overall, the EU creates many more standards than it abolishes.The “noblest” ones (Europe sees itself as the cradle of humanrights, for example) inspire and provide the framework for themost practical applications such as the protection of personalinformation in the digital world. In the areas of interest to us,the different Member States’ national legislation on consumerrights are in the process of being harmonized and they are expe-riencing difficulties. There are also all sorts of customs andpractices in each country which have an effect on all aspects,including even preferences for certain types of payment. In any event, the EU has become the major source of legis-lation in Europe, given that its directives, unlike communityregulations which are totally and directly applied, are “trans-posed” into the different national legislations. The creation and implementation of standards requires greatamounts of work, including the need to carry out preliminarystudies to analyze the impact of a planned directive and count- © Acsel - L’association de l’économie numérique.
  43. 43. Chapter I/Europe: Diversity in the single market 43less reports and assessments. It has brought along with it a specialcategory of technocrats known as “eurocrats”: the Europeanpublic service has approximately 35,000 civil servants and staff,which represents a large workforce but this is nothing comparedto the numbers of national civil servants. Without caricaturing the situation, it is worth rememberingthat, in addition to the European Commission, which embo-dies eurocracy, the legislative process involves the EuropeanParliament, whose members are elected by direct universalsuffrage. It also involves the Council of Ministers, represen-ting the Member States whose democratic nature is a conditionfor membership within the EU. It is our sincere hope that thedeployment of online social networks, that is having the greatpolitical impact that we are seeing in the news, will also contri-bute to democratization in Europe. The EU’s standardization activities are also prompting a lotof response from consulting firms and in particular plenty oflobbying activity by defence groups representing corporate inter-ests and other social groups, including consumers represented bythe BEUC (The European Consumers’ Organisation). It shouldbe noted that it introduced the “digital rights” that are part ofconsumer contracts in its eight priority activity areas. Whether or not we agree with it, it represents the reality thatthe players involved in online retail have to deal with, even ifthey dread a lack of legal frameworks just as much as the com-plete opposite. The economic partners see the single market as the most per-fect illustration of European construction, involving the freecirculation of goods and services, capital and also people. Nofinancial penalties (such as customs duty) and no discriminationbetween companies and institutions who wish to set up opera-tions in any of the Member States. As it involves retail, e-commerce provides a crucial contri-bution to the single market, as you could say that it relocatesshops and thus provides open access to consumers wherever theylive. Otherwise, today’s BtoC cross-border purchases are mainly© Acsel - L’association de l’économie numérique.
  44. 44. 44 Cross-border e-commerce/A Digital Europe at the heart of trade DIGITAL AGENDA? By including a policy brief* to the European Digital Agenda, the French Centre for Strategic Analysis underlined the fact that with an annual turnover of 660 billion Euros, ICT represents 5% of total GDP and over the last twenty years has accounted for half of all increases in productivity achieved by the Old Continent. Apart from these directly measurable effects, the ICT boom has deeply changed society not only with new means of communication but also in the changes it has brought to how we create content and how we conduct business. * The European Digital Agenda, policy brief 223, Centre for Strategic Analysis (May 2011).>> made by tourists and business travellers: in this case it is the consumers who cross the borders. Therefore it is truly up to e-com- merce to open a single retail market for the European consumer. So it is understandable that the European authorities are keeping a keen eye on how things are going, to the extent that they are even fixing target figures. Politics is also involved, more or less in coordination with the economic players, in the implementation of the commu- nity services that are essential for the economy to be able to function, including research, subventions, taxation policy and public investments... In the European Union, European net- works, whether they are physical or digital, offer a vast field for action in these areas. This is the reason why ICT are part of a strategy with a number of programmes included in a European Digital Agenda: “The digital strategy for Europe is one of the seven flagship initiatives for Europe 2020. It aims at defining the key leading role that information and communications technologies (ICT) are expected to play if Europe is to totally fulfil its ambitions for 202010”. 10. Paper issued by the Commission to the European Parliament, to the Council, the European Economic and Social Committee and the Committee of the Regions, A digital strategy for Europe (2010). © Acsel - L’association de l’économie numérique.
