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

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

  • Cross-border e-commerce> a digital europe at the heart of trade <
  • 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
  • 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.
  • 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.
  • 4 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 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.
  • 6 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 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.
  • 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 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 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.
  • 52 Cross-border e-commerce/A Digital Europe at the heart of trademembers, Switzerland and Norway. The IMRWorld studypresents a slightly different sample of European countries: 23countries, including Switzerland and Norway, but also Russiaand Turkey. This variation in the geographical scope of the studies isawkward, but paradoxically it may be useful if we look at itfrom a “cross-border4” point of view. Our attention is alsodrawn to EU border countries such as Turkey and Russia (oneis candidate and the other not) where specifically the volume ofe-commerce business is currently quite low but it is expected togrow strongly. We would therefore be wrong to underestimatecross-border expansion to countries included in the “broaderdefinition of Europe” and further afield.The multiple facets of e-commerceWhat is more problematic is the difficulty we have in reachingagreement on the definition of e-commerce. It is increasinglydifficult to separate the type of retail we describe as “electronic”from the other forms of retail or even from the rest of the eco-nomy, without mentioning the traditional opposition betweenonline and bricks and mortar retail, or “traditional” retail as it iscurrently referred to. How can we separate online retail when the majority of com-mercial transactions involve an Internet connection at one pointor another in the transaction, without the whole transactionnecessarily being carried out on line? In the most advanced countries, it is estimated that over threequarters of consumers plan their purchases using the Internetin some way or another. In contrast, some people prefer to seethe products in store before making their purchase on line. Thisdiversity is even clearer when it comes to delivery services, to thehome or to a pick-up location, and also sometimes at the ware-house or store, or even at a drive-in, where a customer orders4. To simplify presentation in this book, we will refer to the term “cross-border” to represent “commerceor cross-border e-commerce”. © Acsel - L’association de l’économie numérique.
  • Chapter II/The contrasting landscape of European e-commerce 53 THE GEMS STANDARD There does exist a standard, it is the GEMS (Global E-Commerce Measurement Stan- dard) accepted in 2010 by several European associations in the e-commerce sector in the United Kingdom, Belgium, France, Germany, in Slovakia and The Netherlands*. It is based on a group of definitions, one of which is online commerce (e-retail shop- ping). The main studies illustrated in this book refer to this standard. At this point we would like to mention the problem of exchange rates: the British studies express amounts in pounds sterling converted into Euros, and we know that exchange rates are not set in stone – and even more so in the case of the dollar. * See: IMGWorld study.>> grocery items on the Internet and then picks them up at the supermarket or warehouse. E-commerce is no longer synonymous with distance shopping – and not all distance shopping can be described as e-commerce either, far from it5. A Eurobarometer6 report published in March 2011 provides a useful reminder of the fact that in the twelve months prior to the report, 37% of EU consumers made purchases on line, but also 21% made a remote purchase by mail and 13% ordered by phone. Therefore, almost half of distance shopping is not orde- red online. Seeing as the consumer takes a smartphone everywhere and this terminal enables access to online commerce, e-commerce is not limited simply to home shopping, but can be extended to distance shopping. Therefore, if we are seeing more and more “e-” in retail and in the economy in general, expressions that were once considered as paradoxical like “proximity e-commerce” are perfectly appropriate in today’s world. 5. Here, e-commerce, electronic commerce and online commerce are all synonyms. However, the scope of e-shopping is broader, considering that on the Net as in the physical world, shopping (where we “go shopping”) does not necessarily result in a final purchase. 6. Eurobarometer No.299, Attitudes Towards Crossborder Trade and Consumer Protection, Analytical Report (2011). © Acsel - L’association de l’économie numérique.
  • 54 Cross-border e-commerce/A Digital Europe at the heart of trade All in all, the different approaches to European e-commerce arenot essential to our subject, which aims less at providing an exact,precise and single representation (supposing that this project isstill realistic), than analyzing what the obstacles and opportuni-ties are for cross-border e-commerce across Europe and beyond,and to describe the ways and means required. We may add thatthe notion of “distance” shopping remains relevant for cross-border e-commerce as a channel offering a buyer the option toshop in a retail store outside of the native country. We are going to analyse the study carried out in January2012 by the Centre for Retail Research (CRR) in Nottingham(United Kingdom) for Kelkoo. The sample of thirteen countriesis quite representative of European e-commerce, but does notassess the inequalities so much as it includes only one EasternEuropean country (although it is the biggest one), and that isPoland. Based on the data collected and analyzed by the CRR, onresearch reports and government publications (including those ofthe EU), this study publishes figures and data relating to e-com-merce in 2011, with analyses and short term forecasts (2012).E-commerce or Internet retailing7 includes the sale or transfer ofmerchandise (including software) and any related services suchas shipment or installation, purchased over the Internet by theend consumer. The study was carried out in accordance with theGEMS standards, but excludes online spending on the followinggoods and services: tickets, travel, cars, fuel, pornography, insu-rance and financial services. Another important source is the IMRWorld study on globale-commerce in 2010, and what is interesting about this study,apart from the fact that it relates to world commerce, is that it7. Online retailing deals with the sale or transfer of merchandise (including software) and any relatedservices such as shipment or installation purchased over the Internet by the final consumer. The defini-tion used takes into account and is consistent with the new Global E-Commerce Measurement Standard,agreed in 2010 by e-commerce organisations in the UK, Belgium, France, Germany, Slovakia and theNetherlands. The report deals with retail spending (as defined in the new standard) and excludes onlinespending on tickets, travel, cars, fuel, pornography, insurance and financial services. We believe this isthe first study to be published that is fully consistent with the new standard. © Acsel - L’association de l’économie numérique.
  • Chapter II/The contrasting landscape of European e-commerce 55systematically provides information about each of the countriesstudied (country profile). This enables us to get a better unders-tanding of e-commerce (state of play and perspectives) in aneconomic and social context. This study is also based on theGEMS standard, but this one includes spending on travel andticket sales. We will mention other sources to complete the picture, pro-vide details or present information from a different angle.European market estimationsE-commerce is growing very strongly in Europe, with a volumeof business close to 200 billion Euros, which represents morethan a third of world e-commerce: 36%, whereas the GDP of theEU accounts for 28% of world GDP. Roughly 40% of Europeanconsumers have purchased over the Internet in 2010 whereasthey accounted for less than 30% in 2006. According to CRR-Kelkoo, online sales in Europe in 2011reached 200.5 billion Euros for the 13 European countries. Threecountries represent more than 70% of the total: the UnitedKingdom (59.4 billion), Germany (45 billion) and France (38.6billion). Behind these three leaders, two groups generated a volumeof business of almost 10 billion Euros, they were Italy and theBenelux countries. Spain represents 9.3 billion, followed bySweden (5.7) and Switzerland (5.4). At the “bottom of the table”, we clearly need to distinguishbetween the smaller highly developed countries (Scandinavia)and Poland, where the turnover of e-commerce (4.5 billion fora population of 38 million inhabitants) is lower than that ofNorway (4.8 billion for a population eight times smaller). We can therefore observe a “gap” between the three leaders andthe major countries that follow them, representing a ratio of 3to 1 in online sales volume. Obviously, Poland and also Italy andSpain are all mission countries for local and foreign e-retailers, asclearly indicated by the rates of growth observed.© Acsel - L’association de l’économie numérique.
  • 56 Cross-border e-commerce/A Digital Europe at the heart of tradeBRITISH CONSUMERS ARE THE ONLINE SHOPPING CHAMPIONS“A McKinsey* report published during the e-G8 shows that in the United States,online purchases represented 250 billion Dollars in 2009, with an average of 1,773Dollars per household. This is not to be seen as a record, as the British do better (1.4times better) than their American cousins and 1.8 times better than the French. TheBritish provide examples in two areas, one of which is online travel booking. In 2009,they spent on average 1,067 Dollars in this sector, compared to 717 Dollars for theFrench and 631 Dollars for the Americans. The same goes for food purchases, wherethe amounts totalled 228, 79 and 33 Dollars respectively. There is one reason forthis: the British supermarket chain Tesco was very quick to develop e-commerce**”.* The Net’s Sweeping Impact on Growth, Jobs and Prosperity (2011). See www.mckinseyquarterly.com.** Michel de Grandi, Les Échos (8 June 2011).u The American benchmarkTo get a better idea of how European e-commerce stands, it isalways useful to compare it with that of the United States. To doso, the CRR refers to a Forrester Research study carried out in2010. In terms of volume, Europe is ahead of the United States,and if these two entities have a great difference in population(500 million Europeans compared to 300 million people in theUnited States), they are very close in terms of GDP. The tur-nover for e-commerce in the United States totalled 173 billionDollars, compared to 172 billion Euros for the thirteen Europeancountries. More significantly, European e-commerce is growing fas-ter: after a drop to 2% in 2009, growth increased to 11.4% in2010 in the United States (20% in Europe), but Forrester consi-ders that 2010 is a peak in American e-commerce, which shouldfall back to growth rates below 10% to reach an amount of 250billion Dollars in 2014. © Acsel - L’association de l’économie numérique.
  • Chapter II/The contrasting landscape of European e-commerce 57 Finally, the share of the online retail market in overall retail(another notion which requires discussion8) is above that of theUnited States in several countries. The 12% of market shareobserved in the United Kingdom in 2011 (CRR-Kelkoo) may beconsidered as a medium term objective for the entire EU, with anaverage of a little under 7.8% in 2011. In billions of Euros, except for the United States (billions of Dollars) E-commerce turnover 2009 2010 2011 United States 155 173 192 Europe 144 171.9 203 UK 44.9 52.1 59.5 Germany 34.4 39.2 45.1 France 24.8 31.2 38.7 Source: CRR-Kelkoo, 2011, except for the United States (Forrester, 2010), where the data excludes the travel and financial services sectors as well as the turnover of international subsidiaries of e-retailers such as Amazon and eBay. The IMRWorld study on world e-commerce in 2010 providesturnover expressed in Euros and significantly higher in general9.The figures drawn up in 2009, show that the volume of busi-ness in the United States was 175 billion Euros (185 for NorthAmerica and Canada) compared to a little less than 175 billion forEurope (almost equal therefore in absolute value in 2009). Theyconfirm that Europe would have exceeded the United States, butonly in 2010 and to a lesser extent than in the observations ofthe CRR-Kelkoo study (IMRWorld estimation: 214 billion inEurope compared to only 200 billion in the United States). Butthe significant difference in growth in favour of Europe (22%compared to 14%) should further increase the gap.8. “Although comparisons with the US may not be fully comparing like with like”, adds the CRR-Kelkoo study. 9. It is worth remembering that estimations include spending in the travel sector and ticket sales. © Acsel - L’association de l’économie numérique.
  • 58 Cross-border e-commerce/A Digital Europe at the heart of trade 2009 2010 (estim.) Growth Billion Billion Euros Euros 2010/2009 World 478 590 23% Europe 175 214 22% North America 185 211 14% Asia-Pacific 93 130 40% Source : CRR-Kelkoo, 2011 What is interesting about this study is that it provides figuresfor the rest of the world thus enabling comparisons betweenmajor geographical regions. Global e-commerce should almostdouble by 2013, to over 1,000 billion Euros! As well as the American benchmark, we must note that e-com-merce accounts for 130 billion Euros in Asia-Pacific (IMRWorld).Japan has a volume of business similar to that of the UnitedKingdom, and among the emerging countries, we have Brazilwhich can be compared with Italy or Canada. As for China, itsrate of market growth will probably make it one of the world lea-ders in a few years from now.u Is China a benchmark?According to a study by the Boston Consulting Group (BCG)10,the Chinese e-commerce market represented 476 billion RMBin 2010, compared to 128 billion in 2008. While less than 10%of the population had purchased online in 2006, this figure hadrisen to 23% in 2010 and is expected to almost double by 2015to total 44%, thus reducing the gap with the United States andother developed markets. China had 457 million Internet users in 2010, 52% of themlocated in urban areas compared to only 18% in rural areas. Asfor the number of online shoppers, they are expected to increasefrom 145 million in 2010 to 329 million in 2015! By way of10. The World’s Next E-Commerce Superpower: Navigating China’s Unique Online-Shopping Ecosystem.The Boston Consulting Group (2011). © Acsel - L’association de l’économie numérique.
  • Chapter II/The contrasting landscape of European e-commerce 59comparison, this growth represents on average the equivalent ofthe Canadian market, which each year would be combined. Finally, the BCG estimates that online purchases currentlyrepresent 3.3% of retail and should total 7.4% in 2015. Chinashould therefore become the biggest world market for e-com-merce by 2015, with an average growth of 33% per annum.Differences and adjustmentsAs is the case for the majority of indicators used to report EU eco-nomic characteristics, averages are relatively insignificant becausethe gaps between the Member States are so large. Still, they are notcompletely staggering. If three countries (the United Kingdom,Germany and France) account, as we have already seen, for over70% of the total, they owe that to the size of their economy, evenif they are totally ahead of the other major countries that are fur-ther down the leader board (Italy and Spain). In terms of diffe-rence, the comparison with the current situations of Norway (notin the EU) and Poland is striking, but the growth rate is muchstronger in Poland. Yet still, the leading countries do not seem to have reached thelevel of maturity that would bring the rate of growth to less thantwo figures, contrary to what is expected in the United Statesfrom 2011, according to Forrester.u E-commerce shares in retailIn terms of market share in retail, and still according to CRR-Kelkoo, e-commerce accounts for 7.8% in Europe, but muchmore in the United Kingdom (12%), in Germany (9.0%), inSwitzerland (8.7%) and in Denmark (8.0%). These last figuresare important because they probably indicate a reserve for growthfor the countries that are less mature with regard to e-commerce,such as France with 7.3 % in 2011, but with an expected rate of8.7% for 2012. On the other hand, the major countries which are “laggingbehind”, including Poland and Spain have a rate of around 3%,© Acsel - L’association de l’économie numérique.
  • 60 Cross-border e-commerce/A Digital Europe at the heart of tradewhich is four times less than the United Kingdom and 1.3% forItaly. Considering the differences in growth between e-commerceand retail in general, online European retail should still gain ano-ther point in market share in 2012 at 8.8%, which would place iton a par with the United States.u E-consumer demographyFrom a demographic point of view, and as already discussed inthe previous chapter, about 40% of European consumers pur-chased over the Internet in 2010, compared to less from 30%in 2006. On this basis, we can compare a group with over 50%(Scandinavia, the British and the Germans) and the other groupof those with 20% and less (roughly fifteen EU countries inclu-ding Spain, Italy and Poland), with France situated close to theaverage, as is often the case. In the group of 13 European countries that were part of the CRR-Kelkoo study, 45% of consumers purchased goods and services overthe Internet and this is also the percentage observed for France. Butthey represent 70% in Norway, 66% in the United Kingdom and56% in Germany, compared to 23% in Poland and in Spain andonly 12% in Italy.u Four Europes in e-commerceIn this very diverse set, we see some groups of countries that arerelatively homogeneous, enabling us to divide Europe into foure-commerce groups. The first group includes the Scandinavian countries, Norway(outside the EU), Sweden and Denmark, which have highperformance communications infrastructures and make greatuse of the Internet in general. E-commerce accounts for a largemarket share there, but less so than in Germany and the UnitedKingdom. The CRR-Kelkoo study suggests, with caution thatthis anomaly may be due to the fact that local players havelimited capacity to achieve economies of scale because of the sizeof their markets. © Acsel - L’association de l’économie numérique.
  • Chapter II/The contrasting landscape of European e-commerce 61 The second group includes the United Kingdom and Germany,whose telecommunications infrastructures are less efficient andwhich have a lower user rate than the first group, but they accountfor a larger market share in e-commerce. The third group includes Switzerland (outside the EU), Franceand the Benelux countries with average market shares, lower pro-portion of regular Internet users and less high speed access (exceptthat the Benelux countries can boast an Internet user rate similarto that of the Nordic countries!). Finally, the fourth group (Spain, Italy and Poland) which werefer to as mission countries for e-retail. In this case there arefewer regular Internet users and high speed access is less avai-lable with a low market share in e-commerce… but they do havegenuine reserves for growth in cross-border e-commerce. It should be noted that, according to these criteria, the UnitedStates would be categorised in the second group.u What do Europeans purchase online?Not all Europeans shop for the same goods on line and thereasons for these differences seem to have something to do withthe level of maturity of the market. This is only a simple expla-nation since the sector breakdown is also subject to debate. Themedia products are at the top of the shopping list, followed byclothing and consumer electronics11. Online grocery shopping isa good indicator of how mature a market is, as is the case withthe United Kingdom. According to the CRR-Kelkoo study, which we should remem-ber excludes travel and ticket sales, average yearly spending isestimated at 429 Euros per person in Europe for 2010. It is com-forting to see that this evaluation is consistent with the totalturnover figure of 200 billion Euros for the EU.11. According to a study by the European Union (February 2009), the three most widely purchasedproduct categories were, expressed in percentage of people who shop on line, tourism and travel (42%),followed by clothing and sports articles (41%), books, magazines and e-learning (39%). Then camehousehold goods, including toys (35%), tickets (33%), films and music (29%), electronic goods (25%),software and computer games (21%). Half of those who purchase films, music, books and similar pro-ducts, software and computer games, download their order directly. © Acsel - L’association de l’économie numérique.
  • 62 Online Sales % increase of online sales Av. No. of Items Per customer per annum Per customer per annum Purchased 2010 2011 2012 2010-2011 2011-2012 2010 2011 2012 UK 1 515.38 1 693.65 1 741.02 11.76% 2.8% 41 39 43 France 1 208.44 1 440.84 1 688.90 19.23% 17.2% 26 28 32 Denmark 1 652.00 1 897.35 1 967.02 14.85% 3.7% 30 31 32 Germany 887.95 991.40 1 031.91 11.65% 4.1% 23 25 28 Italy 1 093.48 1 261.03 1 399.44 15.32% 11.0% 27 22 26 N/B/L 735.85 868.60 870.31 18.04% 0.2% 18 20 25 Norway 1 435.44 1 733.89 1 766.64 20.79% 1.9% 18 21 24 Online share per cutomer Poland 366.80 457.64 523.20 24.77% 14.3% 16 15 18 Spain 795.33 892.87 946.45 12.26% 6.0% 19 17 19 average no of items purchased – 2008-2012 Sweden 883.60 1 068.20 1 098.83 20.89% 2.9% 25 26 28 Switzerland 1 297.76 1 539.32 1 552.82 18.61% 0.9% 27 28 33 Total/averages 25 25 28© Acsel - L’association de l’économie numérique. CRR–Kelkoo Online trends 2012 Cross-border e-commerce/A Digital Europe at the heart of trade Weighted average 1 067.65 E 1 221.22 E 1 298.37 E 14.18% 6.3%
  • Chapter II/The contrasting landscape of European e-commerce 63 More significantly, spending per consumer was estimated at1,221 Euros in 2011. Based on this criterion, the biggest spen-ders (over 1,400 Euros per year) are the Danish, the British, theNorwegians, the Swiss and the French. It is interesting to note that the travel sector, holiday bookingsand ticket sales represent a large share of e-commerce in the broa-der sense, both in terms of the percentage of Internet users whoshop on line and relative to basket value: the exclusion of thesepurchases represents a relatively large reduction in the averagebasket value.u GrowthWe are aware of the rather gloomy forecasts for the Europeaneconomy, both in terms of demand (consumption) and supply(corporate financing). But the majority of online e-commercegrowth engines should nevertheless continue to drive activity in2012 and in the medium term. In any event, the CRR-Kelkoo study estimates growth inEuropean e-commerce between 2008 and 2011 at over 40%and expressed in current prices. This is explained by the fact thatcommon to all European countries is the high level of growth,which is always in two figures and much higher than the ave-rage of 20% in the countries “catching up”: Spain, Italy and espe-cially Poland, with 33.5% of growth between 2010 and 2011.They seem to have made up the lost time even though the moreadvanced countries still have a growth rate in double figures. Growth figures should not be affected in 2012 with an estima-ted figure of 16.1%, and as a result European e-commerce shouldachieve a result of 232 billion Euros. In terms of growth, thechampions in 2011 were Poland (33.5%), but also Italy (24.8%),France (24%), followed by Spain (19%). However, countrieswhich were already high up in the e-commerce leaders table, likeSweden, Norway or the Benelux continue to achieve rates over20%. Quite logically, the two leaders in absolute value are theUnited Kingdom and Germany and they complete the markettable, with approximately 15% all the same.© Acsel - L’association de l’économie numérique.
  • 64 Online sales and sales growth and Online, as share of all retail 2008-2012 CRR–Kelkoo Online trends 2012 Total Online Sales (Euros billions) Annual Growth Online Sales Online, as share of all retail 2008 2009 2010 2011 2012 2008-2009 2009-2010 2010-2011 2011-2012 2008 2009 2010 2011 2012 UK 40.09 44.86 52.13 59.42 67.74 11.9% 16.2% 14.0% 14.0% 8.6% 9.5 % 10.7 % 12,0 % 13.2% France 18.60 24.75 31.18 38.66 47.17 33.1% 26.0% 24.0% 22.0% 3.9% 4.9% 6.0% 7,3 % 8.7% Denmark 3.21 3.83 4.49 5.21 5.94 19.3% 17.3% 16.0% 14.0% 5.4% 6.1% 7.0% 8,0 % 9.1% Germany 29.40 34.34 39.19 45.07 50.92 16.8% 14.1% 15.0% 13.0% 6.0% 6.9% 8.0% 9,0 % 10.0% Italy 5.58 6.60 7.98 9.96 11.76 18.2% 21.0% 24.8% 18.0% 0.6% 0.8% 1.0% 1,3 % 1.6% N/B/L 6.95 8.31 10.17 12.25 13.96 19.6% 22.4% 20.4% 14.0% 2.7% 3.5% 4.3% 5,1 % 5.7% Norway 2.79 3.26 4.00 4.88 5.71 16.8% 22.8% 22.0% 17.0% 5.6% 6.3% 6.8% 8,1 % 9.1% Poland 1.86 2.51 3.37 4.51 5.59 34.9% 34.4% 33.5% 24.0% 1.7% 2.0% 2.5% 3,1 % 3.8% Spain 5.30 6.31 7.87 9.37 10.87 19.1% 24.8% 19.0% 16.0% 1.9% 2.5% 3.0% 3,5 % 4.1% Sweden 3.20 3.82 4.70 5.74 6.78 19.4% 23.1% 22.1% 18.0% 3.9% 4.8% 5.8% 6,9 % 8.0% Switzerland 3.24 3.82 4.55 5.45 6.32 17.9% 19.1% 19.8% 16.0% 4.8% 5.6% 7.4% 8,7 % 9.9% Totals 120.22 E 142.41 E 169.63 E 200.52 E 232.76 E 4.1% 4.8% 5.7% 6.6 % 7.6% Weighted average 18.5% 19.1% 18.2% 16.1% 4.9% 5.6% 6.7% 7.8 % 8.8%© Acsel - L’association de l’économie numérique. Cross-border e-commerce/A Digital Europe at the heart of trade
  • Chapter II/The contrasting landscape of European e-commerce 65 If we take a look at one sector in particular, we can see thatclothing (including shoes, very popular) should progress in 2011by almost 40% in France (22.5% in the United Kingdom), andelectronics and telecommunications goods by 25.8% (12.7% inthe United Kingdom). Another area which is also developing isthat of grocery supplies in the United Kingdom (17.5% com-pared to only 13.5% in France for an average growth of 24% ine-commerce). E-commerce remains a high growth sector in Europe, and evenin countries which have the highest levels of maturity and wherethe overall economy is sluggish. A perfect illustration is the caseof the United Kingdom, which leads e-commerce across Europe:the rate of growth in e-commerce is slowing down but it remainsseveral times higher than that of general retail. But although European e-commerce has every reason to feeloptimistic, it still remains confined within national strongholds,where everybody stays at home. This is the case mainly for thebigger countries, whereas the smaller ones, especially the weal-thier ones are keener (or maybe forced) to trade more openly.As a result, cross-border trade is stagnant. If we take a look atthe e-commerce leader table, in each of the major Europeancountries, we can see that the only sites that are foreign to thecountries observed are two or three subsidiaries of American cor-porations. Again, this goes to show that the United States holds the keysto technological environments and service platforms (via Google,Microsoft and now Apple or Facebook to name but a few) andthey also represent the only truly “global” players in e-commercewith Amazon being a good example of this. Europe is a fertile ground for producing national champions.All that remains to be done is produce European leaders. ***© Acsel - L’association de l’économie numérique.
