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Breaking the barriers to cross border e-commerce for european smes

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Summary document with the findings of the European project PECOS4SMEs

This project has been funded with support from the European Commission.
This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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Breaking the barriers to cross border e-commerce for european smes

  1. 1. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 2 of 19 EXECUTIVE SUMMARY In the last two years, from January 2013 to December 2014 we executed a publicly funded project titled PECOS4SMEs – Personalised eCommerce Strategies from SMEs. The project was funded under the LifeLong Learning Programme of the European Commission and 7 partners from 7 EU countries were directly involved as partners in the execution of the project. The purpose of the project was the promotion of useful e-Commerce strategies for SMEs including transfer of knowledge and practices from top performing countries in e-Commerce to lagers. The intention was to bridge the cross border sales gap between Northern and Southern Europe and thus help the economic recovery of the hard hit European South. As a consequence of the introduction of new technologies and concepts facilitating cross border e-Commerce, (e.g. effective link building, search engine user attitudes etc.), SMEs have the opportunity make their businesses more profitable while at the same time improve their ICT competence. Based on the work carried out in the context of the project we identified and present here the barriers to SMEs for growth via cross-border sales. We present these barriers from a practical viewpoint by looking at specific SME practices in relation to the most important elements of the e-Commerce lifecycle. We don’t elaborate on the barriers at a higher level as we consider them on the one hand obvious (e.g. high market entry costs, product specific issues) while on the other hand several very credible publications1 are presenting them in sufficient detail in order to assist policy making. We intentionally stick to a simplistic analysis of the barriers by associating them to inadequate e-Commerce practices adopted by SMEs today in order to immediately assist SMEs improve their current turn over from cross-border sales. 1 A good reference is an Accenture publication titled “European Cross-border E-commerce The Challenge of Achieving Profitable Growth
  2. 2. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 3 of 19 TABLE OF CONTENTS PECOS4SMES 1 1. INTRODUCTION 4 1.1 Methodology 4 2. SME E-COMMERCE PRACTICES 6 1.2 Ordering 9 3.2 Payment 11 3.3 Delivery 12 3.4 Communication 13 3.5 Overall Service 14 3.6 Promotion 16 LIST OF TABLES TABLE 1 - LIFECYCLE ELEMENTS PER SME SECTOR 7 LIST OF FIGURES FIGURE 1 - ANALYSIS METHODOLOGY 5
  3. 3. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 4 of 19 1. INTRODUCTION In the present document we have summed our combined conclusions on e-Commerce barriers to SMEs stemming from the analysis work we conducted but also from designing, developing and validating the PECOS4SMEs training system during this 2 year project. In the present section we describe the analysis methodology used for identifying the barriers for SMEs. The outcomes of the analysis methodology are available through the PECOS4SMEs project (www.pecos4smes.eu) while specifically for the European Overview there is an interactive presentation available online here (http://www.ccs-samples.com/EU-Overview/menu.html). The identification of barriers provided also the knowledge to design an e-Commerce Cheat Sheet for SMEs, kind of a fast track to improving present e-Commerce performance (http://ccs- samples.com/PECOS4SMEs/eCommerce_Cheat_Sheet.pdf). In the sections that follow we present our viewpoint on the barriers to SMEs in cross border e-Commerce in terms of the different elements of the e-Commerce lifecycle. 1.1 METHODOLOGY For executing the project, an analysis methodology was elaborated with distinct phases, activities and outputs. The methodological framework which guided the analysis phase of the project is depicted in the figure below in terms of high level activities and outputs:
  4. 4. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 5 of 19 Figure 1 - Analysis Methodology The three phases of the analysis depicted above are the following:  Phase 1 is the National Phase, during which we collected most recent sources about e- Commerce and isolated based on a set of pre-defined criteria the material which were considered for further analysis resulting to the elaboration of 7 country reports2 on the e- Commerce state of play.  Phase 2 comprised Needs Identification Phase during which the business and learning needs (for e-Commerce related skills) and requirements (for the usability of the delivery tools) were identified and were later transcribed to didactical and technical requirements for guiding the development of e-Commerce strategies for SMEs, the training content and delivery tools.  Phase 3 is the Translational Phase during which a comparative overview was elaborated depicting from a critical viewpoint the SME e-Commerce state of play in the partner countries. In the context of this work it was possible to identify practices leading to improved revenues from online sales. 2 The Netherlands, Belgium, U.K., Greece, Italy, Cyprus, Poland
  5. 5. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 6 of 19 2. SME E-COMMERCE PRACTICES The SME sectors taken into consideration are presented in the table below accompanied by the elements of the e-Commerce lifecycle relevant to each sector.
