European E-Commerce Still Trailing US

To the surprise of absolutely no one, a study by Andersen Consulting found that the US is leading the global e-commerce race, and major differences exist between the new economies of the US and Europe.

According to the study “Connecting the dots?” which was based on interviews with senior executives in the US and Europe, the US generated 67 percent of global B2B e-commerce revenues in 1999, and 76 percent of global B2C e-commerce revenues, compared to a 14 percent share of B2B and B2C revenue for Europe. But US companies seem hesitant to work for a share of the European market.

The survey found a significant decline in the number of US firms aiming for international expansion in their e-commerce initiatives. Almost twice as many European as US organizations are using e-commerce for geographic expansion, the study found. The multiplicity of languages, differences in regulation, and infrastructure have made it more difficult for US companies to succeed in Europe. The study found that the subtler differences in culture and various stages of development in Europe are even more significant barriers. Only one-third of the 60 US executives surveyed said it was important to adapt their Web presence to reflect regional language and culture differences. The finding underscores an attitude of indifference by US companies to the complex European market, according to Andersen Consulting.

The key driver of e-commerce initiatives, according to the report, is fear of competition. Seventy-five percent of established European businesses say they are trying to keep up with competitors, and seeking to secure a strategic position in their industry. Almost 80 percent of businesses report plans for further e-commerce opportunities, and 72 percent report that they have developed an e-commerce strategy. The survey also shows that around 72 percent of European firms now use e-commerce for sales and marketing, up from 53 percent last year; 47 percent of companies said they are using e-procurement, compared with only a few percent in 1998. There is continued usage across logistics, financial accounting, product development, human resources and payments, according to the study.

“Established businesses have ceased to be intimidated by e-commerce or star-struck by its pioneers. Certainly the last year has proven the advantages of strong brands, deep pockets, and managerial expertise,” said Rosemary O’Mahony, Andersen Consulting’s Managing Partner-Technology for Europe, Middle East, Africa, and India.

There are still marked differences between the US and European eEconomies, according to the study. If anything, the last year has seen the US slightly increase its absolute lead in e-commerce. The study shows that European companies are both making less use of e-commerce than their US counterparts and using it across a narrower range of functions.

Despite this, there is evidence of a growing wave of confidence in Europe, where 60 percent of executives believe the continent can become the hub of a global network economy. This confidence appears to be reinforced by features of the European e-commerce landscape, which have made it more difficult than expected for outsiders, such as US companies, to prosper in the European marketplace. Thus, European companies’ greater understanding of the complexities of international e-commerce can be one source of competitive advantage. This applies not only at home but also in helping European firms make the most of Europe’s linguistic and cultural links with other parts of world, now that e-commerce is making physical distance less important. But in the long term, this advantage might be eliminated if European companies assume that the greater complexity of trading internationally will offer them inherent protection from competition.

The study also identifies two substantially negative factors for the continued growth of e-commerce in Europe: an increasingly evident shortage of key skills, and a legal and business climate less favorable to entrepreneurs than that of the US.

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