  • 66 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 67 Chapter III The issues at stakein cross-border e-commerceT he e-commerce landscape is particularly dynamic and the amount of cross-border trade is significant, but itstill appears to be stagnating. However, an increasing num-ber of e-commerce players are working to extend their nat-ural catchment area, in other words their domestic markets,by attempting to develop other European markets. With a turnover amount close to 2,500 billion Euros in theEU, retail is by its very nature a “proximity” or local form ofcommerce. Before e-commerce came along, cross-border retailspending was mainly limited to travellers, tourists and businesstravellers. This still remains partly true today. Data concerning European cross-border e-retail is quite rareand reflects the fact that it still remains quite marginal. However,the already mentioned Eurobarometer study1 indicates that theaverage amount of European cross-border spending on goodsor services is around 7%. The most active customers are inLuxembourg (39%) and Malta (38%). Conversely, we observe lessthan 5% of cross-border purchases in countries such as Romania,Poland, Bulgaria, Hungary, Italy or the Czech Republic.1. Eurobarometer No. 299, Attitudes Towards Crossborder Trade and Consumer Protection, AnalyticalReport (2011). © Acsel - L’association de l’économie numérique.
  • 68 Cross-border e-commerce/A Digital Europe at the heart of trade The diagram below provides a good illustration of the dif- ferences in cross-border spending behaviour across European countries. EU Cross-Border Internet purchases Source: Eurobarometer, 2011 report Please tell me if you have purchased any goods or services in the past 12 months, by distance in (YOUR COUNTRY) or elsewhere in any of the following ways.…? Via the Internet (webside, email, etc.). Base: all respondents, % Yes, from a seller/provider located in another100 EU country answers by country. 80 60 39 3840 34 30 24 22 18 20 13 12 11 9 9 8 8 8 8 7 7 7 6 6 5 4 4 4 3 3 2 0 MT AT LT PT IT LU IE DK FI SE NL BE FR UK SK EE SI EL EU 27 LV DE ES CZ HU BG PL RO CY But for its part retail supply to physical stores or BtoB retail, has been cross-border for quite some time. In the BtoC market, e-commerce could well change the situation by enabling com- panies to relocate shops as it were. It is also likely that many common operations in BtoB will be applied to BtoC. Cross-border in the European e-commerce landscape A report published by the Commission and dating back to 2009 entitled Cross-Border E-commerce in the European Union2, reveals that from 2006 to 2008, the proportion of all European consum- ers purchasing at least one item via Internet increased from 27 2. European Commission, Report on Cross-Border E-commerce in the EU (February 2009). © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 69to 33% whereas that of cross-border remains stable at around7%. Among the consumers surveyed, a third of them do howeverplan to use the Internet to search for a cheaper or better qualityproduct. Consumer resistance would seem to be quite passive:a lack of information and various fears that are more or less jus-tified. A Eurobarometer3 report in March 2011 on the attitude ofconsumers towards cross-border retail indicates that 37% ofEuropean consumers made a purchase on the Internet in thetwelve months that preceded the survey4. Between 2006 and2010, the percentage of e-buyers increased by 10 points, from27 to 37% (drawing closer to the aim of the Digital Agenda:50% of online buyers in 2015). More significantly, one Internetuser out of two purchased goods or services on line. But only7% of consumers purchased on line in other EU countries, and4% in countries outside of the EU. This is quite significant, but the ratio of cross-border pur-chases compared to domestic purchases is not progressing.Online cross-border sales are increasing in absolute value, butnot at a faster rate than e-commerce in general. The very domestic character of online European retail is con-firmed by the hit parade of the most visited websites in eachof the major countries: the only foreign sites in the countriesobserved (2 or 3 among the first 10 or 15) are American. Thetwo most visited sites in France in the first quarter of 2011 arein fact, according to the data from Médiamétrie/FEVAD, eBayand Amazon. It is no surprise that the share of cross-border varies greatlyfrom one country to another. Logically, the small countries relymore heavily on it: cross-border purchases represent for exam-ple almost 50% of e-commerce in a country like Austria.3. Eurobarometer. Flash EB no. 299 (March 2011), data collected in September 2010. The populationsurveyed is a sample of citizens aged 15 and over and residents of the 27 Member States (totalling morethan 25,000 people). 4. It is interesting to note that a similar number of people purchased a product by mail order or from acatalogue (21 and 13% respectively, and 34% in total). © Acsel - L’association de l’économie numérique.
  • 70 Cross-border e-commerce/A Digital Europe at the heart of trade In the United Kingdom, although happy to purchase goodsabroad, Internet users give preference to the United States. Thiswould suggest that criteria such as language, culture or politicsweigh heavily in the equation.u Motivations and reservationsThe same Eurobarometer provides further interesting informa-tion about consumers’ motivations and reservations: the lack ofinformation and the lack of trust, which obviously results directlyfrom it, are decisive factors for 60% of those questioned. Hereagain, we have illustrations of the differences between Europe’sMembers: the most wary consumers are the Greek and theBritish; the most trusting ones are the Dutch and especially theIrish and the people of Luxembourg. Generally speaking, con-sumers place more trust in local retailers than foreign ones (thereare some exceptions): 48% on average, but with scores muchhigher in the Scandinavian countries or in the United Kingdom(64%!). However, there were some 4% of consumers questionedwho trust foreign retailers more. We must also note that 57% of people questioned expressedfears about encountering difficulties in the event of an incidentoccurring and 47% were concerned about possible problemswith delivery. It is reasonable to suspect that the real obstacles that lead toconsumer reluctance are much less justified, they result fromdoubts both expressed by purchasers and retailers alike. Indeed,if 18% of distance shoppers who made domestic purchasesdeclared an incident (very often relating to delivery times) andif 6% claimed that they did not receive their order at all, thesesame incidents are less frequently declared in the case of cross-border sales (respectively 16 and 5%). Yet the people questioned claim that they would be moreinclined if they received more information and were betteradvised. This is quite promising, as the proportion of those whoclaim that they know where to find the information and advice(a third of the sample) increased by 11% compared to 2008. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 71Men in the age range 25-39 with a high level of education, andlikely to be the best informed, are also the least wary. To put things into perspective, prior experience in shoppingon foreign websites is crucial: if only 14% of the e-shoppersquestioned expect to spend more on cross-border shopping inthe years to come, the percentage rises to 35% for those whoalready have previous experience. A further study carried out by Forrester Research5 publishesdeclarative data that is much more optimistic. Admittedly, thedata was collected from e-shoppers (and not consumers) ofseven countries. In response to the question “Have you alreadyordered products from a website in a different country to theone you live in?” 29% responded affirmatively. The percentageis much higher in the United Kingdom and in Sweden (40%)and the Netherlands, but lower in Italy, France (23%) andespecially in Germany (21%). This serves as confirmation: theBritish purchase more on American sites than those in the EU.u Reluctance on the supply sideAs far as supply is concerned, it is worth noting that in 2009 halfof the retailers in the twenty seven European countries were sell-ing online, but only a fifth (21%) were selling and promotingacross-borders. The majority only operated in one or two coun-tries, and only 4% traded regularly with ten EU countries ormore. As a result, 55% of Europeans had never come across anyadvertising by retailers from other European countries. At the end of August 2010, LeGuide.com and the E-commerceFair in Paris carried out an online survey involving e-retailers inthe LeGuide.com database. This survey was designed to assesstheir opinions on export: seen as a “reality” right from the timethe site was created by 41%, a step already taken for 7%; a stepto be taken for 34% and “not an objective” for 18%.5. Forrester Research, Targeting the European Cross-Border Buyer (2009); study carried out on a sample of5,399 European e-shoppers in seven countries. © Acsel - L’association de l’économie numérique.
  • 72 Cross-border e-commerce/A Digital Europe at the heart of tradeu The cross-border “mystery shopper” experimentGeneral difficulties can provide an explanation for customerreluctance. This notion was proved by a “mystery shopper”experiment carried out for the European Union by the firmYouGovPsychonomics6, which demonstrated how 60% of cross-border transactions failed before the order could be confirmed! The experiment involved mystery shoppers in the 27 coun-tries of the EU and featured a shopping list with 100 productsthat were strictly comparable and divided into 8 categories. Atfirst, the shoppers performed a search for offers that combinednational and cross-border goods by using search engines thatwere set for use in their home country and by searching on pricecomparison websites. We specify here that the idea was not todraw up a list presenting the offers available, but to find a way ofobtaining a diverse sample which would include a large numberof cross-border products. The search phase took place betweenthe end of February and the beginning of March 2009; testingof the offers took place between the end of April and the begin-ning of July 2009. The order process was tested on 13,573 offers in total, includ-ing 10,964 cross-border offers (81%) and 2,609 domestic offers(19%), from over 4,000 e-commerce websites. The ratio betweencross-border offers and domestic offers depends strongly on thecountries. Logically, the major countries have a much largerproportion of domestic offers than the smaller ones. For somecountries and products, only cross-border offers are available – butthis rate is extremely low in Germany (8%) and in the UnitedKingdom (6%) [France: 28%].What can we learn from this survey?First lesson: cross-border offers are quite easily accessible, but82% of shops were only accessible in a single language, 11% intwo languages, 3% in three language, 2% in four and 2% in fiveor more.6. Mystery Shopping Evaluation of Cross-Border E-commerce in the EU. On Behalf of the EU. Health andConsumers Directorate-General. Final Report, 20 October 2009. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 73 Second lesson: cross-border offers propose better prices, withoffers 10% cheaper in more than 50% of product searches (netprice including delivery fees). The English are least likely to findthese products cheaper (14%), followed by the Germans (27%).But the percentage rises to 42% for French buyers. Third lesson: 61% of the offers if paid for with a bank cardfailed to be completed. This is mostly certainly the most star-tling piece of information, as this failure rate varies from countryto country, ranging from 75% (Romania, Bulgaria) to less than50% in Spain and Austria. As is often the case, France is withinthe average (59%). The failure rate rises to 70% in Belgium. We should add here that there is no actual purchase (the exper-iment ends before the final click). There is little doubt that thereal failure rate (in the event of a real order) would quite certainlyhave been much higher – we could say two thirds to give an idea. The failure is triggered by one of the critical transaction pro-cesses, either when registering on the website (62% success ratecompared to 93% for a domestic sale), when proceeding to payor when entering the delivery address. Delivery at the shopper’s home address was possible for98% of domestic sales, but only for 48% of cross-bordersales, for the latter 44% of orders included extra delivery fees:the average domestic delivery fee was 8 Euros compared to16 Euros abroad, and the average delivery time for domes-tic delivery was four days compared to seven for cross-border.Regarding delivery, we noticed large differences mainly withregard to the size and weight of the products concerned. Theeasiest products to deliver being books, films and music, aswell as household products. Austria, France and Spain are thecountries with the best delivery service, the Eastern Europeancountries fare less well. The study points out other important issues regarding theavailability of multilingual information (or lack of it) on theterms and conditions of sale, complete price details, currencyconversion, the right to withdraw, guarantees, after sales service,protection of personal data and eligibility for promotional offers.© Acsel - L’association de l’économie numérique.
  • 74 Cross-border e-commerce/A Digital Europe at the heart of tradeThese are all possible obstacles for cross-border trade. Be that asit may, this experiment clearly shows that European cross-bordere-retail is anything but “seamless”.Perspectives for cross-border e-commerceIn a European economy that is somewhat sluggish, e-commercewhich is growing strongly is a notable exception. Some wouldobject that online retail is only progressing at the expense of tra-ditional retail, and cross-border at the expense of local retail. Bothof these assertions may be proven wrong. Cross-border e-com-merce is beneficial to consumers as well as to retailers, notablybecause it reduces costs. On top of that, it plays an essential role indigitalizing services, and more generally it helps the deploymentof both the digital economy and society. Boosted by Europeandiversity, it leads to the completion of the single market, speedsup integration by multiplying the number of exchanges and bymodernizing business structures in the countries that have madeless progress in this respect. More generally speaking, we will seee-commerce, in its own way, build Europe by stimulating the cre-ation of efficient trans-European infrastructures and multiplyingexchanges between EU citizens. All in all, the factors that argue in favour of development andinternationalisation of online commerce in Europe are not onlybusiness related. They are also strategic, economic, industrial andeven social and political. Cross-border e-commerce also contrib-utes to spreading European influence across the world as well ashelping players with European and global potential to emerge.u So is this a zero-sum game?First of all, we will start by dispelling the common but question-able myth about e-commerce in general and its effects on bordercrossing. In both cases, the macroeconomic effect is insignificantso to speak as e-commerce grows at the expense of traditionalretail, and cross-border trade at the expense of local trade. A zero-sum game, you could argue. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 75 It makes less and less sense to oppose traditional and “elec-tronic” commerce. E-commerce is growing not to the detrimentof traditional retail but to the detriment of retailers who are recal-citrant to the changes that digital technology is introducing intoretail. In other words, electronic commerce is not a competitorfighting traditional commerce. It irrigates retail in general anddoes so in increasingly different ways, which is part of the reasonfor the term “multichannel”. In other terms still, digital technology provides even moreroom for retailers to deploy their strategy, initiatives and tac-tics. And cross-border increases it even further: far from limit-ing change to a redistribution of the market between exportersand domestic players, it creates a new dynamic environment forexchanges to develop.u The advantages of Europe in all its diversitySo according to this, cross-border increases commercial interests.But according to which fundamental elements? The fundamental elements which determine the importanceand the promises of e-commerce growth in a country are obvi-ously its size, demography, structure and the level of econom-ical development. The fact that some of the major Europeancountries are lagging behind in terms of GDP, structures, tech-nology infrastructures and applications can also be consideredas a potential for growth when the catching up process getsunderway, as is the case for Poland for example. In this per-spective, the countries of Southern Europe and even more soEastern Europe are all mission countries with growth reservesfor e-commerce. It is not surprising that the “technological profile” of a countryis also a decisive factor. This profile includes its regional technicalinfrastructures (their density and performance) and the equip-ment belonging to its inhabitants as well as the services availableto consumers and retailers. In other terms: How strong the dig-ital economy and society are in the country where online com-merce is developing.© Acsel - L’association de l’économie numérique.
  • 76 Cross-border e-commerce/A Digital Europe at the heart of trade The level of market maturity would appear to also influencefluctuations in GDP on rates of growth in e-commerce: experi-ence gained by Internet users has a cumulative impact on onlineshopping. In particular, when a consumer is satisfied with a cross-border purchase, it is likely that he will renew the experience. A Forrester Research7 study, quoted by ACSEL provides alist of the most favourable elements for e-commerce growth bycomparing the populations referenced by each element with theaverage for all adult Internet users. The most decisive elementswere: – trust in the security of online transactions; – network performance; – the level of education; – income level. The user sex and age would seem to have less of an impact. Butthe most important criteria of all seems to be … experience of aprevious purchase (in the three months before). Above a certain level which they seem to have reached in theUnited States, maturity quite logically leads to a slight drop ingrowth rate. But we can see that this slowdown can in fact bedelayed by the opening of other domestic markets that are lessdeveloped but with heightened growth. This is the reason whythe growth profile of different European countries is an impor-tant variable in cross-border targeting. Many Internet users are increasingly well equipped, experi-enced and confident: these characteristics are present to a greateror lesser degree in each of the EU countries and promise anincrease in the number of buyers and their frequency of pur-chase. It is true to say that this may indeed have a negative impacton the average basket value. At the same time, this population is better informed and isharder to satisfy and volatile, but is more likely to cross-bordersto shop.7. Forrester, European Technographics Benchmark Survey (Q2 2009), based on a sample of 4,386 Euro-pean online shoppers. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 77 Other types of technical infrastructures and related servicesrequired by e-commerce, these include logistics and payment sys-tems. As far as delivery is concerned, the majority of Europeancountries are well equipped, but crossing borders always involvessome kind of obstacle, at least an increase in tariffs. Given thecountries’ heterogeneities, this also affects payment systems. Retailers with established experience in distance selling have anadvantage when it comes to online commerce, especially as it isnormally involves existing logistics and postal services and a wideuse of various payment systems. In this respect, some Europeannations are more gifted than others. The relative delay in e-com-merce in Italy is no doubt partly due to the fact that it is a lessestablished tradition.u The border, a place for exchangeOther geographical, sociological or psychological factors aremuch harder to pin down but they can also have a clear impacton how often and for which variety of applications the Internetis used, with the relative cumulative effects(one application leadsto another, including online shopping). This is one of the reasonswhy the long, boring winters are often given as an explanationfor the appetite of the Scandinavians for the Internet. On the oneside of Europe, as we saw in the previous chapter, the Italians aregreat fans of new technology, of mobiles and smartphones in par-ticular, even before applications, accessible by these systems, areeven available. To add to that, there is also great diversity in con-sumer habits. It would be sensible to think that a common language and thecustoms that go with it (but not always) would make life easierfor European e-retailers, but it is not so. It is however the casefor their American counterparts, who have a genuine single mar-ket from a linguistic, legal and cultural point of view. America,Africa, Asia, or even the United States and China, are not homo-geneous either, but it has to be said that, for a continent whichcame together over a half century ago, the differences acrossEurope are putting up some stout resistance: French touch, British© Acsel - L’association de l’économie numérique.
  • 78 Cross-border e-commerce/A Digital Europe at the heart of tradeway, deutsche Qualität or all’italiana are just some illustrations ofEurope’s different specialties. But, compared to all of the barriers that exist elsewhere in theworld, the border is a focal point for exchanges that increasewhen the social groups they separate have strong personalitiesand are open to exchanges with others, or indeed when they havean appetite for such differences. This is the reason why Europeandiversity may be the source of new dynamic growth in e-com-merce, much greater in Europe than in the United States, wherethe differences, although they are very much visible, doubtlesshave less impact on trade between States or regions. Not forgetting the diasporas living in different communitiesscattered across Europe (in the British Iles, for example), andmigrant populations (at least 40 million legal immigrants in theEuropean Union). Many of them have preserved contact withtheir countries or regions of origin, notably for commercial pur-poses and digital networks can further strengthen this contact. Finally, the “wealth of smaller nations”, and there are many ofthem in the EU, represents another advantage as they have a ten-dency for cross-border purchases as the figures reveal.u The “small prosperous country” syndromeIn the same way that it can have an impact on cross-border retailin general, the size of the country has an influence on the fre-quency of visits to websites in other countries. It may appear atrivial remark but it is important in the case of Europe, whichhas a high number of small countries. Small countries, especiallyif they are wealthy, are more likely to participate in cross-bordershopping. This is not only because the domestic production ofsome types of goods is limited, whilst the consumer profile of itsinhabitants is similar to that of larger countries, but also becauselocal players only gain minor benefit from economies of scale,compared to countries with huge retail markets. Obviously if we idealize things, e-commerce provides peoplein small countries with access to the same shops that people inbigger countries can shop in. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 79u Gains for consumers and retailers alikeCross-border serves the common interests of consumers andretailers. When asked their opinion, the reports we have studiedhighlight the fact that both parties would apparently seem eagerto develop international trade. For consumers, online cross-border retail relocates retail stores:a product which is simply not distributed in a certain country ismade available to inhabitants of this same country. Apart from widening the choice available, cross-border e-com-merce also results in reduced costs in at least three different ways: 1) due to increased competition both between the playersinvolved in online retail and between the latter and local distrib-utors; 2) by reducing possible surcharges involved with border cross-ing and other costs of fragmentation; 3) by economies of scale including the sharing of experienceand skills. Of course, the ways in which consumers and retailers allocatethese gains can also differ: price reductions expected by some,preservation of margins for others and in the end competitionusually arbitrates. For retailers, the main advantage of cross-border is the oppor-tunity to expand their catchment area. The hope is that there willbe a quantitative impact (selling the same article to a greater num-ber of people) as well as diversification and its qualitative effectsdepending on the specificities of domestic and regional markets.It also enables better market risk management, as the economicsituation is never exactly the same throughout the EU, and thisis also another ripple effect of European diversity. On top of that,cross-border opens access to the Russian, Ukrainian and Turkishmarkets, which represent this “new frontier” between Europeane-commerce and the global market. Crossing borders requires a number of activities, skillsand jobs that need to be shared as intelligently as possi-ble if resources are to be put to good use. Indeed, interna-tionalisation requires the creation of trans-European service© Acsel - L’association de l’économie numérique.
  • 80 Cross-border e-commerce/A Digital Europe at the heart of tradeplatforms that will be needed by e-retailers and small busi-nesses in particular. Finally, the international market will teach e-retailers the skillsand provide them with the know-how they need by providingthem with the opportunities to “take on” new consumer popu-lations and find solutions to the difficulties they encounter. Theresources they acquire can be just as easily applied to their domes-tic markets as they can be used to cross new targeted borders, thistime outside of Europe.u Welcome to the competitionThe fact remains that, from the e-retailer’s microeconomic pointof view, the lowering of borders is ambivalent. It combines oppor-tunities and advantages brought about by increased competi-tion, not only on foreign markets but also on domestic ground.Local competition between “bricks and mortar” retail and locale-retailers can be intense: for example we know how competitivethe British market is. Generally speaking, the structure of European e-commerce hasfavoured the emergence and consolidated the position of power-ful national players who are difficult to match, particularly becausethey have perfect marketing knowledge of the market and itsparticularities. Challenged from outside the borders, the same retailer will befaced with new competitors to his market, which was more orless protected until that point. But e-commerce still has a longway to go to reach the mature situation whereby protectionistmeasures could be required. In competition, “what does not killme, makes me stronger”: the energy and intelligence required tocross or avoid obstacles are the strengths needed by Europeanplayers to face competitors arriving from America or Asia to con-quer Europe. It is a question of choosing to pay premium pricesto acquire strong national players or attempting to confront them. Between threats and opportunities, in any event, cross-borderretail creates more room for retailers to deploy their strategy andtactics. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 81E-Commerce is building EuropeIt is indeed true that e-commerce needs the European institu-tions and a market that is at long last unified by a harmonizedlegal framework. There is something else that many e-retailersare also hoping for and that is a harmonized taxation system.However if we highlight the “lack of Europe” too often, we tendto forget that e-commerce has its own way of building Europe. Wecould even dare suggest that the approach adopted by the playersinvolved in online retail across Europe, this “variable geometry”Europe of archipelagos, could inspire a pragmatic approach thatwould be positive for future European integration. In any event, the European institutions have clearly addedcross-border online commerce to their political projects whichinclude a number of ambitious objectives. As we already pointedout, the Digital Agenda indicates that 50% of Europeans areexpected to shop online by 2015 (compared to 36% at present)and 20% of consumers will shop cross-border (compared to 7%today). Quite rightly, EU authorities see this as a sign that thesingle retail market is now complete. But there are numerous other efforts being made by e-com-merce with regard to its participation in European constructionand they are just as important.u Speeding up the modernisation and integration of lessadvanced countriesWhen it involves local players, based on a multichannel approachfor example, cross-border trade accelerates the modernisation ofstructures and business practices in all countries. It can stimu-late European integration by speeding up the catching up processinvolving the least advanced Member States. E-commerce data collected in these countries prove that thingsare already well underway. In the advanced countries where therate of growth is lower, we noted that open international tradedelays the slowdown brought about when their home marketreaches maturity.© Acsel - L’association de l’économie numérique.