  6. 6. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 7 of 19 Table 1 - LifeCycle Elements per SME Sector Sector Life Cycle Retail and Wholesale Ordering Payment Delivery Communication Overall Service Promotion Manufacturing Ordering Payment Payment Delivery Communication Overall Service Promotion Real estate Buying Contracting Payment Overall Service Communication Promotion
  7. 7. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 8 of 19 Sector Life Cycle Accommodation Booking Payment Payment Communication Overall Service Promotion Construction Trading Contracting Payment Promotion The problems with current SME practices are presented in the sub-sections that follow per lifecycle element without direct reference to sector. This was not deemed necessary as the practices are described below in a simple manner making it easy for SMEs to visualize how they apply to their specific situation. As such, the explicit incorporation of sector related information would impact negatively readability without adding significant value. The SME readers are encouraged after reading the present publication to refer to deliverable D3.3 of the PECOS4SMEs project, titled “Cross-border e-Commerce Strategies”, available through the project website.
  8. 8. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 9 of 19 1.2 ORDERING In relation to Ordering, the following weaknesses have been identified in relation to the most frequent approaches of SMEs to e- Commerce: Customer data not used: The potential of utilizing information from customer profiles and order history is largely ignored. At the very least, such customer data can be used to make personalized suggestions about what others with similar profiles have purchased (Amazon and eBay are good examples). Ideally, SMEs will maximize benefits by personalizing the site to reflect each customer's needs by providing customer-focused marketing campaigns and promotions such as banners, recommendations and special offers. Consumer feedback not encouraged: Shoppers are largely influenced by reviews from other shoppers and there are many good review platform available facilitating the incorporation of consumer reviews to items of the e-Shop catalogue. Consumer reviews will also maximize conversions through price aggregators as shoppers will be looking for a combination of good price and good reviews about the e-Shop they will use. Product comparisons not available: It is not uncommon for consumers to struggle between two or more similar products. In such situations a product comparison functionality will make a difference by allowing the shopper to review the features of each product one by one before deciding. The more extensive a product catalogue is the more necessary to provide product comparison functionality, especially since most shopping carts provide today this functionality out of the box.
  9. 9. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 10 of 19 Power of video is downgraded: Digital marketing is about informing and educating consumers and selling indirectly by monetizing on a good online reputation. To this end SMEs are not attributing the necessary attention to the use of product demos to show, explain and educate consumers about specific products. The majority of manufacturers already provide such videos for their products and all that is needed is to integrate this video on the e-Shop or at the very least provide an http link to the page on manufacturer’s website or video channel with the product demos. Search box importance is ignored: Shoppers come in all flavours. A great deal of them will not spend any time browsing through the e-Shop for various reasons but will use the search box to search on specific items. The more sophisticated and friendly search box the more the chances to make a sale. However, many SMEs provide no search box or at best just a box to write text which returns results from all over the site. A good example demonstrating the importance of the search functionality is the display “recently viewed and purchased” items and popular customer buys, providing multiple search options and the ability to filter on the basis of specific attributes. Strong search is important not only in retail but also in manufacturing due to the size and complexity of product catalogs. Order management not taken into account: The process is not over when the shopper places an item to the shopping cart. It should be possible to link back to the product page to make sure it is the right product and it should be straightforward to change quantities or remove items from the cart. The impact varies off course depending on the products but can be substantial. SMEs should thus spend adequate time reviewing the cart functionality to make sure it is the most suitable one for their e-Shop. This is of special importance to the manufacturing sector where customers often need to configure products to specifications and there is today widely available e-Commerce technology allowing customers to configure and view multi-featured products in real-time, confirming desired product dimensions before placing orders. Is it long now? Where am I? An ordering process with many steps taking a lot of time is not going to be popular with shoppers. A mechanism displaying the progress of the order is not a luxury feature. Especially as m-Commerce is gaining in popularity. Navigation between step sis also important as it should be flexible in terms of accessing previous steps and not sequential while it is beneficial to have a “proceed to checkout” button or link on each page of the ordering process. Sadly many SMEs do not consider this important.
