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Under the direction of Jean-Rémi Gratadour,Vice-President of ACSEL

> 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

© Acsel - L’association de l’économie numérique.

2 Cross-border e-commerce/A Digital Europe at the heart of trade

Electronic commerce and online services are now an inte-gral part of everyday life of consumers, businesses and

citizens all across Europe. For this reason, the way people compare, buy and sell goods, the way in which they search for and provide information, as well as the manner in which they manage payments or data and exchange or share things has been totally revolutionized. The digital economy is trig-gering new growth, however the potential for progress is still huge and could well benefit every economic sector and region in the European Union. The Internet economy gen-erates 2.6 new jobs for every job lost and helps reduce the effects of isolation for a number of rural areas.

However the digital economy’s contribution to global activity remains minor. Although it is rapidly growing on a national scale, e-commerce still only represents a marginal share of European retail. In addition, national borders continue to be an obstacle for online services and limit the development of cross-border activity. Europe’s Internet economy is a patchwork of different rules, standards and practices that hinder its development and undermine the confidence of existing or potential users, on both the supply and demand side. The rapid growth in online services across Europe therefore requires decisive action.

With this in mind, on 11 January 2012 the European Commission adopted a green paper on “A coherent framework for building trust in the Digital Single Market for e-commerce and online services” [COM(2011) 942]. The aim of this ambitious action plan is to double both the share of e-commerce in retail sales and that of the internet sector (less than 3% at present) in Europe’s gross domestic product, by 2015.


3Preface

Five priority areas have been identified: to develop the supply of legal and cross-border online goods and services; to improve operator information and consumer protection; to encourage the development of more reliable, efficient and affordable payment and delivery solutions; to counter abuse and resolve disputes more effectively and finally, to deploy high-speed networks and advanced technological solutions. Each of these programmes will involve 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 as with the majority of the recommendations that the association puts forward. In addition, it is clear that the various testimonies provided by “pioneers” in cross-border e-commerce in Chapter V provide a perfect illustration of the challenges with which we are faced. We must now unite our efforts to boost the develop-ment of a sector which represents not only one of the keys to the creation of a genuine Single Market but which will also be a major source of growth, innovation and job creation in Europe in the coming years.

Michel Barnier European Commissioner

in charge of the Internal Market and Services




5Foreword

In 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 seen significant progress in the basic principles governing e-com-merce. The results are clear for all to see, the figures provide the proof and so do the high number of company success stories.

Nonetheless, today’s European e-commerce still remains con-fined within national strongholds, even though it can play a role in Europe’s construction by contributing to the development of the 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. Our aim is also to describe the channels and measures required for a genuine ecosystem for European e-commerce. In truth, some of these channels have already been explored by the pioneers whose experiences 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 border is also a crossing point and a place where exchanges take place, and which can provide a new means of boosting European e-commerce: instead of destroying the strongholds, we plan to conquer them.

Learning from past experience, retailers and service providers will be better prepared to cross new frontiers, both within the European Union and much further beyond.

For ACSEL, this document represents a new phase in its work to understand the requirements of its members and to assist them. I would like it to play a key role in helping French compa-nies develop their activities on an international scale.

Pierre AlzonPresident of ACSEL




7

Summary

In 2008, ACSEL published a report entitled Europe, an opportunity for e-commerce. This new document aims

not only to update data issued three years ago, it also pro-poses to look at it from a different perspective. The reason being that since that period, the fundamental elements of e-commerce have significantly changed: more people use the Internet, they are better equipped and now also surf online using smartphones and tablets... with a lot more confidence too. The results are clear for all to see, the figures provide the proof and so do the high number of company success stories. And this is despite the current crisis, or because of it, if you love paradoxes.

We therefore decided to not simply update the information and figures, but also to describe the major changes and draw lessons for the future. We also wanted to share in the experiences and testimonies provided by the pioneering figures in this form of e-commerce in the process of internationalization. Finally, we needed to identify which obstacles prevent commerce from cross-ing the borders, but at the same time we wanted to discover how we 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 a border is also a crossing point and a place where exchanges take place. 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 within the European Union and much further beyond. Although the message is an optimistic one, it does also include a warning: if you do not believe in the European market, competitors arri-ving from elsewhere will be more than happy to convert you.