  • 82 Cross-border e-commerce/A Digital Europe at the heart of tradeu Contributing to digitisation of the European economyE-commerce creates and fosters activities, investments, expertiseand practices that go far beyond the retail sector. The e-servicesinvolved in the different segments of the e-commerce supplychain play a role in converting the service sector to Europe’sdigital economy. It enables awareness of the general publictowards digital practices. Finally, cross-border e-commerce can contribute to the opti-misation of the economical and environmental effects of freightsystems, across all territorial levels, including transcontinentaldistribution and intercity deliveries. For continental deliveries,higher volume flows are required to provide a range of logis-tics solutions at reasonable prices. If good practices that havebeen tested in various urban zones can be adapted to the rest ofthe EU (with a multichannel version of deliveries), this couldfurther optimise logistics processes. It is interesting to note thatHOW THE INTERNET BOOSTS THE ENTIRE ECONOMYIn March 2011, the consulting firm McKinsey published a report on the impact of theInternet on the French economy*. The report reveals that the Internet created 1.15million jobs (4% of the labour force) and these jobs can be divided into three cate-gories. Direct jobs (700,000), a figure which represents a quarter of net job creationsin France in the last fifteen years. Additionally, 300,000 indirect jobs were created,for example jobs involving the delivery of online purchases, as well as 150,000 otherrelated jobs. 450,000 additional jobs are expected to be created before 2015 accor-ding to the same source. The same consulting company proposes an indicator tomeasure a country’s Internet connectivity, the quality of its infrastructures, the usesof Internet by its corporations, administrations and private individuals, as well asthe costs generated by online commerce. According to this indicator, France is ran-ked 17th (out of 34 countries in the OECD), far behind the Netherlands (3rd) and theUnited Kingdom (4th).* McKinsey/Google study, Impact of the Internet on the French economy. Taken from an article byMaxime Amiot, “How the Internet has boosted French growth”, in the newspaper Les Échos, 9 March2011. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 83optimising logistics also concerns the consumer himself, whorepresents an “ideal logistics manager” involved at all levels of thedistribution chain right up to final delivery.u The emergence of European multichannel distributionMultichannel initially described the combination of marketingcommunication channels (different channels are used to com-municate with the consumer) before it was extended to involvelogistics (several delivery methods), before blurring the dis-tinction between pure player e-commerce (home delivery) and“bricks and mortar” retail represented by traditional stores. Butnow everything, including payment systems, claims to be multi-channel. It is even going beyond simple generalisation, there arealso hybrid versions as it were, to the extent that some commen-tators talk of networked distribution, just like the Internet, wheredata flows can take any direction to reach their destination. From a practical point of view, multichannel refers to a com-plex and personalised customer experience: for example the con-sumer obtains information online before visiting a store, ordersgoods before picking them up (click & collect) or, vice-versa, asksfor delivery of goods purchased as if he had purchased online,and so on. The “drive-in” system, whereby the customer handles deliv-ery by ordering online and picking up his goods directly froma warehouse or store, provides the perfect illustration of howcreatively consumers can combine supply and demand to findthe best solution in particular when there are sector constraints.In France, the drive-in could therefore boost the food business,which is one of the more difficult segments in e-commerce. Inthe United Kingdom, which is leading the way in this area, 5%of food and grocery sales are processed on line. In France in 2010, nearly a million consumers tested this formof e-commerce. On the supply side, increasing numbers of retailstores now sell goods online and try to offer their range of goodsvia the two channels. It is equally important to follow changes incustomer demand as it is to build and maintain customer loyalty.© Acsel - L’association de l’économie numérique.
  • 84 Cross-border e-commerce/A Digital Europe at the heart of trade Apart from in a few niche sectors, e-retailers will need toreplace the term “and” by “or”. Or go even further if they planto sell their products abroad, where they will need to provideadditional delivery options. The range of alternative solutionsexpands to take into account local particularities that may impacteither delivery, means of payment, marketing issues or customerrelationships. But the variety of choice available to consumers is restrictedby economic “sustainability” or even environmental sustainabil-ity in the case of deliveries. Hence another way of strengthen-ing supply whereby multichannel is implemented over time, likethe different phases of a strategy: a pure player waits until reach-ing a certain critical mass before setting up a physical form ofbusiness in the targeted country, independently or by buildingpartnerships with local retailers. Conversely, a brand adopts theInternet sales channel and ensures that it has a physical network ofdealers that are either their own or that operate as franchises orsimple points of sale.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 retail socialization is already replacing acertain amount of commercial waffling, replaced by the liberty ofexpression we associate with social networking. Their impact on cross-border trade is more problematic.Although we readily stress the global, planetary and borderlessnature of the Internet, it is worth noting that communities whichare united by social networks are extremely localized – with afew possible exceptions represented by diasporas scattered acrossEurope. This does not mean that social networks have little © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 85impact on cross-border issues, but it does mean that e-commercecan have a tendency to relocate them as long as they are outwardlooking, with all kinds of specific affinities, including consumertastes and preferences.u Spreading European influenceOnline commerce enables international exchanges of goods andespecially services and develops European sociability. It is a formof commerce involving people, and therefore creates a com-mon European culture in today’s world of “social-commerce”.Whereas today’s marketing wizards are always on the lookout fornew opportunities offered by social networks, these networks fortheir part, have a tendency to socialize the retail sector. Althoughthey do have their own interests in mind, the efforts made by ser-vice providers to overcome the language barrier and any otherproblems arising from cultural differences are an example forothers. The extended catchment area is thus transformed into anarea devoted to broader social exchange. The aim of EU policy is to spread European influence acrossthe world. Once more, e-commerce has a role to play: with afocus on countries that are not (yet) Members of the EU suchas Norway or Switzerland; countries bordering the EU (Turkey,Ukraine, Russia…); linguistic communities outside Europe andwell beyond. European e-commerce will be better armed to tackle otherborders that are more difficult to cross, like China and Asia inparticular. Within a digital economy which remains dominated to a largeextent by American players, only the European dimension canhelp players to emerge, players who have the required scope andbroader influence than the current domestic leaders. The digital economy is gradually transforming every sector ofthe economy, which means that players who have already mas-tered what brought about such transformations have a reasonablechance of controlling these sectors. This is the mainstream effectapplied to the economy. Just to provide an example, the arrival© Acsel - L’association de l’économie numérique.
  • 86 Cross-border e-commerce/A Digital Europe at the heart of tradeof Apple or Google in telephony, books, the press or televisionspeaks for itself. Europe is a fertile ground for producing national champions.Europe has a number of players capable of operating on a con-tinental scale, but it still needs to position its leaders at “majorcrossroads”.“The United States on its own accounts for almost half of the sector’s profits. Theygenerate huge amounts of revenue by controlling content delivery platforms, likeGoogle or Facebook. They profit from the fertile technology sector (Silicon Valley),abundant capital funds and a unified market. Contrary to what has sometimes beensuggested, Europe and France in particular have plenty of top class Internet compa-nies. But they are not positioned at the major crossroads, like Google, or at the heartof retail, like Amazon, and they lack critical mass. Behind the scenes at internationalsummit meetings, it is the real issue at stake in the economic war that has justbegun”. Philippe Escande,“Internet adulthood”, Les Échos, 25 May 2011. ComScore carried out a very enlightening study8 on theleaders of cross-border e-commerce which confirms this diag-nostic. In terms of world audience, Amazon and eBay are wayahead of the rest of the field. Among the ten strongest, thereare seven American sites, two Asian sites (Alibaba.com is thirdand Rakuten fifth), two European sites (Otto Group is ninth andthe PPR Group is tenth) and there is one Latin-American group(MercadoLibre). Two constructors, both of them American(Apple and Hewlett-Packard), figure in this top 10, as well asthree major retail distributors or distances sellers: two Europeansand Wal-Mart. What is more important is that Amazon, Apple and to a lesserextent eBay and Hewlett-Packard are the only players that aregenuinely cross-border, in that their audience is evenly spread outbetween North America, Europe and Asia-Pacific. eBay does even8. Visitation View of Leading Global Retail and Auction Sites, ComScore (August 2011). © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 87better in Europe (46.9%) than in North America (34.6%). Theothers are “localised”, in that more than 75% of their audiencecan be found in their continent of origin.The costs of fragmentation: the flaws of cross-borderFrom sole trader status to the global marketplace, the demogra-phy of e-commerce is very dynamic, which gives rise to consider-able differences. Nevertheless we can expect it to be consolidatedfurther, either by “natural” means (company creations and clo-sures, development, building on past experience and expertise…)or by creating service platforms and marketplaces. But Europe with all of its differences still lacks “seamless”trans-European networks. In this document, we propose a listof the shortcomings according to the major segments that arecharacteristic of e-commerce transactions: technical infrastruc-tures for Internet access, online payment, marketing and logis-tics. Obviously, these elements ultimately result in surcharges dueto fragmentation, but it is essential to understand how they func-tion on a European scale and what part they currently play inoverall market dynamics.u High speed access infrastructuresEurope is well equipped with technical infrastructures, even ifthey are unevenly distributed among the Member countries ofthe EU. But although the percentage of high speed connectionsis even higher in Europe than in the United States, the outlookis less reassuring for super-speed connection which as we know,is an accelerator of online commerce, at least for some types ofproducts and services. According to the OECD, the number of high speedInternet subscribers (DSL, cable and fibre/LAN) is 37% in theNetherlands and in Denmark, and around 30% in the UnitedKingdom, Germany, Switzerland, Norway and France. The ratesare much lower, around 10%, in the Czech Republic, Slovakiaand Poland. In the United States, the rate is 26%. But according© Acsel - L’association de l’économie numérique.
  • 88 Cross-border e-commerce/A Digital Europe at the heart of tradeto the European Commission (2010), only 1.2% of Europeanhomes have access to super-speed Internet, compared to 4.8% inthe United States and… 35% in Japan. The Digital Agenda 2020 sets a number of ambitious objec-tives: making Internet access at a speed of at least 30 megabytes(MB) per second, available to 100% of all homes and for halfof them at a rate of 100 MB in… 2012. It seems out of reach.In the United Kingdom, the government is expecting the sectorto develop with fibre optic technology offering up to 100 Mbpsfor 85 to 90% of the country by 2015. But how many otherEuropean countries will follow? Even in terms of high speed access, real performances observedare often lower than the rates stipulated. Demand for capacitywill explode in the coming years, increased by the use of telecom-munications for television, video and other social media. The useof video on the Internet accounted for 1.26 PB (petabyte) in2008, 2.97 in 2009, and it could rise to 24 in 20149. Recently,the CEO of France Telecom even mentioned a possible “collapseof the network”10. It should be noted, however, that the European Commissionjust announced that it has reserved 9.2 billion Euros for thefinancing of super-speed network infrastructures in Europe in its2014-2020 Agenda, and the European Investment Bank is goingto participate in the financing. This public sector contribution will be of great benefit, as thelack of bandwidth also poses a threat to “Internet neutrality”, inother words equal treatment for all uses (and users), in favour ofa system based on costs for differentiated levels of Internet access.u Payments11The European market represents diversity in a single market:consumers speak different languages and have their own spend-ing habits according to the country they live in. Having an9. Source: CISCO, June 2010. 10. Les Échos, 25 May 2011. 11. This paragraph was written under the editorship of Patrick Flamant (Ogone). © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 89online shop is not enough to be able to export. A relationshipneeds to be created with customers, to create a genuine close-ness. Once you have eliminated the language element preventingcross-border sales, by translating all pages containing the termsand conditions of sale, payment security, delivery times and soon, you need to ensure that the means of payment proposed onthe website do indeed correspond to the habits and particulari-ties of each country. This will enable you to optimise the rate ofsales conversion when exporting. However, multiplying the means of payment can weigh thesystem down and be very complicated to manage. It is importantto calculate the business interests at stake (forecast of increasein turnover for each new means of payment), the costs (imple-mentation, commissions and administrative tasks) and the risks(notably that of fraud) involved with each means of paymentmust therefore be carried out before a decision is taken. As faras payment is concerned, the e-retailer will need to combinemethod, rigour and knowledge of his market to ensure businesssuccess abroad.Overview of the different means of paymentGenerally linked to a country’s history and culture, paymenthabits differ greatly from one European country to another.Initially, e-commerce attempted to transpose payment solutionsused for proximity retail. However, today the French or the Englishprefer to make payments using their bank card, the Dutch preferto pay their online purchases by bank transfer, and the Germansby direct debit… However, e-commerce has matured and new payment solu-tions that are specific to online transactions, are beginning toemerge, aimed at improving user experience by smoothing thepurchase experience right up to the last step involving payment,this improving the rate of sales conversion. This trend is continu-ing with the arrival of payment tools specially adapted to mobilecommerce (m-commerce).© Acsel - L’association de l’économie numérique.
  • 90 Cross-border e-commerce/A Digital Europe at the heart of trade It is absolutely essential to determine which payment solu-tions exist in each country beforehand and to fully understandthe implications of any choice that is made.Different payment arrangementsImmediate debit as soon as the order is confirmed, debit whenthe goods are delivered, payment in several instalments free ofcharge, online credit? Depending on the products or servicessold, the payment and refund arrangements differ. Some meansof payment are incompatibles with some economic models, andin some cases with local regulations. For example, the sale ofdigital content with a low face value is poorly adapted to pay-ment by instalments. As well as online sales events websites,where cash flow is important for the retailers. The economicmodels relying on the flexibility provided by bank cards mayexperience difficulties exporting their goods in countries wherethe “card culture”is weak…Different means of paymentA method of payment enables a retailer to trigger a transfer offunds in order to confirm an act of purchase. These operationsare carried out by approved third parties (operator, paymentinstitution, bank, acquirers…) under conditions that entail theresponsibility of the different parties involved in the transac-tion. • Payment cards: the general term “payment cards” alsoincludes a whole range of solutions: domestic cards enabling pay-ment for goods only in the consumers’ home country (CartesBancaires (CB) in France, Bancontact/MisterCash in Belgium,Dankort in Denmark and so on..) or international cards for pay-ments in all countries (Visa, MasterCard, American Express,JCB...); credit cards or debit cards; private-label cards and/or loy-alty cards and so on.. In Europe, debit and credit cards are usedin 65% of transactions, with large differences according to thecountries: 86% in the United Kingdom, 82% in France, 58% inItaly and 25% in Germany. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 91 • Online transfers: a voluntary act on the part of the customer(the payment order is issued via the bank to the retailer’s bank), theadvantage of the bank transfer is that it is non-repudiable. In itspresent form, the majority of the time it is not adapted to onlinebusiness as it involves a break between the order phases and pay-ment. However, the Netherlands have developed a solution involv-ing electronic transfer of funds (iDeal) that is adapted to onlinebusiness, and which represents 60 to 70% of online payments. • Online direct debit: as in the case of transfers, direct debit isa procedure carried out directly between banks. But, in the caseof direct debit, the customer authorises the retailer to debit theamount corresponding to his purchase directly from the bankaccount and can dispute the payment. Direct debit is widely usedin Germany with the ELV solution, which represents 50% ofonline transactions.Different payment arrangementsTo make shopping a smoother process, e-commerce has graduallybrought with it a range of new payment solutions. The majorityof them are based on the “classic” means of payment. • E-wallets: are specific to online commerce, e-wallets that wecould also call “PayPal Like”, are very popular due to the fact thatthey are very simple to use. All the consumer needs to do is openan account with one of the service providers (PayPal, Amazon,Google Checkout...) and then associate this account with a pay-ment card or to a bank account. The consumer can then payfor orders in stores that offer this type of payment by simplyentering login and password details. Although e-wallets are verypractical, when there are too many of them it can become tedi-ous for the consumer. It leads to widespread duplication ofpersonal data which can also turn out be dangerous. • Payment on delivery: in the Northern European countries,new means of payment are being developed to meet the specificneeds of some consumers. Solutions such as Klarna, Afterpay oreven RatePay enable e-retailers to offer this type of payment andat the same time avoid cash flow problems (when the order is© Acsel - L’association de l’économie numérique.
  • 92 Cross-border e-commerce/A Digital Europe at the heart of tradeconfirmed, their account is credited for the entire basket amount,less the fees). • Cash payment/prepaid cards: prepaid cards, topped upwith cash transfers, enable retailers to sell to buyers without bankaccounts or living in countries where cash payment represents themajor method of payment. • Online credit: available for online purchases for the last fewyears, consumer credit provides further means of improving therate of sales/visit conversion, notably for purchases of goods witha high face value. However, although some credit companies havebranches in several countries across Europe, the conditions gov-erning these payment solutions vary from one country to another. • Mobile payments: The emergence of smartphones hasfavoured retail development using this media. It is relativelyeasy to transpose card payment information to a small screen.Nonetheless, the need to ensure a smooth customer experienceis often difficult when it comes to entering bank card infor-mation. To improve conversion rates, numerous initiatives arebeing developed. The concept is much the same as for e-wallets:the mobile user pays for purchases simply using login and pass-word details.Examples of such systems include PayPal mobile, Kwixo or evenBuyster. The majority of these solutions rely on the payment cardsystem: the latter is used to transfer funds to a user’s “mobilepayment” account, or is linked to the m-commerce solutionwhen the user subscribes to the system (the user’s bank account isthen debited periodically).Mixed payment solutions: taking into accountthe differences between each countryTwenty seven countries in Europe, that means twenty seven waysof buying and therefore just as many ways of paying! An e-retailerwill therefore need to take into account the differences betweeneach country and adapt its payment mix to the countries it tar-gets. The list of available payment options can soon become avery long one. Indeed, if France and England have a very strong © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 93“card culture”, this means of payment represents only 25% ofonline transactions in Germany. On the other hand, the Germansoverwhelmingly prefer to shop and pay using ELV direct debit(over half of the transactions). In the Netherlands, iDeal (non-repudiable bank transfers)claims almost 70% of the transactions. Not forgetting nationalmeans of payment – almost a third of transactions in Portugalare processed with Multibanco (based on the reception of a codeand then the payment is delivered via an ATM cash machine) aswell as the usual domestic bank cards: Bancontact/MisterCashin Belgium, Cartes Bancaires (CB) in France or even Dankort inDenmark. There are a number of considerations to be taken into accountbefore multiplying the means of payment offered to customers.The direct or indirect costs involved can weigh very heavy ononline store operations and therefore significantly reduce thebenefits of a given method of payment.Multiplying the means of payment and avoidingthe stumbling blocksApart from the technical costs involved in the integration of eachnew means of payment to an e-commerce website and/or manage-ment system, the multiplication of means of payment is accom-panied by banking, legal, financial and organisational constraints. • Currency management: commissions charged on transac-tions vary widely from one payment method to another, fromone country to another and/or from one bank to another. Ifyou leave the Euro zone, we strongly advise you to offer pay-ment options in the national currency. Apart from exchange risksthat are borne by the merchant, the aforementioned must beequipped with an electronic payment system that has a multi-currency option. Merchants must also open a local bank account,either in their name or via a local company to sometimes“circumvent” any protectionist measures… • Bank registration: apart from the issue of different curren-cies, some domestic means of payment require the opening of© Acsel - L’association de l’économie numérique.
  • 94 Cross-border e-commerce/A Digital Europe at the heart of tradea bank account in the country, along with all of the linguisticand administrative constraints that this implies. Solutions suchas payment collection services are a way of getting around thisproblem. Or of reducing its effects, by using the services of aninternational and multilingual payment operator capable ofoffering local support to merchants. • Fraud management: fraud has been increasing for severalyears now and e-commerce is not immune to this danger. Albeitlimited to a relative extent, the risk does exist and must be takeninto account. The more means of payment available, the greaterthe risk. Transactions using certain means of payment are in factrepudiable (or questionable, under certain conditions) as is thecase for ELV in Germany or with payment cards. Well what is best… a risk of fraud or losing customers? Facedwith a risk of fraud, different strategies exist and they vary accord-ing to the sector of activity, the type and price of the goods orservices sold and the business policy… as well as in which coun-tries the companies sell. Basically, we can say that there are 4main types of actions: – integrating the cost of fraud in the prices of the goods orservices; – transferring the risk of fraud via an insurance or authentica-tion system (3D Secure); – limiting the catchment area; – using a decision making tool: scoring. Although they may enable a reduction in the risk of fraud,these strategies can end up more or less penalizing the merchantand/or the end customer. In each case, only an in-depth studyof the specific characteristics of each e-retailer and the economicissues at stake can provide the right balance to handle the riskof fraud and avoid losing customers. Whatever the solution,merchants will need to change their protection strategy and adaptto the techniques and methods of fraudsters who are ever morecreative. • Managing returns and reimbursements: accepting productreturns and reimbursing dissatisfied customers is part and parcel © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 95of all forms of commerce. By automating such procedures, con-siderable productivity gains can be achieved, but not all meansof payment offer the “click and reimburse” functionality on themanagement interface. This concept must be taken into accountwhen selecting any new means of payment. • Bank reconciliation and complex administrative proce-dures: by multiplying the number of available payment methodsand price quotations, merchants will also be complicating theiraccounts (each payment system will need to be consolidated andbank reconciliation needs to be carried out and so on). Not tomention the impact of some payment methods in terms of cashflow when payments are only “really” cashed several weeks afterthe purchase took place. Of course it is not an impossible taskbut it is an additional aspect to be taken into account. However,the impact is greatly reduced when the retailer uses an integratedpayment management platform. • Future payment practices: although it is already very firmlyestablished as part of our everyday spending habits, e-commerceis still developing rapidly. New channels are emerging, includ-ing mobile retail, or even social networks. The retailer needs toensure the availability of enough room as possible for manoeuvreby transferring operations to a payment platform with open APIsand capable of perfectly integrating any future means of paymentthat are introduced with these new sales channels.Creating trust and ensuring a smooth buying experienceAs far as mixed payment is concerned, it is impossible for us toimagine a single model: it is up to each retailer to create an own“ideal” solution according to relevant business strategy (customeracquisition or customer loyalty), the geographical markets andproduct ranges. The aim will be to optimise conversion rateswithout increasing handling costs too much and with the risk offraud kept to a minimum. In all cases, the idea is to ensure a smooth buying experi-ence by offering the customers an environment that they arefamiliar with and which they trust. With this in mind, some© Acsel - L’association de l’économie numérique.