  45. 45. Chapter I/Europe: Diversity in the single market 45 The impact of information technologies on the economy andsociety far outweighs the 5% of European GDP that is indicatedby statistics. But the contribution made by cross-border e-com-merce in the development of the digital economy in Europe isone of its most visible aspects.A Europe which is primarily cross-border?As we have already seen, European construction involves thecoordination of all levels of governing authorities surrounded byborders that do not just simply represent a separation of MemberStates. Between the global level (the EU) and local level, and aswell as the twenty seven sovereign nations, we have several hun-dreds of regions that are more or less independent and other terri-torial entities with their own geographical, historical and culturalborders: Eastern Europe, a Europe of religions and the major lin-guistic areas. There is no doubt that progress made in the construction ofEurope has reduced borders, or it has at least made it easier tocross them. But the troubled history of part of the continenthas created barriers that we thought had disappeared, for exam-ple in the Balkans, with the break-up of the former Yugoslavia.Even within the EU and from its Member States, some regionalmovements who aspire to a form of political existence could alsoend up creating new divisions or reviving old ones. The finan-cial crisis has revived an old division between the countries ofthe North and the West, who are considered economically “vir-tuous”, and the South, whose initials are unfortunately used forthe term PIGS (Portugal, Ireland, Greece, and Spain) and whoare judged less virtuous, while the Members who joined recentlyfrom Eastern Europe (CEE) are moving towards achieving thestandards required by the EU… But what is more surprising are the new borders that the EUinstitutions themselves create so to speak, the most famous ofthese being the Euro zone with its common currency for theseventeen Member States. In the same way, immigration creates© Acsel - L’association de l’économie numérique.
  46. 46. 46 Cross-border e-commerce/A Digital Europe at the heart of trade PIONEER PROJECTS IN A TWO SPEED EUROPE Airbus, the famous European industry flagship, offers us an interesting example of a two speed or pioneering approach to the construction of Europe: groups of countries and companies combine forces for a particular development project. And finally, the Euro, the single currency in the seventeen countries of the Euro zone, is the most important example. It would therefore be hard to understand why the players in- volved in online retail could not also adopt the same approach as part of an ongoing development strategy, to cross the borders of their home countries and form one or several successive groups with other countries.>> a number of exceptions to the free movement of people within the Schengen area (25 Member countries). Other groups of nations or regions, may be interested in developing “special forms of cooperation”: there are some European institutions which operate outside of the EU framework, an example of this is the European Space Agency. The EU has only been in existence for half a century11, yet it has accomplished a number of important transformations. But without a doubt, it is capable of doing a lot better! The single market is not complete. Specific policies have encouraged the deployment of trans-European networks, but European logistics and postal services are not functioning “seamlessly”, far from it. Although the Digital Agenda includes Europe in the digital econ- omy, there is still a need to reduce the digital divides that exist. It is still true to say that the process of unification has pro- duced some spectacular results of historical importance. Among others, this is reflected in the huge amounts of commercial trade and the different industrial and capital related agreements that have all contributed to the integration of the European economy. 11. The “Schuman declaration” of 9 May 1950 is considered to have led to the creation of the European Union. © Acsel - L’association de l’économie numérique.
  47. 47. Chapter I/Europe: Diversity in the single market 47 The strongest indicator of this progress is that the least econo-mically developed countries and regions are catching up bycapitalizing on their competitive advantage in order to be part ofthe EU economy. Generally speaking, these countries and regionsappear therefore to act like reserves required for growth, in par-ticular with regard to the digital economy and online commerce. But still today, borders receive a lot of bad press and the expres-sion “without borders” is an indication of this. We have reporters,doctors and managers without borders, why not customs offi-cers too? However, although the border is a barrier, it is also acrossing point, and whether it is busy or not depends on how dif-ferent the two sides are and how open they are to trade. Europe’s“logic” would therefore appear to remain trans-border rather thanborderless for some time to come. In particular, this logic governs commercial activities becausefrom the retailer and consumer point of view, the “good borders”are those that can be crossed, without any dissuasive costs orfinancial penalties. The EU itself has no firmly established exter-nal limits simply because it is still enlarging its membership. Asfar as online commerce is concerned, Turkey, Ukraine or Russiaare major market targets that are also moving towards entry tothe digital economy. The situation is the same for countries andregions in the rest of the world which form linguistic and culturalcommunities with a number of Member States. The EU, Europe in the broader sense, the rest of the world: arethey all steps leading to cross-border e-retail?The European modelIt might appear as a paradox today if we extol the virtues of theEuropean Union. The crisis threatening its single currency, thedifficulties encountered when trying to save the Member Stateswho were most harshly hit, and more generally, the “debt cri-sis”, are today a cruel reminder of the shortcomings of Europewith its twenty-seven Members. It is also experiencing difficul-ties dealing with emerging countries or the United States, who© Acsel - L’association de l’économie numérique.