  10. 10. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 11 of 19 What if I want….? More relevant to the manufacturing sector is the provision of functionality for requesting a quote. Due to the nature of the products/items sold by manufacturing SMEs it makes sense to provide functionality to customers to ask for a quotation based on their provided conditions. Complementary to the direct sales, the quotation functionality can positively affect sales. This not a widely applied practice among manufacturing SMEs today because they rely on the customer picking up the phone or sending a fax/email with a request for a quote. This is logically what is going to happen with local customers but may not be the case with foreign customers. In order to break the natural resistance of foreign shoppers in the manufacturing sector it is helpful if a well thought out quotation tool is made available online to deal among others with the communication of two parties in a third language. 3.2 PAYMENT In relation to Payment, the following weaknesses have been identified in the most frequent e-Commerce practices of SMEs: Limited flexibility: Many SMEs are stuck to the old ways of doing things and fail to grasp the importance of flexibility when it comes to receiving payment. Many shoppers are looking for specific payment methods in e-Shops in order to shop. Online stores commonly use credit and debit cards, gift vouchers, cash on delivery, PayPal, etc. as their main payment system3 . Credit cards still dominate the online payment sphere, but the demand for alternative payments such as e-wallets, cloud-based payments and mPOS, is on the rise4 . Payment details should be displayed on the home page in plain sight. 3 A detailed breakdown of payment preferences in key markets can be found in the Payvision infographics library http://www.payvision.com/infographic and the Paypers country factsheets http://www.thepaypers.com/cross-border-ecommerce 4 White paper "Key Business Drivers and Opportunities in Cross-border Ecommerce": http://www.payvision.com/cross-border-ecommerce-report-survey-2014
  11. 11. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 12 of 19 Inadequate security: Even though the majority of SMEs are aware of the impact of payment security on shoppers, they fall short on offering a secure payment environment because they think it is too complex or expensive or they feel that the responsibility rests solely to their payment solution provider. However, it is not difficult to protect Internet communications via encryption and utilize secure communication channels (SSL, VPN). A good practice is to use Trustmarks (small images or logos that show a security guarantee by an external party indicating that it is safe to shop on the site). Shoppers will be more inclined to make a purchase if they know that their payment details are safe from prying eyes. Not mobile friendly: Many SMEs still ignore mobile payments as an important payment option for their customers and are thus not aligned with the e-Commerce landscape of tomorrow. However, more and more consumers are shopping on-the- go from the palm of their hands. There are over 200 alternative payments across multiple markets in the e-Commerce industry today but it is predicted that over the next 5 years most of these options will evaporate and the vast majority of payments will be made online5 . While cross-border spending is largely driven by credit cards, and will remain so in the near future, cross- border e-Commerce will be propelled by mobile payments in the future. 3.3 DELIVERY The following weaknesses have been identified in the most frequent e-Commerce practices of SMEs in relation to Delivery: No delivery tracking: SMEs are not reaping the benefits of order tracking which is relatively easy to facilitate. Order tracking, apart from enhancing the business profile of an SME leading to repetitive sales, it can potentially save time by eliminating phone calls or email communication from shoppers to check the status of their order. Foreign shoppers in particular will be looking to track their order real time. 5 White paper "Key Business Drivers and Opportunities in Cross-border Ecommerce": http://www.payvision.com/cross-border-ecommerce-report-survey-2014
  12. 12. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 13 of 19 Poor delivery management: This involves several different functionalities, some more important than others: o Rearranging and personal collection: There are still many SMEs today who after the sale they direct the shopper to a courier service without bothering about the flexibility and the overall service provision of the courier service. The choice of carrier is crucial. o Flexibility in returns: Some SMEs were quick to grasp the importance of offering various options to shoppers for returning unwanted items. Including a full refund. Other SMEs are still failing miserably in this area. o Out of the norm delivery times: Deliveries on a Saturday or after 18:00, even the choice of a specific delivery slot are not commonly offered by SMEs today but only from main e-Commerce players the likes of Amazon. Automatically this means that an SME which is offering such services is ahead of the competition and is likely to enjoy excessive online sales revenues during the Christmas period. Lack of customs related information: A frequently ignored aspect of cross border sales by SMEs is the customs and duties levied by each country. Unless customs charges information is provided to shoppers, they are not able to calculate the entire cost of their purchase, leading to friction. Custom charges refer to additional shipping charges, credit card fees, taxes, etc. and should be provided and added to the price information. Online calculators are freely available for EU sellers6 and so there is no reason for SMEs to lose out by not providing accurate custom charges on cross-border orders. 3.4 COMMUNICATION The following weaknesses have been identified in the most frequent e-Commerce practices of SMEs in relation to Communication: 6 http://ec.europa.eu/taxation_customs/customs/customs_duties/index_en.htm
  13. 13. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 14 of 19 No toll free customer service number: Even though the cost associated with the provision of a toll free number is today very low and it is very easy to set up it is not a frequently encountered practice among SMEs. However, research has shown that having a toll free number displayed in the template of an e-Commerce store will increase its conversion rate, in some cases as high as ¼. Non-systematic monitoring of social media: Sporadic postings and responses and “poor” profiles are the norm among SME social media profiles. Communication monitoring and responding via social media can yield a lot of business but only is done systematically based on a long term strategy. SMEs should try harder with SM, start small and gradually upscale their game. Not universally accessible Live Chat: The power of Live chat is not harnessed by SMEs today even though it is essential towards the provision of high quality customer service. Ideally both forms of live chat are offered (written chat room and call back) but even one of them will make a difference, especially in cross border sales. 3.5 OVERALL SERVICE The following weaknesses have been identified in the most frequent e-Commerce practices of SMEs in relation to their overall service: Insufficient information provision: The value of accurate information is not fully appreciated by many SMEs with the best example being the inability to offer their customers exact and accurate information on delivery time and costs. Detailed and accurate information should be provided not only before the checkout process as a summary, but also on each products' page. Inaccurate information may lead to loss of trust in customers' eyes.