  • 96 Cross-border e-commerce/A Digital Europe at the heart of tradepayment methods inspire trust: it is not even a question ofusing them, the simple fact that they are available on paymentscreens is enough. This is the case for PayPal for example whichis particularly important if you are targeting the American orAnglo-Saxon markets. Finally, it is worth noting that the mixed payment solutionis a “living process” that evolves over time to adapt to tech-nological modifications and customer needs in the differentmarkets involved. The e-merchant has to keep close watch on newdevelopments and new payment solutions in his market in orderto keep pace with his competitors.u MarketingWhen it comes to marketing, we have already seen that difficul-ties essentially arise from linguistic and cultural differences, butthere are also legal obstacles too. In particular, each country hasa different approach to the protection of privacy and the use ofpersonal data for commercial purposes. The possibility of usingthe same terms and conditions of sale applicable to all Europeancountries can still be difficult for e-retailers and this is one areawhich provides a practical illustration of the importance of har-monising European regulations. Conversely, marketing service providers know how eachindividual markets works and can help organise campaignsat European level. This is especially the case for e-mailing: thegroup Come&Stay is a European digital agency specialising inonline acquisition and loyalty strategies. It offers its technicalexpertise and knowledge of different consumer profiles in manydifferent countries. Brands can also organise European cam-paigns instead of simply targeting national customers. Leading players in search marketing such as Google, makes iteasier to customize advertisements for each country and there-fore centralise international campaign management. Searchengines such as Kelkoo, LeGuide.com or Twenga adapt pricecomparisons according to cultural preferences, tastes and holidaycalendars, etc. © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 97 Despite these tools, there is still quite a steep learning curvewhen starting up in international e-marketing and manye-retailers will confess that with each new country you need toredefine best business practices while bearing in mind that whatworks in one country may not necessarily work in another. Thereis nothing like past experience and we therefore recommend thatyou refer to the Testimonial section of this book for more infor-mation.u LogisticsAs far as delivery logistics are concerned, there is now a widerchoice with the gradual arrival of the “Fast delivery” standard thathas been adopted by e-commerce players and new entrants tothe market, including e-logistics coordinators, fourth party logis-tic providers (4PL, whose role is to optimise the supply chain)or even e-commerce leaders who provide logistics on behalf ofthird parties. Other players, including wholesalers or central pur-chasing bodies, could also enter the market with new servicesand benefit from the development of e-commerce to adapt theirrange of services to the BtoC market. But trans-European delivery is still experiencing problemsoperating in certain countries or regions, with different levelsof efficiency between postal services and the extra costs of bor-der crossing. There are even difficulties with “return goods” andrelated costs. Here again, differences in legislation and deliveryservices are combined with contrasting consumer behavioursfrom country to country. Germany is well known for having thehighest return rates for distance selling, and this requirementpartly explains why the traditional players are at the top of theleader table in e-commerce. Unlike the United States, Europe does not have a singlepostal service capable of covering the entire continent like theUSPS, and even less so a postal monopoly, which is still thecase in the United States. Unfortunately, the American exam-ple is not such a good one as the USPS is currently battling toavoid bankruptcy.© Acsel - L’association de l’économie numérique.
  • 98 Cross-border e-commerce/A Digital Europe at the heart of trade In addition, a lack of services is not a general problem acrossEurope. So there are no real difficulties in BtoB and nor arethere in express deliveries – and that is without a monopoly.In the first case (BtoB), the problem is solved by volumes and asystem capable of optimising traffic. In the second case (expressdelivery), high tariffs cover the costs that are also high. All in all, what is lacking is a kind of universal “fast delivery”service at European level. This service should be capable of meet-ing the demands of e-retailers in terms of tracking and deliv-ery times, while maintaining prices in line with their marketingstrategy often aimed at reducing the price of delivery and poten-tial return goods... and in some cases they even offer free delivery. Unfortunately, applying this concept to BtoC raises theproblem of which comes first, the chicken or the egg? For theservice to be feasible it requires sufficient volumes… somethingthat is difficult to achieve without a universal service! It is onlyabove a certain volume of trade that freight consolidation can beenvisaged based on the BtoB model.u Fragmentation is costlyUltimately, the difficulties more often than not lead to extra costsfor those who adventure into this activity. The costs of fragmen-tation increase considerably with the number of countries thatare covered. Cost is often a disincentive, notably for small busi-nesses, and is borne in some way or another by the consumer. A document issued by the Commission12 estimates the costof the fragmentation relating to consumer rights. Administrativecosts incurred by the distance seller are 5,526 Euros if the afore-mentioned operates in their own country, compared to 9,276Euros if they sell in one or two other countries of the EU. Whereoperations are envisaged in the 27 countries of the EU, simpleadministrative costs would amount to 70,526 Euros! ***12. Commission Staff Working Document accompanying the proposal for a directive on consumer rights.Impact Assessment Report (2008). © Acsel - L’association de l’économie numérique.
  • Chapter III/The issues at stake in cross-border e-commerce 99© Acsel - L’association de l’économie numérique.
  • 100 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 101 Chapter IVMoving towards a cross-border e-commerce ecosystem D evelopment in e-commerce leads to consolidation in the three key segments, namely marketing, payment and delivery. This should alleviate the difficulties arising from heterogeneity by enabling e-retailers to benefit from the economies of scale, while at the same time safeguarding competition and innovation1. In reality, the development of a true European e-commerce ecosystem is experiencing the same kind of challenge as Europe is with its construction : how to combine the advantages of con- centrating all resources (public and private) wherever a certain critical size is required (research, technology, infrastructures…) bearing in mind that smaller structures have the capacity to inno- vate and adapt well. In some companies we can see how much information tech- nologies already contribute to achieve this combination of activ- ities. The United States for example owe much of their success and supremacy in the digital economy to small companies like this. 1. These consolidations are accompanying strong development of platforms and other marketplaces. Such structures handle several parts of the e-commerce supply chain on behalf of players (and not only small businesses) who wish to concentrate their efforts in the areas in which they excel. Without question, these platforms, that in most cases are operated by companies that are used to operating inter- nationally, provide small companies with access to cross-border retail. © Acsel - L’association de l’économie numérique.
  • 102 Cross-border e-commerce/A Digital Europe at the heart of trade E-commerce is not only a technological, economical and socialenvironment, it is also an institutional, legal and political one.Although it was found that over 60% of cross-border e-commercetransactions currently fail, a majority of these failures doubtless“raise questions” among the governing authorities.The rules of the gameAll games have rules, and we have seen that the European Unionand its institutions are now active in rolling out standards, nota-bly in the area in which we are interested. Players also create stan-dards by including contract laws in the framework of commonlaw. As a result, the players sometimes fear a lack of common law(the dreaded “legal vacuum”) and sometimes find that regulatorshave gone too far and risk paralysing activity. We agree with themeasures in favour of smoother transactions, but we disapproveof those which lead to an increase in costs (sometimes the sameones!). In essence, each time a new legislative proposal is submitted(a European directive for example), the reactions on the part ofe-retail associations and commentators differ and they share twocontradictory beliefs. The immediate reaction is to deplore theobligations and additional costs, seen as a handicap to e-com-merce. But upon further thought, others believe that thesemeasures can streamline the market and raise the level of trustin e-commerce, especially if such measures apply fairly to allretailers without affecting competition. It is also true that legal security inspires trust in e-commerce.But we are also aware of the fact that differences between legalsystems within the European Union are barriers for cross-bordertrade, even more so when there are also differences in taxationsystems. These difficulties are a cause of fear for some (buyers)and reluctance for others (merchants). © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 103E-commerce at the heart of the Europeaninternal market2With turnover up by 29.5% between 2008 and 2010 for allEuropean countries, the European online sales sector has grownsignificantly. Online retail offers European consumers a number of advan-tages and plans to provide various new possibilities: a broaderrange of goods and services, improved access to products (Internetis available 24 hours a day), easy comparison of products andservices on offer as well as product evaluation systems. In addi-tion, the sectors in which consumers can buy goods and servicesnever stop growing (tourism, household electrical goods, cloth-ing, household goods, cultural products and food). The Frenchman, Michel Barnier who is currently EuropeanCommissioner in charge of the Internal Market and Services hasdecided that the development of the digital economy will be themajor priority during the second half of his term of office whichends in 2014. His department has prepared a major action planto help speed up the development of the European e-commercemarket and build the confidence of players involved in onlineretail, professionals and consumers. This action plan has fourmajor objectives: creation of an attractive framework for devel-opment of the range of electronic services, improved protectionof European consumers, better payment systems and improvede-commerce logistics, and finally a more secure and fairerdigital environment.u Encouraging e-retailer activityin the internal marketLegal fragmentation has been identified by the EuropeanCommission as being one of the main obstacles to cross-border trade between the Member States of the European Unionfor e-retailers and in particular for the smaller structures.2. This paragraph was written under the editorship of Marc Jamet (Euralia). © Acsel - L’association de l’économie numérique.
  • 104 Cross-border e-commerce/A Digital Europe at the heart of tradeFor retailers with operations in the European Union, the mainregulatory obstacles for cross-border e-commerce arise princi-pally from differences in laws protecting consumers, VAT, recy-cling fees and levies. The ways in which these rules are appliedvary considerably from one Member State to another, and thiscreates a complex business environment that is costly and unpre-dictable for companies which plan to sell their products onlineand across their national borders. Community institutions have set up a certain number of textsthat provide a framework to encourage online intra-Communityretail. The most important Community text regarding the develop-ment of e-commerce in Europe is the Directive on ElectronicCommerce3 which was adopted in June 2000. In article 3 relat-ing to the “Internal market” it stipulates that “the Member Statesmay not, for reasons which fall within the fields coordinated bythis directive, restrict the free movement of information society ser-vices between Member States4”. This same article 3 also states thatinformation society providers are subject to the legislation of theMember State in which they operate (country of origin rule) andguarantees the necessary legal security required by profession-als to develop their activities beyond their national borders. Thiscountry of origin rule (known as the internal market clause),combined with the principle of no prior approval requirements(banning the obligation for information society providers to fol-low authorization procedures that would not be applicable tosimilar services if they were supplied by other means), make lifeeasier for many companies with activities in e-commerce. In itsreport on how the e-commerce directive has been implemented,expected at the end of 2011, the Commission emphasises thatit does indeed represent a light regulatory framework, but onewhich is coherent. There are no current plans for in depth reviewof the directive text. It would seem rather that the Commission3. Directive 2000/31/CE, of 8 June 2000 regarding some of the legal aspects of e-commerce in theinternal market. 4. See article 3.2 of the aforementioned directive. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 105is seeking to ensure uniform application of the provisions of thedirective in the different Member States as well as to strengthenthe basic principles and notably with regard to the liability ofintermediaries. It will also prepare guidelines for implementa-tion within a specific e-commerce framework of article 20 of theServices directive5. This directive includes a ban on undue dis-crimination with regard to a country of residence or consumernationality (geographical restrictions on merchant sites). The Commission nevertheless clearly states that rules govern-ing relations between professionals and consumers are mainlydealt with by national laws. Since there are twenty seven differentnational policies on consumer rights and much uncertainty aboutthe contracts that apply to distance selling, this situation remainsa major obstacle for e-retailers. The new directive on consumerrights6, the provisions of which will take effect from 20137, is afirst step towards reducing the differences between national con-sumer laws within the EU, but it does not represent a text thatwill provide full harmonisation, and therefore it will not elimi-nate all legal uncertainties that hamper companies. To reduce legal fragmentation, a new solution was proposedby the Commission on 11 October 2011 with the publication ofa draft regulation on a common European sales law8. The aim ofthis proposal is to create a new legal framework that will be inde-pendent of existing national regulations. This would enable com-panies to offer their customers a single contract compliant withthis new European sales law, whether the customers are compa-nies or individual consumers and without having to comply eachtime with national rulings of countries in which they wish toconduct business. However, this new system would be limited tocross-border contracts between companies (BtoB) and betweencompanies and consumers (BtoC) for the sale of goods and5. Directive 2006/123/EC of 12 December 2006 relating to services in the internal market. 6. Directive on consumer rights – pending publication in the Official Journal of the European Union(OJEU). 7. The Member States will have to transpose the provisions of the directive into national law within twoyears of its publication in the OJEU. 8. Draft European regulation on common European sales law – COM(2011)635.. © Acsel - L’association de l’économie numérique.
  • 106 Cross-border e-commerce/A Digital Europe at the heart of tradethe provision of digital content as well as other related services(repairs and maintenance). In these areas of business, the twoparties to a contract would remain free to decide whether or notto opt for European sales law. In the case of BtoC contracts, thischoice of strategy must be made with sufficient “awareness andinformation” by the consumer, backed up by a specific declara-tion and the possibility to withdraw from the contract at no extracost if some of the information required from the merchant hasnot been received. The Member States will also have the possi-bility to authorise the use of this optional instrument in contractlaw for sales that take place at national level. The Commissionconsiders that this new instrument could drastically reduce thecosts involved with legal compliance, which are estimated at10,000 Euros on average for each new export market that a com-pany attempts to enter. For consumers, it offers the advantagesof a broader choice of products for sale that can be purchasedsecurely with a high degree of consumer protection. The draftregulation must now be adopted by the two European co-leg-islators, the European Parliament and the EU Council. But, inthe same way as the directive on consumer rights, which has justbeen formally adopted after a three and a half year procedure,the draft regulation, which will represent a large step towards anintegration of European consumer rights, will doubtless lead tomuch opposition. Apart from the question of contracts and consumption, thereis also the problem of the Community taxation laws. The complex nature of VAT systems is considered to be a hugeobstacle to the development of cross-border e-commerce in theEU. To be able to sell their products in other Member States,professionals must obtain information beforehand about the dif-ferent national thresholds above which they must declare theiroperations to the Member States. They often end up facing com-plex administrative procedures that are costly and sometimesneed to be dealt with in several languages. The creation of a singlepoint of contact requested by many Member States but techni-cally complicated to implement, would enable professionals who © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 107sell in several Member States to register, declare and pay VAT ina single Member State. The single point of contact already existsfor non-EU electronic service providers and this will be extendedin 2015 to providers of electronic services to non-taxable cus-tomers in the EU9. The Commission conducted an extensiveconsultation process on the future of the VAT system10, and thisshould lead to a complete overhaul of the intra-Community VATsystem, in particular for distance selling of goods and services.The European Parliament has for its part taken a stand with itsnon-legislative resolution of 14 October 2011, in favour of aVAT system based on the place of consumption, both for goodsand services. It also invites the Commission to present a pro-posal to simplify cross-border taxation issues before the end ofDecember 2012. To make life easier for companies and to ensure coherence atEuropean level, the Commission should also adopt several initia-tives to improve electronic authentication systems. It is preparinga proposal to amend the e-Signature directive11, in the first halfof 2012. In conjunction with the European Multi-StakeholderForum on Electronic Invoicing created in 2010, the Commissionwill undertake a number of initiatives in 2012 to develop wide-spread use of e-invoices. On 23 November 2011, it also proposedan amendment of the directive 2003/98/CE12 on the reuse ofpublic sector information. This amendment should facilitate the use of public data,improve the legal security of operators and stimulate the cre-ation of new services, particularly in digital technology anddirectly related to public data.u Strengthening the protection of European consumersOne of the major challenges to be met by the directive on con-sumer rights13, which was formally adopted on 10 October 20119. Directive 2008/8/EC of 12 February 2008 on the place of supply of services. 10. Green paper on the future of VAT of 1st December 2010. 11. Directive 1999/93/EC of 13 December 1999 on a Community framework for electronic signatures. 12. Directive 2003/98/EC of 17 November 2003 on the reuse of public sector information. 13. See previous note. © Acsel - L’association de l’économie numérique.
  • 108 Cross-border e-commerce/A Digital Europe at the heart of tradeby the EU Council and is currently pending publication in theOJEU, is the quality of information given to consumers beforesigning a contract with a professional. The European directiveprovides a uniform list of information that the professional mustsupply to the consumer before signing a contract. Professionalsmust also clearly mention beforehand whether the buyer or theseller will pay the return delivery charges in the event of with-drawal by the buyer. An estimation of these charges must besupplied if they are chargeable to the buyer. The new directivealso sets the withdrawal period for consumers who sign a dis-tance selling contract to fourteen calendar days after delivery,compared to the current seven days. To make it easier for theconsumer to exercise this right to withdraw from a sale,the directive also introduces a standard withdrawal formwhich can be used to withdraw from any contract concludedat a distance. Among other advantages for consumers, the text of the newdirective also obliges professionals to indicate the total cost of theproduct or service purchased, before signature of the contract. Iteliminates all hidden costs and charges behind free service offersand also bans pre-checked boxes on websites. In the instance ofcredit card payments, professionals will no longer have the rightto invoice consumers charges over and above what this serviceprovision actually costs them. Professionals who use special tele-phone lines enabling consumers to contact them for informationabout their contract can no longer invoice these calls at abovenormal rates. The European framework for the protection of personal datais also undergoing a complete overhaul. The European JusticeCommissioner, Viviane Reding, has indeed suggested that allof the European texts on the protection of personal data bereassessed before the end of 2011. The aim is to ensure both anadequate level of protection for consumers and the harmoni-ous and controlled development of new economic models andchallenges represented by activities such as behavioural advertis-ing, social networks and cloud computing… The Commission is © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 109also preparing several sector based initiatives for example withinthe online games sector, for which it will submit an action planin 2012 that could well lead to the adoption of Europeanlegislation. Apart from the legal issues, the Commission would also liketo strengthen consumer rights regarding information by pro-moting trustworthy comparison websites that are independentand transparent and which are capable of offering a broader ser-vice to consumers in more than one Member State. An investi-gation by the Directorate-General for Competition is currentlyunderway and will determine if one of the Internet giants is abus-ing its dominant position in this sector. To strengthen consumerrights to information, the European Commission will also edita new European online guide to consumer rights similar to theeYouGuide published in 2009.u Improving payment systems and logisticsin the European UnionAnother important aspect concerning the development of e-com-merce in Europe concerns efficient payment and delivery systems,that are both trustworthy and inexpensive. The mystery survey14mentioned previously and carried out by the independent con-sulting firm YouGovPsychonomics on behalf of the Commissionstates that 60% of cross-border transactions failed because theretailer could not handle delivery of the product to the buyers’countries or did not offer the adequate means of cross-borderpayment. Beyond the problem of available payment means offered byonline sales professionals, it seems that, to this day, consumersdo not place enough trust in the security offered by online pay-ments. The Commission has implemented a vast plan to create asingle Euro payment zone (SEPA).14. Mystery Shopping Evaluation of Cross-Border E-Commerce in the EU, YouGovPsychono-mics,(2009). © Acsel - L’association de l’économie numérique.
  • 110 Cross-border e-commerce/A Digital Europe at the heart of trade A EUROPEAN LABEL FOR TRUSTED E-COMMERCE SITES... MAYBE NOT SUCH A GOOD IDEA In its resolution of 8 September 2010 on the completion of the internal market for e-commerce*, the European Parliament identified the lack of consumer trust in websites belonging to other Member States as a major hurdle to cross-border purchasing. For this reason it asked the Commission to study the creation of a trust- mark which would add value to e-retail websites which comply with all European legislation on e-commerce (sale, payments, personal data protection…) and which would thus guarantee the quality and the security of these sites. However, like all professionals, the Commission recognises that implementation of a European label for e-retail websites would be extremely difficult, costly and not really geared to the fast changing European e-commerce market. Alternatively, it plans to use existing labels and to create a certification system or an organisation which recognizes these labels and trustmarks such as Trusted Shop. In 2012, the Commission will create a platform for reflection on the subject and will submit an initial feasibility study for such a proposal by the end of 2012. The online drug sales sector should be a pioneer as the new directive on falsified medicinal products** adopted in 2011 includes the introduction of a European trust- mark logo for legal websites selling medicinal products before the end of 2012. * Resolution by the European Parliament dated 8 September 2010 on the completion of the internal market for online e-commerce. ** Directive 2011/62/EU of 8 June 2011 on falsified medicinal products.>> A European regulation to unify credit transfers and direct debits15, is currently being adopted and should considerably lead to a more widespread use of these instruments by European com- panies and consumers. In November 2011, the Commission also issued a green paper on electronic payments on mobiles and by bank cards. The role of this advisory document is to assess the problems preventing entry to the online payment market, and to list new solutions for improving security and interoperability between electronic payments and bring down the cost of payments. To achieve this, 15. Draft regulation setting the technical requirements for credit transfers and direct debit in Euros and amending the regulation (EC) n°924/2009 – COM(2010)775. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 111they will need to address the delicate issue of multilateral inter-change fees for bank card payments. A legislative initiative maybe introduced in 2012. In 2012, the European Commission willalso publish a study on the economic potential of cross-border“pay-to-view” services. The delivery of parcels was identified as being one of the “miss-ing links” in the e-commerce single market. Indeed, the cost oflogistics services varies greatly from one country to another forvery different reasons: the national habits in terms of distanceselling, the size and density of the country, competition and themarket and consumer habits… These variations intensify eachtime a parcel crosses a border. In 2011, the Commission pre-sented the results of a study it commissioned from the Britishconsulting firm FTI Consulting on the postal costs involved indelivering cross-border parcels. As a result of this study, in 2012the Commission will propose a green paper on the delivery ofparcels, and in particular cross-border parcels, which will targetthe problems encountered by companies and consumers in thearea of e-commerce logistics. The green paper will identify thebest European practices for direct delivery, delivery at pick-uplocations, home delivery at set times, “drive-in” options and eventhe creation of highly automated parcel pick-up systems.u Civilizing the European digital environmentBy way of a final phase in building consumer and company trustin e-commerce, European institutions want to improve the enfor-cement of existing regulations, for consumers as well as for pro-fessionals, and to ensure that consumers have adequate means ofappeal in the event of abuse or disputes. To fight against counterfeiting, child pornography, libel andpiracy, the Member States have gradually implemented stron-ger procedures for controlling Internet sites and especially webhosting providers when they are informed of illegal content ontheir site. Nonetheless, professionals are faced with uncertainty andincreasing legal fragmentation in this area due to increasing© Acsel - L’association de l’économie numérique.
  • 112 Cross-border e-commerce/A Digital Europe at the heart of tradeimportant and conflicting requirements of the Member States.A particular example of this is in France with the tricky imple-mentation of the HADOPI law. As previously announced, thereare currently no plans to call into question the principles of theDirective on e-commerce, in particular with regard to disclaimersissued by technical intermediaries who host or provide contenton the Internet. Instead, the Commission plans to propose a newEuropean text in 2012 which will harmonise notification proce-dures and the removal of illegal content from the Internet. It willalso propose an amendment of the directive on intellectual prop-erty rights16. Finally, the Commission is currently analysing animplementation by the Member States of the directive on unfairtrade practices17 and the directive on misleading and comparativeadvertising18, and specifically in e-commerce. If e-commerce is to be truly efficient and secure, Europeanconsumers must be provided with a fast and inexpensive solu-tion when they encounter problems with a good or service theypurchased online. This is not the case today, because consumersare not always aware of existing appeal procedures and are oftendiscouraged from using the traditional procedures to lodge anappeal (national courts), because they are complicated, expen-sive and slow. To offer a solution to this situation, the EuropeanCommission will propose a legislative text at the end of 2011which will facilitate the implementation and the widespreadavailability of alternative systems for the settlement of disputes,and notably an online dispute settlement solution, which canalso be applied to cross-border cases. As part of the action plan set up by the European Commissionto develop e-commerce in the European Union, the Europeanlegislative framework for e-commerce will need to change greatlyin the coming years. We will need to pay particular attention toensuring that all new initiatives remain coherent, and that theireffective implementation is coordinated by the Member States.16. Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights. 17. Directive 2005/29/EC of 11 May 2005 on business-to-consumer commercial practices in theEuropean market. 18. Directive 2006/114/EC of 12 December 2006 on misleading and comparative advertising. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 113u Is the ecosystem under threat?The overview would not be complete if we did not pay a littleattention to what the scaremongers describe as threats to retail ingeneral and to e-commerce in particular. Their argument is that an economic crisis could see a drop inconsumer morale, which will affect spending and retail in gen-eral, with growth prospects often lower than 2% – and still, thisassumes no unforeseen events. On top of all that there are doubtsabout the resilience of the Euro (if the Euro is called into ques-tion, this would do no good whatsoever to cross-border trade),fears about inflation or about energy resources. Household confi-dence which is itself correlated with the state and prospects of theoverall economy, could well affect online spending, but not more(and even less it would seem) than spending in general, if we con-sider the current sociological characteristics of e-buyers and thetypes of goods they purchase. It is even worth asking oneself ifreduced spending would not favour e-commerce, at least becauseit could offer lower prices than the rest of the retail sector. E-commerce remains a dynamic sector in Europe, even in thecountries that are close to maturity and whose economic situa-tion is far from brilliant. The case of the United Kingdom, whichleads e-commerce in Europe, speaks for itself: growth in e-com-merce is slowing but remains several times superior to that oftraditional retail. Others are dreading a new Internet bubble with some compa-nies which have far from delivered the goods finding their sharesover valued, whereas many others, and notably e-commerce com-panies, are experiencing difficulties funding their future growthand international development projects. But even if some abusescan justify this fear to a certain extent, the digital economy is nolonger a simple promise, as it was at the beginning of the 21stcentury. It has certainly delivered on its promise since then, andthe current state of European e-commerce is proof of that. Besides, the leaders of the digital economy are still very opti-mistic and this is clear in the results of the barometer publishedin France at the end of March 2011 by ACSEL and Ifop: 93%© Acsel - L’association de l’économie numérique.