European e-commerceWhat is the current state of European e-commerce and what direction is it expected to take? Both in terms of results already observed and future expectations, the situation is still quite contrasted and particularly attractive. In 2011 it represented a turnover volume of almost 200 billion Euros, or over a third of global e-commerce! Of course there are disparities among coun-tries, but these are all reasons for the least developed countries to try to catch up and a source of hope for growth for all involved.

Already, European online business has outpaced that of the 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 the United Kingdom, Germany and France. Europe is thus hot on the heels of the United States in terms of its share in the e-commerce segment of global retail business. However, this notion is becoming more complicated due to the fact that the different distribution channels are constantly overlapping.

Cross-border e-commerce

Europe is well equipped for cross-border e-commerce, if we take this term to describe how between the different forms of com-merce, boundaries are less clearly defined.

Several major European countries have extensive experience with distance shopping, their logistic capabilities and postal services are finely tuned and they offer a broad and diverse range of payment solutions.

The storm clouds lingering over the economy and doubts con-cerning the Euro have an impact on household confidence, but to a lesser extent that of players involved in e-commerce, con-sumers and retailers. There is a storm cloud that is undoubtedly more 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,


9Summary

the difficulties experienced by innovative companies in obtain-ing funding are unfortunately commonplace for all small and medium-sized businesses, in France at least.

Nonetheless there have been a number of innovations since 2008 to give us cause for optimism.

First and foremost, we have what is known as “multichan-nel business”, which far from setting distribution networks up against one another, improves their ability to monitor their cus-tomers and offer them the best adequate solutions at the best price at the right time and in the right place. The reason is that this multichannel commerce, which represents one facet of “mul-tichannel marketing” techniques widely employed since the end of 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 use of multichannel are leading to what can be seen as the end of e-commerce, or at least the term will become obsolete, which some 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 commerce as a distinct sector if we consider that the majority of business transactions now involve an internet connection at one point or another? Digital technology is simply becoming increasingly part of commerce and the economy in general.

Everything is becoming “multi” all around us, or we could even 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 provides universal access to e-commerce (unless it is taken over soon by the tablet). It also serves as an interface between the physical and virtual world, offering more and better than mobility, ubiquity. This present book describes how the terminal used for proximity commerce is also of interest to cross-border commerce.

In the same way, the fact that social networks are localized in nature, in most cases involving close relations, does not



automatically disqualify them. If these networks play a role in socializing commerce, then a form of relocation will result and stores 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 quickly familiarise themselves with multicultural issues. Not forgetting that these same social networks enable e-retailers, and in par-ticular smaller retailers, to share their experiences and to form larger groups capable of defending their interests. A step ahead of the economy for once, political events have provided the example of how networks can open up to diasporas and the rest of the world, as was the case with what has sometimes been referred to as the Arab Spring “revolutions 2.0”.

A cross-border Europe?

Although European e-commerce is a cause for optimism, it still remains confined within national strongholds. Europe is made up of 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, 23 official languages, hundreds of regions (some of which are claim-ing the right to their own political existence) as well as thousands of native or immigrant communities that are geographically con-centrated or scattered or even virtual. The Union has also created new types of border with the Euro zone and the Schengen area. This is hardly surprising if we consider that the European Union is a variable geometry community, the perfect illustration being Airbus, the flagship of European industry.

Europe is a patchwork of both political and cultural borders and 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.


11Summary

The heterogeneous nature of the European Union is also marked by the inequalities of wealth between the richest and poorest countries, and even more so, on a regional level. There are also digital divides between public infrastructures and privately owned equipment, services and applications. This is particularly true when it comes to e-commerce.

The proliferation of diversity is not necessarily a sign of failure of the process of unification which has been undertaken over the last half century. The fact that the differences have been reduced is a sign of progress for the European construction process. In this regard, it is true that the EU calls on its institutions, issues common or harmonized standards and implements integration policies, particularly in the area of trans-European networks.