  14. 14. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 15 of 19 Not mobile friendly: Utilisation of m-Commerce and tablets, if done properly can generate a decent profit margin. Google research suggests that spontaneity plays a major role in shopping activities and that this is estimated to affect 81% of smartphone purchases. However, not all SMEs understand what m- Commerce can do for them and are slow to shift towards mobile friendly e- Shops. Low quality product images/no alternate views: Even though the importance of good quality images is easy to grasp by everyone, today’s reality is that SMEs are not likely to pay a professional photographer and/or graphical designer for this purpose. SMEs until now paid architects and designers to set up or renovate their physical store but are not very willing to pay a graphical designer and/or professional photographer a fraction of the cost. Perhaps they would be convinced to do so if their turn over from on line sales became substantial but this may happen unless they invest on high quality images first. So, kind of a chicken-egg problem to be solved here. No online promotions: SMEs are not helping online shoppers to stay loyal by not offering promotions and savings to encourage them to make a purchase. Promotion through free or discounted delivery is very helpful also and good to advertise across the e-Shop. At the very least there should be a threshold over which deliveries are free of charge. Not bothering about the design of the delivery boxes: Surprisingly enough most SMEs have never even thought about bothering with the boxes used for delivering their goods to customers. Simple carton boxes are used by the majority of SMEs, blank, without any logo or business information on them or a nice graphical design which would encourage the customer to keep and re-use the box thus constituting a constant reminder of a good shopping experience.
  15. 15. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 16 of 19 Gift wrapping? Not relevant throughout the year but critical during the Christmas season there are not many SMEs advertising gift wrapping for online sales during Christmas. It can produce good results while it requires practically nothing to provide it online. 3.6 PROMOTION The following weaknesses have been identified in the most frequent e-Commerce practices of SMEs in relation to Promotion: No or insufficient SEO: Even though its impact on turnover is probably over rated today the fact remains that it is simple for SMEs to improve their SEO approaches improving their ranking7 . Unprofessional newsletters: Newsletters are a specific type of email marketing and as such needs to bear a professional design and catchy content. SMEs first need to consider if they need a newsletter. If they conclude that the do, then they should make sure they approach this professionally preferably with external, specialized help. Not using PLAs: The Product Listing Ads (PLAs) Google addition to AdWords is becoming a popular means of promotion. However they are not widely used by SMEs today who are missing out on the opportunity to effectively promote their products. 7 SME readers are encouraged to download the PECOS4SMEs e-Commerce game (www.ccs- samples.com/PECOS4SMEs/PecosGame.zip) to assess their present knowledge on such issues and to take the SEO/SEM survey (https://ec.europa.eu/eusurvey/runner/SEOSEM).
  16. 16. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 17 of 19 SMM Misconception: This is probably today the most confusing promotional technique for SMEs. Many different opinions about what Social Media Marketing is and how it is used. Many SMEs have Web 2.0 profiles and think that SMM is about directly promoting their products through their profiles. The reality is that when doing this it is also very possible that they are turning potential customers away. It is important to understand that SMM is about engaging with (future) customers and building a good online reputation by providing high quality information. Sales are indirect by cashing in the online reputation. This requires substantial and continuous work and as such it is not for all SMEs. Sharing options not provided: The social aspect of buying is still ignored today by many SMEs when it comes to online purchases. Many advantages which come with the provision of sharing options (e.g. email a friend, ShareThis, AddThis, etc.) are thus missed. “Submit to Index” not used: Google offers the “Submit to Index” functionality that allows web shop administrators to submit or resubmit URLs that should be visited by Google’s indexing bots. After using this functionality a bot usually visits one’s URL within a day. This simple action will speed up the inclusion of one’s web shop in Google’s search results, thus speeding up the moment that Internet users will start finding the shop. Power of analytics not harnessed: Analytics is an important instrument to monitor the effectiveness of an e-Shop. Analytics provide insight at which moment shoppers abandon the buying process. SMEs should focus on at least some key metrics, such as: o Number of visitors o Page views o Referring sites o Bounce rate/Exit pages o Keywords and Phrases
  17. 17. D6.11 Breaking the Barriers to Cross-border e-Commerce to European SMEs Page: 18 of 19 Shoppers not profiled: The vast majority of SMEs are not pro-active in terms of predicting the behavior of their visitors/customers. However, the possibility to compare visitors/customers to industry data in order to understand to what content they are likely to react best is there offered by profiling service providers the likes of Adobe Analytics and Google Analytics Premium.
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