  • 114 Cross-border e-commerce/A Digital Europe at the heart of tradeof leaders were confident about the future, this is a record withouta doubt. However, it does not prevent them feeling concerned,in particular (for 81% of them) about the difficulties experiencedin funding their investments that are indeed essential for interna-tional development. This survey also details the general difficulties that French com-panies encounter when trying to obtain funding, in particular ifthey are small companies. Four directors out of ten claim thattheir company is searching for funds to backup their expansion.The majority still need to turn to private investors for funding.65% of directors who require financing plan to look to investorsfor help, compared to only 31% who turn to banks and 5% to theStock Exchange. With regard to e-commerce, Pierre Kosciusko-Morizet explains that: “This sector has something special about it:its survival does not necessarily depend on financing. Investment isused to seek further growth and move on to higher levels. If we wantto create international champions, this matter requires reflection,with consideration given to not only the weak confidence of Frenchprivate investors, but also the regulatory framework”.Platforms, cloud computing: How to make cross-border e-commerce more accessible to all?To summarise: the three major categories of hurdles facingexpansion of cross-border e-commerce are the linguistic andcultural differences within the EU, the lacking trans-Europeanservice infrastructures (notably for payment and delivery) andthe incoherencies between the legislations and the taxation sys-tems of Member countries of the EU. Such problems are also theresult of the complex political structure of the EU. These obsta-cles reunited create a feeling of reluctance, that is quite justifiedin most cases, but which tends to be worsened by uncertainty,both on the part of consumers and merchants. And even whereit does not end in the failure of a transaction, it results in extracharges to retailers and ultimately to the consumer. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 115 But each of the three barrier types requires different types ofaction plans. The linguistic differences are obviously the simplest to reduce.But do we really need to reduce them? Although cultural diver-sity creates difficulties and leads to extra costs, it is also createsnew targets for European e-commerce. We can deal with thecosts of diversity (costs of intercultural exchanges) by consider-ing that they finance quality jobs and that they will also affectnon European competition. On the other hand, gaps in our ser-vice infrastructures, incoherent standards or taxes and all of theextra costs involved with fragmentation require coherent publicand private initiatives.u Providing access to European e-commercefor small businessesAs previously mentioned, European e-commerce brings togethercompanies of all different sizes, with on one side tens of thou-sands of small and medium sized business and on the other side,players operating at national level and sometimes but more rarelyeven at European and international level. But at the end of theday, does the size of the e-retailer really have a direct impact onhow far he can extend his catchment area? If in the future, accesscan be secured to cross-border services, small and medium-sizedbusinesses will also be able to perform trans-European transactionswith distant customers. It is obviously quite clear that cross-border is adapted to playerswith European and even global projects, or at least those playerscapable of reaching this level by creating special alliances and part-nerships. It is just as evident for technological and transport infra-structures, if we remember that they are part of specific EU policies(the Digital Agenda and transport and payment policies etc). But action at European level is also required for services thatare part of the e-commerce value chain (marketing, payment,logistics…), starting with “e-commerce solutions” and right upto all that is necessary to reach the marketplaces, including allsystems that improve the transaction process and allow econo-© Acsel - L’association de l’économie numérique.
  • 116 Cross-border e-commerce/A Digital Europe at the heart of trademies of scale. To help small businesses, we need to eliminate anybarriers that prevent access to international online commerce19. Lastly, it is worth remembering that in this context, “cross-bor-der” means not only crossing borders of any sort that are insidethe EU, but also the EU borders that are less distinct betweenother countries of Europe and indeed the rest of the world.u Integration platformsWe believe that integration platforms play an essential role in theimplementation of trans-European e-commerce.Software platforms“E-Commerce solutions” enable businesses to substitute variablecosts for fixed costs and investment. If each e-retailer had to deve-lop a merchant website independently as well as all of the func-tionalities required for each online transaction and internationaltransactions, the majority would give up before they even getstarted. “All in one” solutions such as Oxatis and Powerboutique, oropen source solutions like Prestashop or Magento are integratedservice platforms which provide the required functions to get ane-commerce business and marketing strategy up and running.Payment solution platforms such as Ogone also perform thesame role and enable businesses to reduce the costs of integratingthe various means of payment required for e-commerce develop-ment across Europe. Finally, the marketplaces of e-retailers suchas Amazon, Pixmania or Rakuten offer access to a cross-borderclientele by offering products and services to customers in severaldifferent countries.Logistics platformsIn the last chapter we detailed the various problems encounteredby trans-European delivery logistics, by comparing them with19. Incidentally, the tariffs and prices displayed by the service providers are a precious source of infor-mation for small businesses when identifying the costs to include in their business plans for futuredevelopment projects. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 117the maturity of BtoB solutions and express delivery, whose tariffs,however are not always adapted to entire e-commerce segmentsand are reserved to high value baskets. In any case, two factors can play a leading role here in thedevelopment of logistics platforms: the separation between thelogistics function and the transport function (several logisticscompanies use a same transport network for the freight of theirrespective customers), and a shared information system to ensureoptimal overall coordination. These service platforms can belongto a single operator with sufficiently large operations, or a groupof operators who have signed agreements or partnerships. Finallywe already mentioned the fourth party logistic providers (4PL),who also claim to be integrated service platforms which managea large number of service providers. The logistics example clearly shows the importance of coor-dinating continental lines (delivery) with last mile and evenlast metre delivery everywhere in Europe, to meet the effec-tive demands while at the same time optimising the stock andflow logistics equation from an economic and environmentalperspective. More generally speaking, platforms are necessary for all areasof e-commerce, whether they are for specialist or end-to-end ser-vices, as is the case for the generalist or sector based marketplaces. Cross-border commerce is not without risks. For this reason,the e-retailer must coordinate strategy and tactics and controlthe timing of a steady business deployment – this is obviouslyinconsistent with the obligation to provide services in every EUcountry. These integration platforms are there to remind us thate-commerce is capable of increasing its processing power at asimply amazing rate. This rate is even ten times greater for theEuropean countries that are in the catching up process.More subsidiarity and virtuous combinationsTo close this chapter, we may suggest two principles on which tobase development, but also regulation and governance issues, for© Acsel - L’association de l’économie numérique.
  • 118 Cross-border e-commerce/A Digital Europe at the heart of tradewhat we have called the European e-commerce ecosystem. Thefirst one is taken from the idea of European construction andthe principle of subsidiarity, and the other one is taken from theInternet with the principle of collaboration. In simple terms, the principle of subsidiarity involves lettingeach player or group of players perform to their maximum abilityrather than replacing them, and to do so only if absolutely neces-sary. In an article published in June 201120, Pierre-Yves Gomez,Professor at the Lyon School of Management and founder of TheFrench Corporate Governance Institute, observed that “pyra-midal governance forces large companies to introduce formalfunctioning and monitoring systems that are very costly. By stan-dardizing work, the top-down transmission of power reduces thescope for local creativity which is the main source of value cre-ation…”, not to mention the “cumbersome bureaucratic controlsin top-down systems”. Inversely, when authority is delegated bottom upwards, the“bottom level” enjoys the most legitimacy and a greater degreeof freedom to operate. The organisation is therefore similar to acity, this city that Europe has invented, between ancient Greeceand medieval Italy. The collaborative social networks provide anew lease of life, whereas economic theory (notably that of ElinorOstrom, who was awarded the Nobel Prize in Economics in2009) rediscovers and measures the economic efficiency of asso-ciations. Subsidiarity appears in the Single European Act (1986): article5 of the Maastricht Treaty establishing the European Communitystates: “The Community shall act within the limits of the powersconferred upon it by this Treaty and of the objectives assignedto it therein. In areas which do not fall within its exclusive com-petence, the Community shall only take action in accordancewith the principle of subsidiarity if the objectives of the planned20. “Renouer avec la subsidiarité comme principe de gouvernance”, (Re-establishing subsidiarity as aprinciple of governance) (article in French), Le Monde, 13 June 2011. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 119action cannot be properly achieved by the Member States andthat because of the extent of the action or the expected impact theobjectives can be better achieved at Community level”. As for thecollaborative principle, it refers to systems whereby knowledge,skills and initiatives of individuals are all aggregated and accumu-lated in an online social network. After creating Wikipedia, thecollaborative encyclopaedia that has now become a reference, thisprinciple is now being adapted to all kinds of applications: frombusiness applications to the political arena as well as in all areasof social and occupational life, where the abilities of players canbe increased by resources available online. When asked21 about their attitude towards cross-border com-merce and consumer protection, three quarters of the consumersconsider that they would be in a better position to defend theirrights if they could join together with other consumers who hadexperienced the same incidents. On a more positive note, the collaborative principle sug-gests the contribution of “consumer players” who help perfectand even design products and services. This same concept canbe found in professional Anglo-Saxon literature with what IanJindal suggests should be called “purchandising”. In an editorialfeatured in the November 2010 edition of the magazine InternetRetailing, it was stated: “‘Purchandising’ would be the practice of improving the specifi-cation and procurement of products and services so that they bet-ter match the needs, desires, interests and aspirations of customers(thereby reducing the marketing and promotional demands to con-vert customers’ interest into cash). This is different to ‘normal procure-ment’ since it would be based upon insight to customers’ behaviour, ahigh level of collaboration and ultimately co-creation”. In fact, the principle of subsidiarity and the collaborative prin-ciple, could well be turned into one if we consider that the scopeof the first is significantly broadened when the “empowerment”21. Flash Eurobarometer no. 299, March 2011. © Acsel - L’association de l’économie numérique.
  • 120 Cross-border e-commerce/A Digital Europe at the heart of tradeof players pushes back the incompetence thresholds of subordi-nate groups. In some aspects, the platform notion summarises these prin-ciples by providing a concrete operational environment. Thisnotion is also to be found in what is commonly referred to ascloud computing, which the sector’s giants (Google, Microsoft,Apple Hewlett Packard and Amazon to name but a few) are allbattling to control with mobile terminals such as smartphonesand tablets. Does the institutional future of Europe also depend on thedevelopment of cloud platforms? If such an event were to occur,then you can be quite sure that cross-border e-commerce willhave played a leading role in this regard. In any case, cross-border e-commerce cannot underestimatethe importance of redistributing the roles between all partiesinvolved: demand, supply, mediators and those who regulaterelationships between them.THE CLOUD IS BORDERLESSJoseph Reger, the Technical Director of Fujitsu Technology Solutions, underlines that,in a speech at the Davos World Economic Forum, the EU Commissioner Neelie Kroesemphasized how important it is to establish a European strategy for cloud compu-ting, within the framework of the Digital Agenda. “The European Economic Area isa complex system, which includes a large number of countries and therefore just asmany stakeholders. We are faced with the major challenge of building a unified andstable infrastructure». It is necessary to build a unified legislative framework for themanagement of data in the «cloud» and to reduce the damaging effects of fragmen-tation. «At the same time, manufacturers also need to establish common standards incollaboration with governments and regulatory authorities”.** “Les Européens doivent faire cause commune dans le ‘cloud computing’” (The Europeans need tojoin forces in “cloud computing”) (in French), Les Échos, 26 August 2011. © Acsel - L’association de l’économie numérique.
  • Chapter IV/Moving towards a cross-border e-commerce ecosystem 121 It is remarkable that the construction of Europe in general andthat of the e-commerce ecosystem and its infrastructures with theestablishment of trans-European delivery networks are all facingthe same challenge. What is even more remarkable is that a com-mon response is being formed with these virtuous combinationsthat are inspired by the key principles and materialised by infor-mation technologies. ***© Acsel - L’association de l’économie numérique.
  • 122 Cross-border e-commerce/A digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 123 Chapter V Pioneer figures of cross-border e-commerceA fter having studied cross-border e-commerce in terms of real figures, the hurdles facing it and the issues at stake,this next chapter is now dedicated to the players themselves,these pioneer figures who are opening new business horizons.Of course, each contribution illustrates some of the pointswe developed in the previous chapters. But the commentsof these leading figures also remind us that, when there areno signposts along the way, you need to be determined, takeone step at a time, avoid any obstacles and adjust to the real-ities, even if it sometimes means taking a small step back tomake further progress… with plenty of experience, howeverdifficult it may be. The “business cases” we have gathered together in this chap-ter are relative to all kinds of e-commerce: multichannel brands,marketplaces, private sales specialists or pure players. Theyalso refer to all sectors, and in particular the clothing sector,which seems set to trigger the emergence of “mass” cross-bordere-commerce. The authors would therefore wish to thank all of the playersinterviewed for accepting to share their experiences in this book,and thus improve the understanding of this subject of ours…which is above all, theirs.© Acsel - L’association de l’économie numérique.
  • 124 Cross-border e-commerce/A digital Europe at the heart of trade BUBBLEROOM: building a strong brand in EuropeAfter a career in the fashion media, Svante Tegnér, the founder ofBubbleroom, an online clothing and accessory web shop, adaptedhis past professional experience in content writing and applied itto online selling. Launched in 2009, the site is a store and a place for exchangerevolving around fashion: blogs and social networks provide thesite with fashion related content and the most popular of theseare rewarded financially. Initially opened in Sweden, the site opened a year and a halflater in Denmark, Norway, and Switzerland and more recentlyin Poland. After a year of activity abroad, 60% of sales are nowcoming from outside of Sweden. To support this development,Bubbleroom was acquired by a Swiss distance selling companywhich also contributes with its knowledge of distance selling. For the founder of Bubbleroom, easy international expansionis one of the major advantages of e-commerce. “When you are already present abroad, opening in new countriesis easier, and increasingly so in the light of experience gained, even if,of course, there is always a risk. Compared to traditional retail, thisis a huge advantage”. The time required for Bubbleroom to opena site abroad can vary from four weeks to three months. The company prefers to open stores in countries where e-com-merce is less developed and with smaller markets. Consequently,the advantage lies with lower setup costs. “Major markets likeEngland or Germany are very competitive and expensive to access”,explains Svante Tegnér. Three steps are essential and can be difficult when buildingforeign presence: – adapting to the language and the services in the countries; – building a list of customers who recommend the brand tolaunch marketing campaigns on social networks; – generating enough orders to raise the budget required to setup the business. © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 125 “Our biggest challenge is to build and develop brand awarenessabroad, this is why marketing is our biggest project”, adds the CEOof Bubbleroom. At this stage of its international development, the organisa-tion is managed centrally in Sweden. The Bubbleroom site hasa special “.eu” website dedicated to Europe and delivers to allEuropean countries from its base in Sweden. In the countrieswhere its activity is most developed, orders are sent by ship fromSweden to distribution warehouses and then delivered to the endcustomer via national postal services. Logistics arrangements arethe same for the management of return goods. “In EU countries, even if some legislative adjustments are required,it is more or less the same everywhere. It is more difficult for exam-ple in Switzerland or in Norway as far as dealing with the cus-toms authorities is concerned. There are always a few local differenceswhich need to be taken into account: cash on delivery is not alwayspossible in all countries, the rates of instances are higher in Finland,free return delivery and the frequency of returned goods in Germanyare all factors to be taken into account in the economic model”. The founder of Bubbleroom is optimistic about e-commerceprospects in Europe. The future is very promising for those whohave a clear economic model and a strong brand, even if compe-tition between European players is increasingly fierce. His advice: to not underestimate the difficulty of creating atruly European brand. u© Acsel - L’association de l’économie numérique.
  • 126 Cross-border e-commerce/A digital Europe at the heart of trade DUKAN is now launching its globally successful diet on the WebDue to the worldwide success of his book, published across 30countries, translated into 16 languages and read by 25 millionpeople, the Dukan slimming method was adapted for the Webfor the first time with the launch of online coaching in Francein 2008. “Very quickly, the demand for information on the foodsthat are part of the Dukan slimming programme was very strong andit led us to develop an additional service to distribute food and dietrelated products and we launched an online store in January 2010”,explains Philippe Mascaras, the Managing Director.u Consumer habits in the physical world and on the webare complementary and the constant exchangesbetween the two are part of the brand’s global strategyThe success of online sales therefore encouraged the brand toset up a multichannel distribution system at physical points ofsale. “Part of the pharmaceuticals range was available from June2010 and this was a phenomenal success”. The company works inpartnership with Monoprix and Casino in France to develop itssales within large supermarkets. The company rapidly extended its range to “gourmet plea-sure” products, foods for people who wish to “stay slim”without following a diet and therefore enabling them to reachout to a broader target audience.The online shop currently offers 110 products and roughly fiftydifferent flavours. This amount of choice for slimming diets andthe different flavours on offer take into account consumptionhabits across different countries and open the way for an inter-nationalisation of online shopping. “We set our sights on pro-duct innovation so that we can offer a broader choice of products.For example, this enables us to sell a goat cheese flavour product inEngland that is much less in demand in France!”, according toPhilippe Mascaras. © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 127 At the same time as the online coaching was expanding abroad,the company opened the associated online shop. This was howthey proceeded in Spain, England, the Netherlands, and Italyand in Poland in 2011. Their opening in Germany is planned forthe end of the year. “It took us two months to open in each country. But England andthe Netherlands were slow to get started because of strong competitionand a number of very specific local differences. In contrast, in Spainand Italy, the sites functioned well right from the start. In countriesoutside of Europe, the shop is already launched in the United Statesand China and Brazil are in the planning stages. By the end of 2012,we will be global players. Today, cross-border development depends onthe Internet”, according to the Managing Director of Dukan. When choosing a location, the selection criteria used byDukan take into consideration the project’s target, in other wordsthe countries where book sales were successful and where a largenumber of people are very overweight, and of course the size ofthe local e-commerce sector. “The differences in terms of consumer behaviour led us to recruitmarket managers, who are natives of the countries in which we locateour operations. Promotional campaigns, prices and payment systemsare different and the market managers can adapt them rapidly dueto their excellent knowledge of the local market. In this way, we areable to save time”. The sites are quite similar across the different countries buteach market manager draws up individual product descriptionsand adapts the packaging and visuals, which vary according tothe countries and pricing strategy. “Our service provider Orium gave us a degree of flexibility andspeed for out internationalisation project by setting up a num-ber of local solutions, while maintaining a global vision of ouractivity: there is a warehouse in each country for storage purposes,pricing is relatively well adapted and we have a choice of transporterswho all offer quality service. They also offer administrative supportfrom time to time if needed by introducing other service providers orpossible partners”.© Acsel - L’association de l’économie numérique.
  • 128 Cross-border e-commerce/A digital Europe at the heart of trade Dukan’s operations are managed centrally in Paris with taxrepresentation in each country. “The advantage of e-commerce isthat we can manage all of our activities in Paris. As far as tools areconcerned, we use the same platform in all countries. What we dolack is an information technology solution to cater for our specificbusiness needs that rely heavily on the notion of a community basedmethod. We are working hard to bridge this gap”.u The free movement of goods faces a number of constraintsFor Philippe Mascaras, “there is a real paradox here: on the onehand we have free circulation of goods within the internal Europeanmarket, but the number of constraints that are encountered makethis promise of easy cross-border trade extremely difficult to achieve”. The toughest constraints include: a not so common cur-rency (UK and Poland), different payment habits (transfers inGermany, cash on delivery in Poland, bank card in France), manydifferent export and import regulations, different terms andconditions of sale, not to mention the various VAT systems... Finally, the single market is not uniform in terms of levels ofdevelopment and we need to adapt pricing policies to the pur-chasing power in each country. “If we implement solutions that harmonise and simplify admin-istrative procedures and if we also support development of interna-tional activity and the search for partners, we can improve the processof internationalisation for many merchants and service providersin Europe. The ways in which organisations function are unclearand many abusive practices also exist. Some take advantage of thecomplex situation to invoice market research services that could besimplified and better shared”, claims Philippe Mascaras. His advice: It is important to focus on the quality of humanresources. He believes that this is the key to a good market under-standing that enables you to save a lot of time. Finally, you needto be well supported with regards the administrative and regula-tory aspects of your business. u © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 129 ELECTROLUX: moving from the BtoB model to BtoC without disturbing the distribution networkWith 40 million products commercialised each year in 150 coun-tries, the Swedish industrial group Electrolux figures among themarket leaders in electrical goods for domestic and industrial use.Its presence on the Internet dates back to the early 2000s.“We launched our e-commerce with test projects in a few keycountries using our warehouse dedicated to BtoB activities. Eachcountry was doing more or less its own thing up until 2007, whenI was named manager for European markets. Two years laterin 2009, Electrolux decided to create their international BtoCactivity, which also includes countries outside of Europe andwhich I am in charge of ”, explains Wilko Klaassen, Director ofCommercial Development B2C Unit. “Today, no brand can afford to be absent from the Internet becauselarge numbers of our customers use it”, adds Wilko Klaassen. Butthis presence is currently in the form of support for the indus-trial group’s distribution networks. In actual fact, only acces-sories and consumables as well as spare parts are sold directlyon line by Electrolux. Across Europe, this represents a cata-logue of approximately 500 items, including a long list of severalthousands of spare part items that are difficult to find in the distri-bution network. “We do not sell finished products which are reservedto our distributors”. But this rule could soon be broken following theannouncement of direct vacuum cleaner sales in the United States inSeptember. «Such products are easy to ship», explains the Directorof BtoC Development. “We are not talking about washing machines, for example, whichrequire two people for home delivery. In addition, three of our maincompetitors, including the brand Dyson, already sell their vacuumcleaners directly via Internet in the United States. We could notavoid doing the same thing”. Belonging to a group operating on an international scaleenables easier access to suppliers and in the majority of cases© Acsel - L’association de l’économie numérique.