  48. 48. 48 Cross-border e-commerce/A Digital Europe at the heart of tradealthough also extremely weakened, still play a dominating rolein technologies that are redefining the economy and societywith their new applications. And finally, Europe is faced with apopulation decline accompanied by population aging, never hasthe term “Old Continent” been more applicable to Europe thanit is today. It is true that this decline is counterbalanced by waves ofimmigration that the EU is struggling to control and this justgoes to show how attractive a target it is. Can it still be consid-ered a model? The economist Jeffrey D. Sachs12, believes that itcan: “The European Union (EU) is the best model to be able tounderstand how neighbours bogged down in long standingconflicts have succeeded in joining forces for their mutual ben-efit[…] The EU has created a peace zone in an area which wasonce the scene of endless battles. It has provided the institu-tional framework required for the reunification of Western andEastern Europe. It has created regional infrastructures. The sin-gle market has played a key role in turning Europe into oneof the most prosperous regions on the planet. And the EU isa global leader in the field of environmental sustainability. Itis for these reasons that the EU represents a unique model forother regions that are caught up in conflicts and experiencingthe effects of poverty, insufficient infrastructures and the envi-ronmental crisis”. The EU thus continues to play an important role on theworld stage, from the confines of this Europe so unsure of whodoes not belong (or not yet?) to the Union, but whose influ-ence reaches even the most remotely located emerging coun-tries. Some of the latter have adopted one of the many languagesspoken in the EU. The majority of them owe part of their newlyacquired wealth to the fact that Europe is their main custo-mer. And the extreme diversity which endangers European12. Jeffrey D. Sachs is a development specialist, Director of the Earth Institute at Columbia Univer-sity and a specialist consultant appointed by the United Nations Secretary General to examine theMillennium Development Goals. © Acsel - L’association de l’économie numérique.
  49. 49. Chapter I/Europe: Diversity in the single market 49unification is also proof of the multiple advantages that it hasat its disposal. The retailers, and in particular all players involved inonline retail, need to fully integrate these European char-acteristics wherever the opportunities (single mar-ket, single or common currency as well as the differentEuropean and trans-European linguistic and cultural areas)come up against obstacles (cultural, monetary, legislative and taxdifferences). Especially when, from another point of view anddepending on the situation and the strategic intelligence of theplayers, the obstacles are converted into opportunities. And, for the most ambitious, perhaps Europe is only the firststep on the road to conquering world markets. ***© Acsel - L’association de l’économie numérique.
  50. 50. 50 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  51. 51. 51 Chapter II The contrasting landscape of European e-commerceW hat is the current state of European e-commerce and what direction is it expected to take? This is not an easyquestion to answer, especially when the definitions of thesetwo terms, Europe and e-commerce are uncertain, they have a“variable geometry” so to say. It is difficult to obtain homoge-neous data relating to the twenty seven EU countries. Certainreports only cover some of these countries, whereas others doquite the opposite (even the same ones) and include countrieswhich are not members, such as Switzerland and Norway, oreven Russia, Ukraine and Turkey. This is the case for two recent studies which we will provideas examples to illustrate, among other things, the current state ofplay in European e-commerce: the CRR-Kelkoo study1, alreadymentioned as well as the IMRWorld2 study on global e-com-merce in 2010. The aforementioned concerns 13 Europeancountries3, less than half of the total number of EU countries,but which account for 80% of its population and the majorshare of its GDP; but it includes two countries that are not1. Online Trends 2011. Research Report Commissioned by Kelkoo. Based upon our analysis of trade estimates,research reports and government publications. CRR, Nottingham, 9 December 2010. 2. B2C Global e-Commerce Overview 2011. Containing total B2C e-Commerce, statistical data, forecastsand country profiles of leading and upcoming countries in the world. April 2011 (last updated: 11 May2011). www.imrworld.org. Study sponsored by Oban Multilingual. 3. Here is a reminder of some of the countries: Germany, Belgium, Denmark, Spain, France, Italy,Luxembourg, Norway, Netherlands, Poland, United Kingdom, Sweden and Switzerland. A Europe ofthirteen member countries that we will discuss later. © Acsel - L’association de l’économie numérique.

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