  • 130 Cross-border e-commerce/A digital Europe at the heart of tradeit provides the structures and resources that are very useful toget online activity off to a rapid start. “The disadvantage is thatthese infrastructures are not always adapted to BtoC commerce,which is not a priority for a group like ours. They sometimes lackflexibility and reactivity, which increases the time required forproducts to reach the market”, explains the Director of BtoCBusiness Development. Most of the e-commerce activity is controlled from the HeadOffice in Stockholm in Sweden, including site creation andmanagement, the definition of the products and range as wellas the sales price. Finally, company marketing strategy is also setout at company head office. The countries directly manage theircustomer relations services, product returns and the translationof their site and product descriptions into the local language.They also adjust product prices if this is required. The company has five warehouses in Europe (Germany, Spain,Italy, United Kingdom and Sweden), each one serves a group ofcountries. It works with a small number of service providers tocover the last mile and deliver products to consumers or to thepickup points. “From my point of view, it would be better to have adedicated BtoC warehouse, but this is not scheduled for the moment.We could also make savings on packaging too. We have the same onesfor products delivered in BtoB and in BtoC, which is not a satisfac-tory solution. But in a large group like Electrolux it takes time tochange such arrangements. Of course it also requires investments”,explains Wilko Klaassen. The main difficulties facing European e-commerce are linkedto the fact that the differences in each country need to be takeninto account: specific retail regulations, tax policies, language andcurrency management (even if the Euro exists) and also in theorganisation of logistics. To add to these technical problems, it isimportant to be capable of keeping up to date about consumerneeds in each country so that the site offers an adequate solution,and in a situation whereby there is no physical store enabling usto evaluate the state of the market. u © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 131 MANGO: a centralised e-commerce organisation that relies on the presence of local shopsLaunched in 1984, Mango, with its 2,050 shops has operationsin 105 countries. It is a brand with a strong international dimen-sion which generated a turnover of 1.27 billion Euros in 2011. Asearly as 1995, the Spanish brand launched its first Internet site.“Right from the start, we believed that e-commerce was an impor-tant means of development and we targeted international business byopening our first site, based on the example of other e-commerce web-sites in the United States”, explains Elena Carasso, who managesthe brand’s e-commerce division. In 2000, the brand opened its first online sales websites.Today, Mango delivers in all European countries and is presentin Turkey, China, Russia and Korea. 80% of its online activity iscarried out in Europe, the remaining 20% is mainly carried outin the United States, Russia, China, Turkey and Korea. Opening a physical store in the country always precedes theopening of their website. The site deployment times are quiteshort, from 4 to 5 months between the decision making phaseand opening. The brand’s notoriety and the maturity of e-com-merce habits are the key factors in the decision making process.“We are present on the Internet in the United States because e-com-merce is very developed over there, although our brand is not so wellknown. In contrast, in Turkey purchasing via the Internet is not socommon, but our brand is very well known, which is the reason whywe opened the site”. For Mango, the physical presence of stores is indeed an advan-tage, as it makes it easier to internationalise its e-commerceactivity notably because it enables the brand to gain a certainlevel of knowledge beforehand about the countries as far as con-sumption habits, legislation and business practices are concerned. “Obviously, we need to found out about specific behaviours onthe Internet, but we also need to adapt certain things when weopen a store, there is not much difference”, explains Elena Carasso.© Acsel - L’association de l’économie numérique.
  • 132 Cross-border e-commerce/A digital Europe at the heart of tradeThe Mango collection is universal and varies little from onecountry to another. The adjustments mostly concern servicesand business practices: free delivery in England and the USA;service quality which is more important than costs in Germanyfor example, competitive practices, special payment methods,sales campaign habits. There are a number of differences notablyin the United States and in England, where the fashion seasonstarts earlier, or in Spain and in France, where sales periods startlater. Sites are therefore different depending on the countries butthe adjustments are only minor. As far as legislation is concerned, the brand has not experi-enced any serious problems. “We offer our customers conditionsthat are always better than those required by legislation and we donot have any serious disputes within the European Union thanks tothe various directives. The Commission is showing a lot more interestin e-commerce just lately. We are waiting to see what will come of it”.u Its e-commerce operations are centralised in SpainMango’s strong local presence with its European subsidiar-ies in different countries enables it to centralise all e-commerceorganisation systems in Spain. The marketing and informationtechnology teams, photographers, designers and warehouses arein Spain. The brand cultivates a “home based” spirit and seeks tocontrol both logistics and information technology developments.“Our e-commerce platform was developed in-house as we would liketo maintain control over the functionalities and developments inareas where we would like to innovate”. In terms of logistics, the European countries are delivereddirectly from Spain within 2 to 5 days. For Elena Carasso,delivering to consumers in Europe does not create anyparticular difficulties. Outside of the EU, this become a lotmore complicated. Difficulties are encountered with the cus-toms services, delivery costs and delivery times are much toolong. The solution for Mango was to open warehouses to servelocal markets in Turkey, Russia, the United States and China. In Europe, goods returns are handled by the Post Office – the © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 133goods must be returned either to Spain or to stores. “We haverather high return goods rates, which is common in the textile sector,but 70% of the returns are handled in-store, which offers the advan-tage of creating business at points of sale”, declares the e-commercedirector. The development of mobile services is our next major projectat Mango, as well as videos and editorials. For Elena Carasso, e-commerce is very much in a growthphase (if we leave out the USA and England, which are alreadyvery mature markets), it is just the right moment for brands andretailers to ensure their presence. The more online retailers thereare and the broader the range of offers, the stronger the demandwill be. For Mango’s e-commerce director, supply will attractdemand, and this is what has been lacking in the last few years.The arrival on the market of brands and at a later stage that ofdistributors like online supermarkets, will further increase theamount of choice for online shoppers and will participate in thegrowth of e-commerce. Moreover, Mango expects to double itsonline turnover in 4 to 5 years from now. u OCLIO, the website specialising in products for babies, has doubled the size of its market by opening in Spain and ItalyLaunched in 2003, Oclio, a family run business has succeededafter only a few years in gradually becoming one of Europe’sleaders, selling products for children aged 0 to 4 years on theInternet. The company operates in France, Belgium, Luxembourg,Spain and Italy and currently employs 22 people. Their example proves that international development can beachieved by e-merchants of all sizes. “Oclio started its e-commerce activities selling child safetyproducts: baby seats, plastic corner protectors and baby phones.© Acsel - L’association de l’économie numérique.
  • 134 Cross-border e-commerce/A digital Europe at the heart of trade“Around 2006, thanks to the reports supplied by LeGuide.com thatmonitored where the traffic on our website was originating from, wediscovered that the majority of our traffic resulted from the keyword‘pushchair’, in other words a single item in our catalogue of safetyproducts”, explains Laurent Censier. Bearing this in mind, Oclioexpanded its range to include all types of baby equipment includ-ing pushchairs, baby scales and bottles... But the childcare marketis a niche market representing only 1 billion Euros in France. Thecatalogue has evolved to include furniture, food, toys and con-sumables (nappies and clothes). “By the end of 2008, Oclio was generating a turnover of 2.7million Euros. It raised the issue of what we could do the followingyear to increase our turnover other than by doing our work. It wasat that moment that we started to look abroad”, explains LaurentCensier. He also added: “We were quite arrogant at that time andwere steered by our intuition, we knew we were only a small com-pany and not particularly strong, you know what it is like to beprofitable in e-commerce. We were earning a little money and werekeen on building a broader catchment area”.u In the beginning, we opened operations to the entire world“From the start, we opened our operations to the entire world,including Zimbabwe… But when the unpaid debts started, wequickly understood and closed. We also did a lot of foolish things…”,admits Oclio’s founder. When deciding in which countries wecould surely expand our catchment area, we based our decisionon three criteria: they had to be geographically close with suffi-cient demand for e-commerce services and a strong birth rate. Some products sold by Oclio are indeed quite heavy (from 10to 33 Kg for pushchairs with car seats), and the logistics wouldhave been too complicated for far distanced countries, and thecost of delivery far too expensive. For this reason, internationalexpansion was first planned in French speaking countries as notso many special adjustments were required and they were situatednear France. These countries were Belgium and Luxembourg. InSwitzerland, customs problems led the company to abandon their © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 135plans. “But it will not prevent us from trying again in Switzerland:it is a small market, but with a high standard of living”, explainsLaurent Censier. In 2008, Spain was very busy “catching up” as far as e-com-merce is concerned. By adding the Italian market, Oclio couldtarget double the numbers of potential customers. The Spanishand the Italians give birth to less babies than in France but theyspend a lot on the first baby. “We took a quick look at the mar-ket on Google and we immediately noticed that there was very lit-tle competition in these two countries. It was very easy to envisageour strengths: if you enter 30 keywords on Google and you check thefirst 4 pages of the search results, you will discover the identity of yourcompetitors”, explains the founder of Oclio. The United Kingdom was left aside, notably because the pricecompetition was too strong and the players were more experi-enced in e-marketing.u The surprise came in the form of the pricesThe company started its expansion abroad with the same productrange and the same prices, only the consumables such as nappiesand small jars of baby food with indications in French only wereremoved. “We left the website on line for a few days and noticedthat logistics were functioning well. After a few days of activity, whenwe had checked that all was functioning well, we bought some key-words. And then 3 days after, we had a surprise because of the prices.Distributors were calling us in total panic as we were undercuttingmarket prices”, tells the founder of Oclio. We adapted prices aftera few negotiations and we either increased prices or reduced themaccording to the market. “With the Internet, you find out straight away when there is aproblem and you can react immediately. A multinational startingup business will not do things like we did. It will check that all is inorder before launching and preparing everything”, explains LaurentCensier. The company is based in Aix-en-Provence and employsnative speakers of the countries in which its activity is deployed.© Acsel - L’association de l’économie numérique.
  • 136 Cross-border e-commerce/A digital Europe at the heart of tradeOn the logistics side, Oclio works with Crosslog who have a ware-house in Lognes. It launched operations in Spain and Italy withUPS which provided a convenient and simple setup, althoughthe solution remained expensive. After a few months, the volumeof orders in Spain was high enough to switch to a direct ship-ment method. Rather than handing parcels over to UPS as theybecame available, Crosslog prepared the orders of the day andshipped them on pallets by lorry to Madrid or Rome. Locally, thelocal postal services are used to cover the last mile. “There is a realsaving of about 20% for us, even if it results in longer delivery timesfor the end customer”. The means of payment differ depending on the countries. InFrance, Oclio proposes bank cards and cheques. In Spain andItaly, the cheque was removed from the list. “In Spain, the bankcard offers us a competitive advantage, because in this country, cardpayments are expensive for retailers due to commission charges. Inaddition to that, some Spanish retailers sometimes offer their cus-tomers a reduction if they do not pay by card!”. As for bank trans-fers, the company detected some fraud. “The consumers who paidby bank transfer were not paying! They were ordering, receiving thee-mail with the details of the French bank account and cancellingtheir orders in 40% of cases. To solve this problem, we opened a localaccount in Spain and in Italy”, Laurent Censier stated. In 2011, the share of turnover for the two countries was respec-tively 12 and 15%. Launching operations was rapid for Oclio assome elements could be duplicated based on France, like mar-keting channels or the corporate strategy adopted for keywordgeneration. Oclio recorded a turnover of 8 million Euros in 2010. The next phases: the countries where lots of babies are bornand where e-commerce is strong, for example Brazil and Turkey,with 1.4 million babies born each year, which could doubleOclio’s market. Poland also offers a large customer mass andwould offer the company an opportunity to be present in theEastern European countries. His advice: go for it and dare! With a light and agile struc-ture, it is neither complicated nor too expensive. It is quite © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 137easy to find out what is going on in a country as far as com-petition and consumption are concerned and to be confidentenough to start up. I can’t even remember saying once that “weshouldn’t have done it”. We take things step by step just likein an e-marketing campaign. You spend a little, it works andyou go a little further. If you encounter a problem, you solveit, and so on. What can be deadly is when things go too wellall of a sudden. From one day to the next, you find yourselfdelivering lots of parcels, and if your terms and conditions ofsale are not precise enough you could find yourself with legalproblems with your clients. You need to build up businessgradually to have time to rectify and change things as andwhen needed and thus learn as you go along. u O’NEILL are hoping that the multicultural aspects of their brand will open the Internet channel in EuropeCreated in 1952, O’Neill is a brand of Californian surfwear spe-cialising in surfing sports products and casual clothing. In 2008,the company was acquired by Logo International B.V., a Dutchcompany. It was at that time that the company launched itsonline activities, with a European expansion strategy. The brand is present in nine countries: Germany, theNetherlands, the United Kingdom, France, Belgium, Austria,Denmark, Spain, Italy, Canada, the United States and Australia.“Our objective is to extend our presence in a further ten Europeancountries in the coming months”, explains Jerome Orlemans,European E-commerce Manager. The selection criteria for O’Neill’s decision to set up in coun-tries are mainly brand notoriety, the size of e-commerce, thevolume of online searches, the market size and the legislativeconstraints. “We are a European company with a Californian culture», saysJerome Orlemans. «Our team is multicultural, the experience of each© Acsel - L’association de l’économie numérique.
  • 138 Cross-border e-commerce/A digital Europe at the heart of trademember becomes a driving force helping our brand to adapt in eachcountry”, adds Jerome Orlemans. The cultural diversity in Europe,the seasonal differences in each of the countries, demands genuineforms of adaptation. The consumer behaviours are also heteroge-neous: “Some countries tend to focus on the quality of a product andon the technical characteristics, like Germany. Whereas in other coun-tries, we notice that the consumer is more interested in the price, likein the United Kingdom”, explains Jerome Orlemans. He empha-sizes the fact that “Some products may be ‘best-sellers’ in one coun-try and ‘worst-sellers’ in another. Owing to the fact that we arerepresented by our shops in all countries, we can gather enoughinformation about the specific nature of the local market”. O’Neill proposes a different collection that depends on thecontinent, and their marketing approach and strategies arewell targeted: “In Europe, we propose a broader range of onlineproducts than we offer in physical stores. We change prices slightly, butin general you could say that we have a quite harmonious Europeanpricing policy”. The sites are 80% identical. Differences lie withour marketing campaigns that are specific for each country.u The Internet channel is growing a lot stronger than thetraditional retail channelThe Internet channel accounts for a high share of our sales andis increasing better than it is in traditional retail. For JeromeOrlemans, “in e-commerce, the key to succeeding when you launchinternational activities is to build strong partnerships”. O’Neill works with PFSweb, which is already very experiencedwhen it comes to launching international online retail activi-ties. “Our service provider provides us with a solid e-commerce andstock management platform. It also handles orders and customer ser-vices, managing payment means and fraud protection… Knowinghow to localise our online activity is essential”, admits the brand’sEuropean e-commerce manager. O’Neill has locally based organisations in the countries.However, CRM is handled centrally. The brand uses means ofpayment such as PayPal, iDeal and bank cards. “In Germany, you © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 139can pay by bank transfer, the goods are reserved for 14 days and aresent after payment is received. We have opted for different methodsof payment that are adapted to the countries and this increases ourconversion rate”, explains the European e-commerce manager. The company has special storage facilities for its online activi-ties. PFSweb handles any problems relating to returns: the serviceprovider receives the returns and describes the reason in order toimprove the process. Where there is a fault, the article is returnedto Head Office, otherwise it goes back into stock. “I have noted significant positive progress within the frameworkof the single market, such as the European legislation which recentlycancelled the German law obliging the seller to pay the return costsfor the customer”, said Jerome Orlemans. But the single market remains fragmented. For example, leg-islation with respect to withdrawal from a sale is a lot less strictin other countries of the EU than in Germany. “This forces us tointroduce complex procedures and to take a number of initiativeslegislation wise”. Jerome Orlemans is optimistic as far as the developmentof the e-commerce market is concerned. “I expect strong con-solidation and considerable growth within the European onlinemarket. Several major European retailers are pursuing pro-active policies with regard to the Internet channel by expand-ing their range of products and adapting to local markets”.And in conclusion, he adds: “It will be interesting to see whatGoogle will do with its online shop (Boutique.com, Boutique.comstores and Google Shopping). ‘Think global, act local’ is certainlyfundamental for Europe if we consider the different cultural, legis-lative and multilingual contexts”, concludes Jerome Orlemans. u© Acsel - L’association de l’économie numérique.
  • 140 Cross-border e-commerce/A digital Europe at the heart of trade ONESTOPPLUS EUROPE: the USA, a real life test location before adapting to EuropeOneStopPlus was launched at the end of 2006 in the UnitedStates by the online fashion and decoration distribution groupRedcats. They wanted to use this leading e-commerce country todevelop and test a pure Web concept with this site dedicated tolarge sized clothing. “Right from the start, the objective was to launch the conceptthroughout Europe. France was always considered as a foothold inEurope, but not as an end in itself. Our objective was to establish ourEuropean presence rapidly and firmly”, explains Antoine Menet,Senior Vice President and Director of OneStopPlus Europe, whoreturned to France in 2009 with the task of developing the con-cept at European level. “On my return to France, I spent the first five months readjust-ing and trying to understand what the European situation wasand how to adapt the concept”. The launch of French operations,the first in Europe, took place in June 2010, eleven monthsafter the decision was taken to launch. Today, the site is openin 10 European countries: France, Belgium, the UK, Sweden,Norway, Finland, Denmark, Portugal, Spain and Switzerlandin the last six months; or 10 countries launched within twelvemonths. The learning curve when launching sites in the differentEuropean countries increases exponentially. It took almost fouryears to go from the first site in the USA to the second in France.But then, only four months were required to open the Belgiansite, then four weeks to launch activity in the United Kingdomand roughly four days for Sweden, where the site was inauguratedin December 2009. “It took us a little time to cross the Atlantic,but then the rhythm got going because we could control technical,logistical and commercial aspects better. Having said that, it doesn’tnecessarily mean that we are going to open up in each new countrywithin four weeks or even four months! We have however adopted a © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 141rhythm which in the next six or twelve months could help us doublethe number of countries in Europe”, adds Antoine Menet. For the Director of OneStopPlus Europe, if the site had notbelonged to a major International group, it would doubtless nothave arrived in Europe, or in any case not as fast. The presence ofRedcats on the two continents has without a doubt facilitated andspeeded up the transfer of the concept to Europe. The site is openin countries where Redcats is already present. The priority coun-tries were chosen according to their potential and the strength ofthe group’s presence locally. The American site offers over 200,000 products and attracts1.5 million single visits per month. Today, 50 to 60% of brandssold on the site are sourced and developed directly by Redcats.The share of external brands present on the site is increasing sincethe line of development on the other side of the Atlantic is tobroaden the product ranges available in shopping malls. In Europe, the site is a business provider for the group’s brands.The site’s turnover goes to the group’s brands and stores. “Withoutany doubt, it was the condition for the creation of the site. The brandswould not have accepted that we have our own turnover as they wouldhave seen it as internal competition”. With 80,000 products, the siteproposes the broadest choice in the specialist area of fashion forthe larger sizes. The ambition of OneStopPlus is to offer identical productsacross the different European countries. “I am curious to see, if overtime, differences will appear with regards the best-selling products soldfrom one country to another or if selling pace changes according to thecountry. You can expect there to be differences between Scandinaviaand Spain, for example. But on the basis of my experience in the USA,reasoning on a continental basis seems sensible. In the United Statesthere are great cultural differences between Boston and San Diego,between Texas and Minnesota, and yet consumers purchase glob-ally the same products at the same moments in time from one Stateto another”, explains Antoine Menet. The sites are similar in thedifferent European countries. Advantages also lie with the deploy-ment of information technology. “There is not much difference in© Acsel - L’association de l’économie numérique.
  • 142 Cross-border e-commerce/A digital Europe at the heart of tradeexperience levels between web users from one country to another. Thearrival of new terminals, smartphones and tablets, will no doubtresult in great changes in the way people browse and much more sothan culture from one country to another”. OneStopPlus relies on the group’s local skills and resources.The e-commerce platform, however, belongs to an external ser-vice provider, and the same solution is used across all of Europe.“I had to choose between the Redcats solutions and alternatives toRedcats. In some cases, I opted for Redcats solutions and in othersexternal providers, like for the front-office IT”, explains AntoineMenet. For the back-office solution, however, the site relies onthe information systems of the stores in the different countries.The majority of the products are brands of the parent company,it was therefore only logical to use internal data as the basis fromthe start. We adopted the same logic for marketing issues: cus-tomer bases and files. In terms of logistics, we also opted for the existing meth-ods, both for supplies and downstream deliveries. “I could havecreated an alternative logistics system to that of the group, but itwould have taken longer. To simplify things, I adapted to existinggroup processes. However, what I was looking for from the start,I cannot exactly achieve with the existing internal logisticssystems. This is the case for the service level, with regard todelivery times in particular, and also the logistics flows are sometimesquite complex. We are currently operating as if we are in the launchphase. If we wanted a perfect system from the start, it would havetaken us two or three years to develop”, explains Antoine Menet. Thesite also relies on the company’s own sales advisors for their cus-tomer relationship services. The group has a call centre for eachcountry. The site’s teams visit them regularly to maintain contactand provide information. For the Redcats group, OneStopPlus is the opportunity forthem to question their usual operating practices. Within sixmonths, between June and December 2010, the small team of6 people based in Paris launched four sites in four countries. “Thissparked off a degree of competitiveness internally and resulted in © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 143the launch of other sites, with other brands. Redcats opened anotherdozen sites across Europe in 2010”. For Antoine Menet, the other major advantage of theOneStopPlus experience for the group has been that it has ledto product restructuring at European level. “Up until then, ourbrands were too closely associated with their respective countries. Bycreating these “trans-brand” systems (logistics, information systems) forOneStopPlus, we also provide the necessary conditions for exchangesbetween the other brands within the group”. Today, OneStopPlus has a team of between 5 and 6 peoplebased in Paris. This team represents the very soul of the site inEurope, providing sales promotion support: product selection forhome pages, choice of marketing strategy and pace... It is also incharge of managing the French site and promoting the networkinternationally. Outside of France, the team includes two peo-ple in the United Kingdom, one in Sweden and one in Belgiumfor local assistance. Finally, in each country there is also a Redcatsteam. “We are currently carrying out tests to see if we can maintainsuch agile operations in a network configuration, with a small teambased in Paris and a relay group responsible for escalating informa-tion (with local awareness) and deploying the concept. These relayteams are also asked to help bring about changes in the shopping cul-ture in these countries, which is still heavily based on home shoppingcatalogues, and find themselves faced with a pure player concept”,concludes Antoine Menet. u© Acsel - L’association de l’économie numérique.
  • 144 Cross-border e-commerce/A digital Europe at the heart of trade PIXMANIA: pioneers showing the wayWith 65% of its turnover generated outside of France, Pixmaniais undoubtedly the leading European cross-border e-commercecompany. The Pixmania adventure began in 2000 with the open-ing of the first site focusing on the Rosenblum family’s initialbusiness: the development of photos. Very soon after, their rangewas extended to include cameras and it now currently proposes22 product categories. Right from the start, the European dimen-sion was important, the idea being to place “Europe as theireconomic playing field”. Pixmania is now present in 26 countriesand generates a turnover of almost 1 billion Euros. “The first key to success when internationalising e-commerceactivities is the product. Are you offering a product that people want?What added value are you providing locally? In this respect, Pixmaniawas able to develop very rapidly because the initial products it wasselling, digital cameras, were indeed adapted: the user manuals werealready translated into different European languages; the objects aresmall in size and are not subject to high transport costs”, explainsPingki Houang, Executive Director of the Pixmania group. With all of these barriers lifted, six months after launchingits site in France, the company initiated its activities simulta-neously in Germany, England, Spain, Portugal and Italy. Everyyear, countries were added to the list, and continuing at this rate,18 countries were opened after 2004. The following step was toposition the brand as the “multi-specialist” in its category. Atfirst, Pixmania broadened its activities to consumer electronicsand household appliances and soon became the leader in Europe.Subsequently, the ranges were increasingly extended: luggage,baby equipment, sports articles… “This multi-specialist concept makes economic sense but the factthat you are broadening your activities also means that you need tohave sufficient customers and a certain degree of brand notoriety”,adds Pingki Houang. At the present time, although Pixmaniahas 9 million customers, these customers do not repeat their © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 145purchases often enough in the area of electronics (an electronicdevice lasts six years on average), which explains why theirstrategy is to broaden their range of products. Becoming amulti-specialist only makes sense if you have access to a strongaudience. To do so, either you need to benefit from a very wellknown brand, or become powerful enough on the web to acquirestrong brand notoriety. It is also a virtuous cycle: the more youexpand the range and the more attractive your site becomes andwith it, the number of potential customers. In the case of Pixmania, the strategy of the best product at thebest price, immediately available with the best quality service anda presence in 26 countries enables them to benefit from strongEuropean brand notoriety.u The limits of centralised organisation when competingwith specific products in local marketsPixmania’s activities are managed entirely from France.“Maintaining a limited range at the beginning and operating withnative teams (half of the 700 people working at the Head Office arenot French) is essential for a sound start. It is also very importantto develop tools capable of operating in the Euro zone. For exam-ple, an information system which does not take this into account willnot be capable of managing complex taxation rules”, advises PingkiHouang. To streamline costs, the group also centralised its logisticswithin a single warehouse in the Paris area which serves the 26European countries. Their promise is to self manage approxi-mately 700,000 products, 98% of which are in stock. “Pixmania’shistory and experience as well as well negotiated contracts with trans-porters enable the company to maintain good quality service. Europehas made it easier to export: for example, to send a local product inGermany using DPD, a subsidiary of GeoPost, the cost is almost thesame as a delivery to France. We can also envisage opening otherpoints, but only if activity reaches a certain threshold”. Pixmaniais large enough to obtain good conditions and terms from itssuppliers and to compete with local players. On the customer© Acsel - L’association de l’économie numérique.
  • 146 Cross-border e-commerce/A digital Europe at the heart of traderelationship side of things, 60 people based in Paris deal withcomplaints. Part of the team members work as outsourcersdepending on the language and how complex the queries are. But as Pingki Houang explains, “if the site now wants to developfurther and double its turnover, it needs to start localising its activi-ties in the countries. After ten years of activity, our centralized formof organisation from France has reached the first threshold in termsof penetration. On top of the 10 or 20 standard best selling products,we need to be capable of managing specific products for each country.For example, you cannot sell a computer in Spain without a Spanishkeyboard”. At present, their local physical presence is limited to theirstores. So far, Pixmania has opened 19 stores in Europe, 9of which are in France. Breaking away from its centralisedmethod of functioning, Pixmania opened a second head officein the Czech Republic, where about 60 people are already busydeveloping their activity in the North West of Europe.u Europe should be capable of ensuring the volume requiredfor the development of e-commerce“The finest pure players of European e-commerce were created inFrance, a country in which it is difficult to create companies, owingto the fact that it is hard to find the necessary financing and also theability to achieve a critical mass”, explains the Executive Directorof Pixmania. These market size problems could disappear thanksto Europe, as it represents a considerable number of e-consum-ers, much more than in the United States. But on the other sideof the Atlantic, it is a lot easier to attract a large number of cus-tomers in a homogeneous environment as soon as a product islaunched. “Europe is still very fragmented, which makes it moredifficult to reach out to consumers and achieve critical mass. Complexlegislation (especially with regard to taxation) creates much difficultyfor small merchants when they try to reach beyond their borders”. For Pingki Houang, although the Euro, which has madeEurope a tangible reality, has made things easier, there are fourvery complex issues that need to be resolved: is the product © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 147adapted? When a company reaches a certain size, it faces theproblem of regulations; then come the problems relating to logis-tics and after that the language, in other words customer relationsand after sales service. Europe has “harmonised the currencies but not much more!”claims the Executive Director of Pixmania. The VAT changeshave had a major impact on e-retailers as they demand a greatdeal of effort in terms of processing and declaration. From a regulatory point of view, the most mature countries arethe United Kingdom, Germany, Scandinavia, notably as far asconsumer protection is concerned. In the South, this approach isnot so widely developed. Ideally, we need a more homogeneoussituation in Southern Europe (Spain, Portugal and Italy). TheNorth is more complicated as the currency is different (pound,Euro). Scandinavia has a great deal of potential with few playersand is of major interest. Finally, Eastern Europe (Poland, CzechRepublic, Hungary, Romania, and Bulgaria) represents a largemarket, even if they currently have weak purchasing power. “Europe is full of promise, but it is likely that it will still takea long time before the entire internal market can be harmonised”,estimates Pingki Houang. His advice: if the product is adapted to the market, you canexport from France. Foreign consumers are willing to pay morefor delivery charges because of the singularity of a local product.At first you can set up business in European countries and con-tinue to work with French laws and taxation regulations. Theserepresent the early stages of growth and development. u© Acsel - L’association de l’économie numérique.
  • 148 Cross-border e-commerce/A Digital Europe at the heart of trade Internet has become a strategic priority for the international deployment of RAJA’s BtoB activityCreated in 1954, Raja is today the number one in Europe forBtoB packaging, with more than 500,000 European customersand operations in 14 countries. “Raja’s first Internet site was createdin 2000 in France. In 2008, a change was made to the technologi-cal platform for all of the group’s subsidiaries. And in 2011, the siteunderwent a complete overhaul which triggered rapid internationaldeployment”, explains Cyrille de Sagazan, Head of E-Commerceand Procurement at Raja. “When we launched our subsidiary inDenmark for example, we were proposing more products on linethan we offering in the catalogue”. With the Internet channel, Rajahopes to make the Web a strategic priority for its multichannelapproach: printed catalogue, tele-sales teams and sales teams onthe ground, merchant website, e-procurement solution, a broaderrange of products in Europe with delivery within 24 to 72 hoursdepending on the country. “Of course, the share of Internet sales is not the same in eachcountry. This depends both on the development of BtoB practicesin the different countries and the maturity of each subsidiary in itsmarket. For example in the United Kingdom, e-commerce is widelyused, but competition is very strong. This meant that we had to set upa specially adapted e-marketing web strategy with good search engineoptimization. The activity in Switzerland, in the Czech Republicand in Denmark relies heavily on the Internet channel because Rajavery much focused on this at the launch stage”. When opening up in a new country, the InternationalDevelopment Department carries out research, studies compe-tition, manages local setup and decides what products will beproposed. “The Internet sites are controlled and administered bythe group’s Marketing department, to ensure proper functional-ities and identical structures and graphics for each country site. Thegroup works with common service providers for the management © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 149of SEA, mail routing and design, to be as efficient as possible bysharing best practices. Each subsidiary manager deals with themarketing team which works on promoting sales on sites”, explainsCyrille de Sagazan. The logistics services are provided by 10 distribution cen-tres. “It is sometimes simpler to link a distribution centre to a neigh-bouring country than it is to open a new centre”, adds the Headof E-Commerce and Procurement at Raja. Belgium suppliesGermany, Austria, the Czech Republic and Switzerland accord-ing to a logistics plan based on the catchment area. Deliveriescan also be provided to Denmark within 48 to 72 hours fromBelgium and this turns out to be more profitable than creatinga logistics centre in Scandinavia.uA better understanding of each country provides the groupwith a wider vision to adapt its strategyMarket analysis and research is carried out before any acquisitionsare made or before physical location, therefore any problems areidentified in advance: “The business models are well established andour logistics function smoothly thanks to our distribution centres.We list all of the legal or taxation constraints, and issue the list tolocal managers”, explains Cyrille de Sagazan. Gradually, Raja hasacquired a deeper knowledge of the constraints relative to eachcountry, thus enabling the entire group to better anticipate anydifficulties. “Nevertheless, unforeseen issues do arise and they need to bemanaged. Regulations concerning e-mails for example and nota-bly the double opt-in, were not planned for when we started. Thelegislation regarding e-mailing in BtoB is not at all uniform acrossthe European countries”, regrets the Head of E-Commerce andProcurement at Raja. When it comes to creating professional customer accounts andthe mandatory fields, the rules are not the same: “In some coun-tries, we cannot invoice if we do not have the company registrationnumber and we are therefore obliged to request a cash payment. Thisposes a number of commercial problems. This slows us down on a© Acsel - L’association de l’économie numérique.
  • 150 Cross-border e-commerce/A Digital Europe at the heart of tradenumber of other points and could possibly have a knock-on effect”.The subject of taxes can also be a source of problems: “For exam-ple in Italy, the tax on plastic and cardboard packaging materials(CONAI tax) had not been implemented when we set up the site. Wehad to adapt the site to calculate the tax before deploying the onlinepayment solution”, declares Cyrille de Sagazan. Raja proposes all of the types of payment facilities and methods:the traditional cash payment (by cheque or transfer), payment onreceipt, or online payment using Ogone. Online payment hasbeen built in to the platform since March 2010. The transactions between the banks, the payment solutionproviders and the different subsidiaries are never the same in eachcountry. The local managers sign an agreement with their bank,then a European agreement with Ogone so that the accounts canbe activated and the interfaces displayed on line. “Activating anaccount can take anywhere between three to ten days! It all dependson the acquirer, who sometimes signs a contract with anotherpayment provider, who will be the go-between with Ogone, as longas the subsidiary has already negotiated a distance selling contractwith his bank. Then, it takes several weeks for the contracts to bevalidated by the banks. It would be ideal if the latter could promisethe same return times because even when we anticipate the difficulties,management can become complex despite support from global serviceproviders like Ogone”, explains Cyrille de Sagazan. The same applies for payment security. In Spain for exam-ple, “the implementation” of 3D Secure is mandatory whereasthis is not the case in other countries. Therefore, there are a fewelements that need to be taken into account at back office leveland these lead to additional costs. “Even when we anticipate, weare always subject to these delays and constraints that are all due todemands that are sometimes too extreme”. For Cyrille de Sagazan, the major difficulty when setting up anactivity in BtoB e-commerce in Europe concerns data protection.“We were faced with several demands from different countries askingus to adapt their sites to new legislation on confidentiality. Germanyis the country with the strictest rules, and we expect this tendency to © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 151gradually spread to other markets. It doesn’t make life any easier”. Harmonised legislation could result in less “made to measure”solutions that need to be developed. “There are still many ele-ments that are specific to countries and it is sometimes difficult tomanage these differences. However, our task of developing activity in14 European countries often enables us to anticipate problems as theconstraints facing a country at a given moment eventually becomethe common rule for all of the other countries. This deeper knowl-edge provides our group with a wider vision to be able to adapt ourstrategy!”, concludes Cyrille de Sagazan. u© Acsel - L’association de l’économie numérique.
  • 152 Cross-border e-commerce/A Digital Europe at the heart of trade RAKUTEN, the Japanese giant includes Europe in its quest to conquer international marketsRakuten, the Japanese Internet giant is including Europe in itsinternational expansion plans by developing a strategy for exter-nal growth. “France was the first step in Rakuten’s plans for Europewith the acquisition of PriceMinister in June 2010”, explains PierreKosciusko-Morizet, cofounder and CEO of PriceMinister, super-vising European operations for the Rakuten group. Founded in 1997, Rakuten now has 10,000 members of staff,generates a 1 billion dollar profit, with a turnover of between 4and 5 billion, a volume of business of 10 billion and a growthof 20% per year. The group operates in an e-commerce market-place, financial services and payment solutions. Rakuten is indeeda major innovator in payment solutions in Japan. The group pro-poses an NFC payment card that is widely used on Rakuten sites,on the Internet in general and in the real world. Rakuten is alsoone of the major Japanese online banks. It alone represents 35%of market share in e-commerce in Japan. To guarantee strong growth, the Rakuten group intends toextend its international influence to match its achievementsin Japan. Today, international turnover represents 10%. TheJapanese e-commerce leader’s international growth strategy fullyreflects this ambition. Rakuten currently has e-commerce activi-ties in ten countries, including Japan.u International activity to guarantee strong growth andrapid achievement of critical massAlready in 2005, Rakuten started its internationalization strat-egy by acquiring Linkshare, an affiliate network in the UnitedStates. “In 2010, English became the official language within thegroup, symbolising their approach to internationalisation”, explainsthe founder of PriceMinister. Rakuten first focused on its presence in Asia. Today, it isthe leader in Taiwan and Thailand and its growth across Asia © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 153continues with a recent set up in Indonesia. A year ago, the groupnegotiated a joint venture with Baidu in China; other countriesacross the Asian continent will soon be added to this list. Outside Asia, the group acquired Buy.com in April 2010 andtook a 75% stake in Ikeda in Brazil in June 2011. The acquisi-tion of PriceMinister in June 2010 became the spearhead of itsEuropean acquisition strategy. PriceMinister’s marketplace operates in CtoC (between 55 and60% of business volume) and BtoBtoC, which represents a sectorwhich is expanding more rapidly. The acceleration in BtoBtoCis clear for all to see, especially since the acquisition of the com-pany by Rakuten. PriceMinister employs almost 200 people in France and pres-ents a growth rate of between 20 and 25% per annum in terms ofvolume. The company opened its first European site in Spain atthe end of 2006/beginning of 2007 and in England in 2010. Tolaunch its international operations, PriceMinister first analysedmarket maturity. “Spain is still quite an immature country, therewas a possibility to become leader by setting up operations right atthe beginning. Looking at it in hindsight, I think it would have beenbetter if we had started activity in England instead. Obviously, themarket is more difficult, but it is more influential”, admits PierreKosciusko-Morizet. It was a logic based on volume that was cho-sen by Rakuten for its international strategy, with priority givento market leaders. This strategy motivated Rakuten to rapidly invest both in itsfirst European acquisition with PriceMinister and in the twoother leading e-commerce countries in Europe, England andGermany. “The group has a market size-based approach to ensurerapid critical mass for cross-border activities”, explains the founderof PriceMinister. As a result, Tradoria, which holds the top posi-tion in independent retailing in Germany behind Amazon andeBay, was acquired by PriceMinister at the end of July 2011and the English site Play.com (14 million registered users and 7million products), in September 2011. The group’s major strate-gic focus is to build a strong marketplace in each country.© Acsel - L’association de l’économie numérique.
  • 154 Cross-border e-commerce/A digital Europe at the heart of tradeu “Cross-border” is fast approaching, we need to keep aheadof major consumer related phenomena“Exchanges between countries represent a strategy priority even if theyrepresent only a small fraction of turnover. Since last summer, wehave opened several Japanese online shops in France. In fact, buyersare still in the process of testing our services at local level: if they aresatisfied, they will shop globally. It is now that we need to take up ourpositions. Cross-border is fast approaching, we need to keep aheadof major consumer related phenomena”, claims Pierre Kosciusko-Morizet. “One of the challenges of cross-border is to develop brand noto-riety abroad. This is especially true for BtoB. At the present time, aPriceMinister customer in France will not necessarily purchase onRakuten. If a shopper purchases on PriceMinister from a Rakutencustomer, this marks a break from the brand and it complicatesthings”. The group’s sites use different technologies according tothe countries and there will be more uniformity in the long run.But firstly, the objective is to provide merchants with a One StopShop solution. On the logistics side, Rakuten has opened ware-houses and offers its professional merchants an order fulfilmentsolution for media products (CDs and books). This offer shouldeventually be available for other countries. To ensure personalisation of the individual country sites, thegroup ensures regular exchanges of best practices. As far as user-friendliness is concerned, the sites differ from one country toanother. For example, the Japanese site contains plenty of photosin the form of thumbnails. For this reason, Rakuten’s local oper-ations across all countries are guaranteed optimal developmentconditions for their individual markets. PriceMinister opened anoffice in London and will do the same in Spain at the beginningof 2012. Up until then its activities were managed from France.Although the sale of hi-tech products is identical in all countries,there are always a few country-specific product categories. For example, food products in Japan represent a large retailmarket for Rakuten, which has the reputation for being capableof delivering fresh produce to its customers, who are willing to © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 155pay more for quality products. Shoppers order fish caught in themorning or eggs laid the evening before. It is only logical to offer identical products in all countries.The importance of each of them in total sales varies according todifferent cultures and consumer habits.u The Europe of business does not exist, we therefore needto work on an individual country basisFor Pierre Kosciusko-Morizet, legislation is a way for existingbusinesses to protect themselves from competitors. This is whytraditional retailers used certain lobbies to prevent the strongemergence of e-commerce, fearing direct competition for theirexisting activities. “It is understandable because legislation has toadapt and legal matters take time and this is clearly a barrier whenwe consider how fast online activities are developing”. However,some countries have seized the opportunities offered by e-com-merce sufficiently early. In the United States, companies pay lesstax on e-commerce. Even if we can question the legality of this,it has allowed a few large American companies to become worldleaders. There are a few factors that distort competition and com-plicate matters. “The approach adopted by European countries andJapan is more passive. But I am quite optimistic, such matters canbe sorted out by the size of the market. Companies are strong enoughto continue developing their online activities”, believes PierreKosciusko-Morizet. “The Europe of business does not exist. We therefore need to workon countries individually to achieve critical mass on the markets,but to do so we need to dedicate resources”. For major e-retailers,countries need to big enough to justify these investments. Thequestion is whether some smaller markets will not thereforeremain local, at least for a certain period of time. u© Acsel - L’association de l’économie numérique.
  • 156 Cross-border e-commerce/A digital Europe at the heart of trade SHOWROOMPRIVE : Europe is an obligation if we want to become large enough to influence the market“The French market is limited and as we had a very powerful com-petitor we obviously needed to look elsewhere... Europe was theobvious catchment area”, explains Thierry Petit, the founder ofShowroomprive, second largest site specialising in private salesin Europe. Launched five years ago, the site boasts 6 million members inFrance and 1.5 million shoppers. Showroomprive generated a turnover of 130 million Euros infour countries. The company opened its English market in mid-April, the Spanish market a year ago and in Italy in June 2011.“The European market is very reactive to private sales”, accordingto Thierry Petit, who estimates that sales outside of France willrepresent 17% at the end of the year and 30% in 2012. The com-pany was self-financed until it turned to an investment fund forsupport for its international projects. “To set up business in Europe, you need a solid structure that hasbeen optimised in France and which can be adapted to other coun-tries. The first internationalisation project is to optimise structureand organisation”, explains the founder of Showroomprive. In hisopinion, success in opening European markets relies on pool-ing a certain number of costs and procedures. European turnoveris increasing very rapidly due to this system involving poolingresources dedicated to selling, production and logistics. This is why all of Showroomprive’s activities are managed fromFrance and its only local operations are in Spain. As for logis-tics, the preparation of orders is centralized in France, where thecompany has 25,000 m² of warehouse space. Stickers for localpost offices and transporters are printed and applied to parcels inFrance. They are then transferred to the countries of destinationbefore being sent to the end customer. Any returns are collectedonce a week and sent back to the warehouse in France. © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 157 The company recruits country managers and marketing man-agers based in Paris and who are native speakers of the countriesthey have operations in. The choice of location is based on the potential turnover andthe likeliness of short term profitability. Although it is no surprisethat the countries considered the most promising in Europe fore-commerce are England and Germany, as far as the specific pri-vate sales market is concerned. France, Spain, Italy and Germanyare the most receptive markets. The first European market to be opened by Showroomprivewas Spain because access to this market was very simple. Theset-up costs were low and its geographical location very conve-nient. Many French entrepreneurs start international operationsby opening in Spain; this was the case of PriceMinister for exam-ple. The Spanish market enables companies to adapt to their newinternational organisation. Spain already represents a turnoverof 12 million Euros, which is quite remarkable. In the clothingsector, Italy is a very important country as brands consider it as thepioneer market. Finally, the team thought carefully about open-ing in Germany, which is one of the biggest European markets,but also one of the most difficult ones because of the large quan-tity of returned goods. This diversity can also be seen in culturalhabits: the Latin countries are generally very sensitive to prices,with similar impulse buying and consumer habits. Germany isvery different. Purchases are much more rational and less impul-sive and the Germans use online comparison sites. This countrywas the founder of the discount concept and Germans are verymuch used to distance shopping and have very different shop-ping habits. “A German does not hesitate in ordering 3 or 4 pairs ofshoes to be sure of receiving one which fits him”. England is a verymature country as far as Internet shopping is concerned, with alow price policy and widespread use of purchase vouchers. Pricepolicies therefore need to be adapted to local business practices. For Thierry Petit, the main barriers to setting up business inEuropean markets are the language, logistics and currencies formarkets outside of the Euro zone. “With the exception of PayPal© Acsel - L’association de l’économie numérique.
  • 158 Cross-border e-commerce/A digital Europe at the heart of tradeand the bank card, roughly 20% of the different locally used meansof payment can function everywhere”. “For countries bordering those we have operations in, local meansof payment are not critically important, and the acceptance of Visacards, MasterCard and American Express alongside PayPal enablesus to meet the requirements of our shoppers. In other countries whereinternational cards are not so dominant, we ask for support fromour banking partners or Atos Worldline who advise us and acceptthe adequate means of payment locally”. But the finger of blame isdirected more in the direction of the different taxation systems.They create more difficulties than the legal aspects of online salesthat are not always very uniform, or different European businesspractices. “VAT regulations can be very different. Some rates are dif-ficult to understand, and the tax collection processes are not alwayseasy to implement. For example, there is no VAT on clothes for chil-dren under 3 years in England”, explains Thierry Petit. The founder of Showroomprive believes that the huge dif-ferences in corporate taxation are totally scandalous. “The largercompanies, notably non European ones, have set up business inDublin, where the taxation rates are almost zero compared to roughly33% in France. This creates unfair competition within Europe”. As for the future, Thierry Petit is considering the countries ofEastern Europe which are growing strongly, even though thereare some genuine obstacles preventing entry to the market. His advice: build yourself a good team that can support you! His wish: the creation of a single point of contact for thecollection of VAT in the different countries of the EuropeanUnion. u © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 159 YOOX Group assisting luxury brands in establishing their Internet business in an international catchment area“On the first page of my business plan back in November 1999,I wrote this phrase which is always included in our company pre-sentations: YOOX Group: the global Internet retailing partner forleading fashion and design brands”, explains Federico Marchetti,founder and CEO of YOOX Group. These are the two objectivespursued by the group for the last eleven years: to assist brands inestablishing their Internet retailing business in an internationalcatchment area. Today, YOOX delivers products in roughly ahundred countries and is present in Europe, Japan, the UnitedStates and Hong Kong and it recently opened in China. Thegroup generates over 78% of its turnover on international mar-kets, according to the half year financial results issued on 30 June2011. Yoox.com, the first site launched in 2000 by the company,is firmly positioned in the luxury goods sector and proposes aselection of products that are difficult to find. These includean edited range of end of season clothing and accessories fromprestigious brands and designers, exclusive eco-friendly fashion,capsule collections, a unique assortment of home design objects,rare vintage finds and art books. Yoox.com is home to top fashionhouses like Balmain, Vanessa Bruno, Diesel, Paul&Joe, Moschinoand Margiela to name only a few. The group also launched Thecorner.com, a site featuringnews about creators and selling exclusive collections proposedby brands and designers in dedicated mini-stores. Since 2006,YOOX continues to help brands and promote their develop-ment on line by designing and managing mono-brand onlinestores “Powered by YOOX Group” for brands such as Zegna.com,Armani.com and Dolcegabbana.com. “Our activity is exclusively on line. Our brands believe that elec-tronic retailing is increasingly complementary to traditional retail. Itis important to maintain consistency between Internet activities and© Acsel - L’association de l’économie numérique.
  • 160 Cross-border e-commerce/A digital Europe at the heart of tradephysical stores, and this will probably be the challenge for fashioncompanies in the future. Virtual sales channels and real channels willneed to blend together”, believes the founder of YOOX. “In addition, very often the international dimension of e-com-merce enables brands to test their potential in a country by tryingone of our online stores. In China, some brands have no physi-cal distributor and are only available on line in a mini-store onThecorner.com.cn. This is the case for example for the Belgianbrand Ann Demeulemeester”. With the Internet, sophisticated monitoring tools enableyou to get a better understanding of what the customer prefersand what they like or do not like. This is essential when youare faced with different consumer behaviours on internationalmarkets. YOOX Group carries out constant information anal-ysis to monitor different consumer habits as closely as possi-ble from one country to another. “For example in Europe, peoplegenerally prefer to buy during office hours, whereas the Americansand the Japanese prefer the end of the day or evening... As far astastes are concerned, the Japanese and the Italians prefer ties andthe Americans have a preference for bow ties”, Federico Marchettiadds, amusingly.uA global presence and a few local outlets as well as plentyof energy and resourcesYOOX’s activity started in Europe in 2000 with an interna-tional dimension right from the start. This was followed by theUnited States in 2003, Japan in 2005 followed by more and morecountries before their recent arrival in China. The company iscurrently capable of delivering in over 100 countries through-out the world. “Going international is a complex process and youmust consider many different aspects with regard to resources, legalexpertise and local partners… YOOX Group decided to be globalwith a slight local presence and to invest lots of energy and resources”,explains the CEO. Localisation is also about languages, currencies, payment solu-tions and consumer habits. In China for example, the company © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 161proposes a “butler service”, which enables customers to try thearticle they purchased as soon as it is delivered. A courier waitsclose by to see if the product satisfies the customer or if it needsto be sent back. The company has opened 7 local offices in Italy, Japan, theUnited States, France, Spain, Hong Kong and China. “We decidedto open these local offices in the most important markets, where weneed to maintain a strong position. To be able to do so, you needpeople who know the culture and local environment well enough toimplement web marketing strategies, public relations and commu-nications, business development and local procurement”, adds thegroup’s founder. YOOX Group currently employs around 500 people whoseaverage age is 30 and 58% of them are women. They work intheir offices in Milan, Bologna, Paris, Madrid, New York, Tokyo,Shanghai and Hong Kong. The team is a homogeneous group ofpeople of different nationalities and from various cultural back-grounds. “They are curious and innovative, proactive and capableof adapting easily in a constantly changing environment”, insistsFrederico Marchetti. Customer services are managed by 8 centres around the worldthat deal with e-mails and telephone calls and all customerrequirements in the different languages. The group also has locallegal advisors to ensure compliance with each country’s legisla-tion. YOOX’s logistics rely on a highly automated distribu-tion centre in Bologna as well as their logistics centres inthe United States, Japan, China and Hong Kong. These localwarehouses enable them to efficiently manage any prob-lems with article returns. In France for example, any articlepurchased may be returned within seven working days afterthe date of delivery. A pre-paid UPS airway bill is includedin the parcel in case the article needs to be returned by thecustomer. Customers simply call the transporter to have thearticle sent back. “Managing a global logistics platform is quitecomplicated and we have learnt a lot about shipping companies,© Acsel - L’association de l’économie numérique.
  • 162 Cross-border e-commerce/A digital Europe at the heart of tradecustomer returns and trade barriers over the last eleven yearsof activity, in Russia in particular”, points out the CEO ofYOOX Group. As far as payments are concerned, specific credit cards such asDiscover in the United States or payment solutions like Alipayin China need to be taken into account. To provide the paymentsolutions adapted to the market, YOOX works with local banksand also integrates the major online payment solutions such asPayPal.u Growth boosted by international activity which showsno sign of a slow downThe majority of the markets that the group has operations inrecorded a rate of growth similar to the first half of 2010. This isconfirmed by the group’s revenue growth due to expansion of itsinternational activities. Italy is still the main market for YOOX,representing 21.4% of its revenue, up by 20.4% compared to theprevious year. The rest of Europe enjoyed a strong growth rate of39.7% compared to the previous year. The main countries which contributed to the group’s turnoverin Europe in the first half of 2011 were France, Germany andthe United Kingdom, which all had increased growth rates com-pared to the first half of 2010. Russia also participated thanks tothe localisation strategy introduced in the third quarter of 2010.North America continued to record strong growth, at a rate of33.9% compared to the first half of 2010. “At the present time, China is a very interesting market whichis still in the early stages of its development. YOOX Group playeda pioneering role in this luxury fashion market by launching sitessuch as Emporioarmani.cn, followed by Bally.cn and Marni.cn,Y3-store.cn, Y3-store.cn, Thecorner.com.cn at the end of 2010and a few weeks ago, Armani.cn”, announced the Head ofYOOX. According to Forrester Research, China is the biggest mar-ket in the world as far as the number of Internet users isconcerned. It surpassed the United States to become the © Acsel - L’association de l’économie numérique.
  • Chapter V/Pioneer figures of cross-border e-commerce 163second world luxury goods market, just behind Japan: the twopillars on which YOOX bases its activities. “International e-commerce is still only in its infancy. Thereis still plenty of potential for growth. For the moment, we areone of the rare pure players capable of distributing articlesglobally. With regard to Europe, it is clear that the single marketcould play an essential role in the success of e-commerce!”, admitsFederico Marchetti. His advice: Concentrate on customer service and techno-logy. They both require regular investments to remain aheadof the rest. Recommendation for entrepreneurs: “I spent twenty yearsstudying how to become a good entrepreneur and succeed inbuilding my projects as well as gathering ideas to create my owncompany. But in the end, I rely more on my instinct than on guruswho claim to teach or advise other people”, concludes FedericoMarchetti. u ***© Acsel - L’association de l’économie numérique.
  • 164 Cross-border e-commerce/A digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 165 The partners• Atos Worldlinewww.atosworldline.comAtos Worldline brings together the core expertise of Atosin Hi-Tech transactional services. A leader in end-to-endservices for critical electronic transactions, Atos Worldline special-ises in electronic payment services (issue, acquisition, terminals,payment solutions and card processing) as well as eCS (onlineservices for customers, citizens, and communities) and financialservices. Atos Worldine’s on-going commitments to research andinnovation enable its customers to benefit from award-winningsolutions in areas such as mobile payments, secure IPTV, onlineCRM and paperless solutions. Atos Worldline generates a turn-over of 867 million Euros and employs over 5,400 people world-wide.• La Poste-ColiPoste,lthe essential partnerfor online retailerswww.colissimo.frLeader in France and number 2 in Europe, the French PostOffice’s parcel division specialises in fast delivery to end cus-tomers in France and throughout the world. With over a millionparcels delivered each day, La Poste-ColiPoste is right at the heartof exchanges between private individuals and companies.In addition, it plays a major support role ensuring the con-tinued growth of e-commerce and trade between private© Acsel - L’association de l’économie numérique.
  • 166 Cross-border e-commerce/A digital Europe at the heart of tradeindividuals. The So Colissimo service is an innovative range ofservices that enable online buyers to choose the type of deliveryand the delivery address for their parcel. With this type of offer,La Poste-ColiPoste has adapted its services to new consumer hab-its, and strengthened its position as the key partner for playersinvolved in online retail.• Oriumwww.orium.comOrium is a leader in international e-logistics, combining itse-commerce logistics services with the traditional supply chain,customer relationship, transport and information technology. Itsservices are targeted to pure players just as much as to stores,brands or industrials groups developing their e-commerce busi-ness as part of a cross channel strategy.In 2006, Orium defined e-logistics as representing the abilityof a service provider to move up the e-commerce value chain.They are now specialists in global customer relationship man-agement. Since its creation, Orium has helped many compa-nies develop their Internet and distance selling activities bothin France and internationally. Some of its customers includeNespresso, Smartbox, Nuxe, Pierre Fabre, Rustica, Nielsen,Dukan, Wanimo, Würth Modyf and Marie-Claire.Orium’s organisation is built around its information system, thehub which controls operations on its different international sites.It also has a quality assurance system, which is certified ISO9001since 2007. Orium use innovative communications and monitor-ing tools that have proved to be highly efficient. The company has200 employees and approximately ten logistics platforms acrossEurope (in Portugal, Spain, Italy, Switzerland, Germany, the UKand Poland). Two sales branches in Singapore and Chicago havejust been opened. © Acsel - L’association de l’économie numérique.
  • The partners 167• PFSwebwww.pfswebeurope.comPFSweb is the online retail specialist offering fully integrated,end to end e-commerce solutions for companies marketing theirproducts on the web.PFSweb provides all services required by companies when cre-ating or redeploying their international e-commerce projects inBtoC and BtoB:• retail website creation and hosting;• interactive marketing services, including e-mail and affiliatemarketing, SEO, SEM and social networks;• software integration management: ERP, e-commerce platform,customer contact centre, online payments and interactive mar-keting;• regular or customised logistics services: stock management,order preparation as well as transport and returns management;• multilingual customer contact centre: technical assistance andsupport via the call centre, e-mail and instant messaging withshared or dedicated agents in the following languages: French,Dutch, German, English, Italian and Spanish;• financial services: tax representation, VAT management, onlinepayments, fraud management, invoicing, credit limit manage-ment and collection support;• personalised consultancy services.With operations in Europe since 1999 and in the United Statessince 1991, PFSweb employs 1,500 people. It provides servicesin six different languages and provides its customers with over250,000 m² of warehouse space.PFSweb is the trusted e-commerce service provider for someof the largest international groups: P&G, Xerox, Chanel,O’Neill, Ricoh, LEGO, Proximus, Columbia, Salomon, Clarins,Havaianas, Olympus and many others.© Acsel - L’association de l’économie numérique.
  • 168 Cross-border e-commerce/A digital Europe at the heart of trade• Chronopostwww.chronopost.comFor the last twenty five years, Chronopost is the French spe-cialist for express delivery of parcels weighing up to 30 Kg,serving companies and individuals all over the world.Chronopost is a subsidiary of GeoPost and part of the La PosteGroup, employing 3,500 employees and processing 300,000parcels daily with a generated turnover of 665 million Euros in2010. In France, Chronopost has built up a network of 80 oper-ational sites including 6 hubs, and delivers to over 230 countriesin Europe and the rest of the world.Chronopost develops innovative delivery solutions that are prac-tical and reliable and adapted to meet the specific needs of its cus-tomers in various activity sectors.For e-retail, Chronopost created MyChrono to fit the demandsof online purchasers and to make life simpler for online web mer-chants.MyChrono offers «3 services in 1», with the broadest range ofexpress delivery services in France and worldwide.• Transport:– in France, with an express home delivery or delivery to one oftheir 4,000 Chrono Relais pick-up points;– in Europe, with an economy delivery service taking 2 to 4 daysor a 24 to 48 hour express delivery service;– in the rest of the world, with an express delivery taking 2 to 5days.• Tracking: Parcels are extremely traceable both for the senderand the receiver (proactive monitoring throughout each step ofthe delivery process and requests can be submitted online).• Support services: to assist e-retailers in their activities: starterkit, web services, returns and exchange goods management, cus-tomer satisfaction surveys and so on. © Acsel - L’association de l’économie numérique.
  • The partners 169• The group Come&Stay,two strong and complementarycompanies:Come&Stay and Social Mix Mediawww.comeandstay.com and www.socialmixmedia.comor contact us directly at paris@comeandstay.com> The European player Come&Stay specialises in the onlinecollection of consumer profiles, the aim being to monetize andenrich them for multichannel strategies.Come&Stay has unique technological expertise in behaviouralanalysis, based on artificial intelligence. It uses this to offer adver-tisers and their agencies innovative consumer profile analysissolutions, enabling them to win new customers and ensure cus-tomer loyalty.> Social Mix Media is a social media agency that assists com-panies throughout the SMO (social media optimization) valuechain, helping with media buying, the integration of social toolson websites (OpenGraph) and creating recruitment campaigns.The Come&Stay group offers advertisers assistance in theirDigital Relationship Management (monitoring the performanceof e-marketing and social media campaigns) with a broad rangeof products and services including:• YesPleez® – online service grouping the leading Europeane-commerce players and providing access to 3 million consumerprofiles with over 90 socio-demographic and behavioural seg-mentation criteria.• CarDirect® – the European database containing the profiles ofpeople planning to purchase a vehicle.The Lead Direct range of products, which provides advertiserswith the possibility to collect profiles of opt-in consumers on anational or European scale. This range is designed both for acqui-sition and brand notoriety strategies.At European level, the group Come&Stay provides supportto customers such as Audi, BMW, BrandAlley, Conforama,Accor Group, Infiniti, La Redoute, Mazda, Nissan, Redcats,© Acsel - L’association de l’économie numérique.
  • 170 Cross-border e-commerce/A digital Europe at the heart of tradeShowroomprive.com, Smartbox, Spartoo, Tourism Ireland,Vente-Privee.com and Walt Disney.The group Come&Stay is listed on the Alternext market ofEuronext® in Paris.• Ogonewww.ogone.frhttp ://twitter.com/ogonefrOgone is an international online payments operator, withover 30,000 merchants across 45 countries.With its global banking connectivity, the Ogone platform canhandle more than 45 international and local payment solutions(bank cards, private label cards, transfers, PayPal and onlinecredit…) with the same tool for an end to end solution, fromtransaction verification through to accounts consolidation.Capitalising on over eleven years of experience, Ogone also offersconsultancy services to accompany their customers whatevertheir size, at every stage of their e-payment solution project.Ogone has 115 employees and has operations in France, Germany,the United Kingdom, Belgium, the Netherlands, Switzerland andAustria. In September 2011, Ogone acquired 100% of the capi-tal of EBS (E-Billing Solutions), number two in online paymentsolutions in India. *** © Acsel - L’association de l’économie numérique.
  • The partners 171ACSELAssociation de l’économie numérique(Association of the Digital Economy)www.acsel.asso.frA place of exchange and proposals, ACSEL groups together com-panies and bodies whose ambition is to reflect as a team aboutthe impact of emerging technologies on the way usages,behaviours and economic models will continue to develop.ACSEL is a think tank that makes proposals based on themedium term perspectives.The association’s activities focus on identifying and understand-ing digital challenges that need to be addressed. They offer assis-tance in transforming the markets to adapt to the digital economyand understanding how they can succeed in leveraging digitaltechnologies.• Undertaking action to build trust in the digital economyIts cross sector position allows it to gather together all players inthe various sectors of activity. Its neutrality is essential for shar-ing best practices and to collectively build the strongest ecosys-tem possible.• Reflection on the key subjects with regard to the digitaleconomyThe work of ACSEL and its committees, covers all of theproblems relating to the emergence of digital technology in theeconomy: paperless procedures and services, development of theretail sector, new forms of marketing and customer relations, newmore mobile behaviour, identity management as part of a respon-sible approach to the digital way of life, business to businessrelationships, new payment solutions…ACSEL’s mission is to help companies transform the econ-omy at a time when both technologies and their usages arebuilding a new digital society.© Acsel - L’association de l’économie numérique.
  • 172 Cross-border e-commerce/A digital Europe at the heart of trade• The publication of background materials: “L’e-marketing, lastratégie de la performance” (E-marketing: A performance strategy) (inFrench) – “L’Europe, une opportunité pour le commerce” (Europe, anOpportunity for E-commerce)(in French) – “E-commerce et distribu-tion, comment Internet bouscule les canaux de vente?” (E-Commerceand distribution, how internet is changing the face of traditionaldistribution channels) (in French) – “Services mobiles, la rupture!”(Mobile services: the break up!) (in French) – “L’e-commerce trans-frontière, l’Europe au coeur des échanges numériques” (Cross-bordere-commerce, A digital Europe at the heart of trade (in French).• Approximately twenty pilot trips, to China or Silicon Valley,to meet the leading Internet players: Cisco, Adobe, Microsoft,eBay, Google, Yahoo!, Facebook…ACSEL is a representative organisation that is recognisedby French and European official bodies. The association isbased in Brussels and works with representatives of the EuropeanCommission. *** © Acsel - L’association de l’économie numérique.
  • 174 Cross-border e-commerce/A Digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 175 Acknowledgements Olivier Bitoun, Journalist Jean-Pierre Buthion, Cartes Bancaires Group (CB) David Chau, Trusted Shops Elena Carasso, Mango Astrid Canevet, Kelkoo Laurent Censier, Oclio Patrick Flamant, Ogone Pingki Houang, Pixmania Marc Jamet, Euralia Wilko Klaassen, Electrolux Pierre Kosciusko-Morizet, PriceMinister/Rakuten. Glynnis Makoundou, Trusted Shops Federico Marchetti, Yoox Group Philippe Mascaras, Régime Dukan Antoine Menet, OneStopPlus Europe Nanie Navarro, Yoox Jerome Orlemans, O’Neill Thierry Petit, Showroomprive Frédéric Ravaux, GlobalWebRecrutement Cyrille de Sagazan, Raja Gaël de Talhouët, Twenga Svante Tegnér, Bubbleroom Carole Walter, Come&Stay ... Translation by Sharon Benmussa, Transitwrite (www.transitwrite.com) Cover illustration and graphic design by Aurélie Baras© Acsel - L’association de l’économie numérique.
  • 176 Cross-border e-commerce/A digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 177 About the authorsu Jean-Rémi Gratadour is the E-commerce Director at GeoPost.Previously, he was a Project Leader at the IREPP Institute (Institutde Recherches et de Prospective Postales). He was also Secretary-General of the Club Sénat association and is also the Cofounderof the art bookstore DessinOriginal.com.Jean-Rémi Gratadour is Vice-President of ACSEL in charge ofinternational e-commerce. ACSEL’s e-commerce and distributioncommission published a book, “E-commerce et distribution, com-ment Internet bouscule les canaux de vente” (about e-commerce anddistribution and how internet is changing the face of traditionaldistribution channels) (in French) in 2009.u After working as an advisor for a consulting firm, as a publicsector marketing director for an IT manufacturer and head ofa local authority IT department, Paul Soriano was the directorof the IREPP Institute (Institut de Recherches et de ProspectivePostales). IREPP already co-edited and published a book withACSEL in 2002, “Mille milliards d’e-mails” (Hundreds and thou-sands of e-mails) (in French). Paul Soriano published “Internet:l’inquiétante extase” (The Internet, the worrying ecstasy) (inFrench) in 2001 with Alain Finkielkraut (published by Mille etUne Nuits) and “Lire, écrire, penser dans la societé de l’information”(Reading, writing and thinking in the information society) (inFrench) in 1999 (published by Descartes and Cie). He is currentlythe editor in chief of the Médium magazine. You can consult thearticles he publishes in the magazine at: www.paulsoriano.fr. ***© Acsel - L’association de l’économie numérique.
  • 178 Cross-border e-commerce/A digital Europe at the heart of trade © Acsel - L’association de l’économie numérique.
  • 179 Table of ContentsPREFACE..................................................................................... p. 2FOREWORD............................................................................... p. 5SUMMARY................................................................................... p. 7• European e-commerce .......................................................................... p. 8•. Cross-border e-commerce ..................................................................... p. 8• A cross-border Europe?........................................................................ p. 10• E-Commerce builds Europe ................................................................ p. 11• Ways and means..................................................................................p. 14• Harmonization.................................................................................... p. 15• Strategies............................................................................................. p. 16INTRODUCTION..................................................................... p. 17• Diversity in the single market.............................................................. p. 17• The prospects are bright despite the scaremongering............................ p. 18• Cross-border commerce: when in doubt, they abstain.......................... p. 22• Multichannel....................................................................................... p. 24• Regulations and policies....................................................................... p. 24CHAPTER I - EUROPE: DIVERSITYIN THE SINGLE MARKET........................................................ p. 29• 1.1 A Europe of diversities .................................................................. p. 29Defining Europe...................................................................................... p. 30Linguistic diversity................................................................................... p. 31Economic heterogeneity............................................................................ p. 33Outline of European categories................................................................. p. 34Digital divides........................................................................................ p. 35Digital Europe in a global context.............................................................p. 36High speed Internet access in Europe.........................................................p. 38Smartphones ...........................................................................................p. 39Socialised e-commerce............................................................................. p. 40European e-commerce influenced by American players................................p. 40• 1.2 The single market and Union policies ........................................... p. 41© Acsel - L’association de l’économie numérique.
  • 180 Cross-border e-commerce/A digital Europe at the heart of trade• 1.3 A Europe which is primarily cross-border?..................................... p. 45• 1.4 The European model..................................................................... p. 47CHAPTER II - THE CONTRASTING LANDSCAPEOF EUROPEAN E-COMMERCE............................................... p. 51• 2.1 The multiple facets of e-commerce................................................ p. 52• 2.2 European market estimations......................................................... p. 55The American benchmark........................................................................ p. 56Is China a benchmark?............................................................................ p. 58• 2.3 Differences and adjustments.......................................................... p. 59E-commerce shares in retail...................................................................... p. 59E-consumer demography........................................................................... p. 60Four Europes in e-commerce..................................................................... p. 60What do Europeans purchase online?......................................................... p. 61• Growth................................................................................................ p. 63CHAPTER III - THE ISSUES AT STAKEIN CROSS-BORDER E-COMMERCE....................................... p. 67• 3.1 Cross-border in the Europeane-commerce landscape............................................................................ p. 68Motivations and reservations.................................................................... p. 70Reluctance on the supply side.................................................................... p. 71The cross-border “mystery shopper” experiment........................................... p. 72• 3.2 Perspectives for cross-border e-commerce...................................... p. 74So is this a zero-sum game?....................................................................... p. 74The advantages of Europe in all its diversity.............................................. p. 75The border, a place for exchange............................................................... p. 77The “small prosperous country” syndrome.................................................. p. 78Gains for consumers and retailers alike...................................................... p. 79Welcome to the competition...................................................................... p. 80• 3.3 E-commerce is building Europe..................................................... p. 81Speeding up the modernisation and integrationof less advanced countries.......................................................................... p. 81Contributing to digitisation of the Europeaneconomy.................................................................................................. p. 82How Internet boosts the entire economy..................................................... p. 82The emergence of European multichannel distribution............................... p. 83Socialised e-commerce.............................................................................. p. 84Spreading European influence.................................................................. p. 85 © Acsel - L’association de l’économie numérique.
  • Summary 181• 3.4 The costs of fragmentation: the flawsof cross-border....................................................................................... p. 87High speed access infrastructures............................................................... p. 88Payments................................................................................................. p. 89Marketing............................................................................................... p. 96Logistics.................................................................................................. p. 97Fragmentation is costly............................................................................. p. 99CHAPTER IV - MOVING TOWARDS A CROSS-BORDERE-COMMERCE ECOSYSTEM................................................. p. 101• 4.1 E-commerce at the heart of the European internal market............p. 103Encouraging e-retailer activity in the internal market.............................. p. 103Strengthening the protection of European consumers................................. p. 108Improving payment systems and logistics in theEuropean Union.................................................................................... p. 109Civilizing the European digital environment........................................... p. 112Is the ecosystem under threat? ................................................................. p. 113• 4.2 Platforms, cloud computing: How to makecross-border e-commerce more accessible to all?................................... p. 115Providing access to European e-commerce for small businesses................... p. 116Integration platforms............................................................................. p. 117• 4.3 More subsidiarity and virtuous combinations.............................. p. 118CHAPTER V - PIONEER FIGURES OFCROSS-BORDER E-COMMERCE.......................................... p. 123• BUBBLEROOM: building a strong brand in Europe............................p. 124• DUKAN is now launching its globally successful dieton the Web.... .......................................................................................p. 126• ELECTROLUX: moving from the BtoB model to BtoCwithout disturbing the distribution network......................................... p. 129• MANGO: a centralised e-commerce organisation thatrelies on the presence of local shops...................................................... p. 131• OCLIO, the website specialising in products for babies, hasdoubled the size of its market by opening in Spain and Italy................ p. 133• O’NEILL are hoping that the multicultural aspectsof their brand will open the Internet channel in Europe .......................p. 137• ONESTOPPLUS EUROPE: the USA, a real life test locationbefore adapting to Europe.................................................................... p. 140• PIXMANIA: pioneers showing the way............................................... p. 144© Acsel - L’association de l’économie numérique.
  • 182 Cross-border e-commerce/A digital Europe at the heart of trade• Internet has become a strategic priority for theinternational deployment of RAJA’s BtoB activity................................ p. 148• RAKUTEN, the Japanese giant includes Europe in itsquest to conquer international markets................................................. p. 152• SHOWROOMPRIVE: Europe, an obligation if we wantto become large enough to influence the market................................... p. 156• YOOX Group assisting luxury brands in establishingtheir Internet business in an international catchment area .................. p. 159THE PARTNERS...................................................................... p. 165• Atos Worldline• La Poste-ColiPoste• Orium• PFSweb• Chronopost• Come&Stay• Ogone• ACSEL, Association de l’économie numérique (Association of the DigitalEconomy)ACKNOWLEDGEMENTS ...................................................... p. 175ABOUT THE AUTHORS ........................................................ p. 177TABLE OF CONTENTS .......................................................... p. 179 © Acsel - L’association de l’économie numérique.
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