Nonetheless, cross-border purchases are sluggish. When approximately 40% of European consumers purchase online, with the large disparities which still exist from one country to another, only 7% of them make their purchases in other coun-tries belonging to the EU. However, cross-border offers are relatively easy to access via search engines and price compari-son websites, and in some cases they propose cheaper prices than in the home country. But a mystery shopper experiment carried out in 2010 revealed that two thirds of the transactions included in the sample taken were cancelled before being converted into genuine purchases. There are real obstacles to crossing borders but 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 major European country also reveals that the only foreign sites in the countries mentioned are two or three subsidiaries of American companies. The moral is: the only genuinely European players in today’s market are American.

E-Commerce builds Europe

Should we be pushing to expand cross-border e-commerce in Europe? A rather more subtle and realistic approach (since



borders do not disappear, the tendency is for them to proliferate) is adopted by those involved, who prefer to stick to the notion of cross-border, without limiting it to the borders of the EU, which are constantly being extended and which strictly speaking do not exist.

Along the way, we will meaningfully refute a few widely held beliefs: 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-border commerce has a momentum of its own whereby the border itself is a place to trade. It is even a source of stimulation, as long as the people it separates have strong personalities and show genu-ine interest in discovering the unique identity of others. French touch, British way, deutsche Qualität or all’italiana, are just some illustrations of Europe’s different specialties. In the North, apparently the long winter months have been provided as an explanation 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 so much an integral part of the Italian way of life. This is without forgetting the wealth of smaller nations, these small, prosperous countries which are open because trade is essential. Identity assets have a bright future ahead of them thanks to e-commerce!

We are gradually moving towards acceptance of the idea that cross-border e-commerce can play a role in completing the construction of a single market. It clearly serves the common interests of consumers and retailers by providing greater choice and reducing costs: increased competition, reduced costs involved with market fragmentation, economies of scale, the sharing of experience and skills…

For e-retailers, the opening of borders results in both new opportunities and new threats, with the arrival of new competi-tors in their own territories. However, it would be inappropriate to include competition in the list of obstacles to the development of cross-border commerce.

It is good for consumers and for retailers, who already represent a considerable number of people, and cross-border


13Summary

e-commerce also serves public interest. It is a corporate citizen, and even though they are not always aware of it, European e-retailers play 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 with it the digitalization of services and on a more general note, the deployment of the digital economy and society in Europe. In doing so, it creates and also contributes positively to activities, investments, skills and practices.

It works towards European integration by multiplying exchanges and by modernizing business structures in the less developed countries.

It also stimulates the creation of efficient trans-European infrastructures and participates in economic and environmental optimization of freight transport at all territorial levels, from trans-continental transport to intercity deliveries. Similarly, it spreads good practices that have been tried and tested across the European Union, notably in urban zones thanks to multichannel delivery.

Finally, e-commerce promotes a kind of European sociability by providing the opportunity to exchange goods and services in particular. Since it is a business involving people, it helps create a common European culture by multiplying exchanges between citizens and the various European communities, especially with the trend towards “social commerce”.

The efforts deployed by online service providers in order to overcome the language barrier and other cultural idiosyncrasies serve 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 of European influence. Strengthened by cross-border selling experience within 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 Europe and much further beyond, notably in Latin America and Asia.

In addition, cross-border commerce promotes the emergence of players capable of operating on a continental and global scale,



in response to the current American predominance. And this is where the issue at stake is extremely important if we consider that the digital economy is gradually transforming every sector of the economy. Those who have mastered the art in these kinds of transformations have a better chance of gaining control in the other sectors too.

With large numbers of flagship companies, Europe still needs to position its leaders at the major crossroads of the digital economy.

Ways and means

Whether the person involved is a retailer, service provider, con-sumer or even a citizen, cross-border commerce would appear to be an absolute obligation. But the key issue remains: we need to explore 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, company size is an issue: hundreds of thousands of small and medium sized businesses are being set up, with players operating on a national scale and to a much lesser extent, those with European or global operations. However, company size is not simply limited to its catchment area: cross-border commerce is suitable for small busi-nesses on condition that it has access to the services required for cross-border exchange and at a reasonable price. There is indeed another 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 in nature and which represent the operational side of the European e-commerce ecosystem.

What remains to be done is to specify the “development pro-jects for cross-border e-commerce”, the software solutions for the different markets as well as the various stages of the e-commerce chain, with a concrete example to illustrate them:

– selling, paying and delivering across-borders;


15Summary

– organizing a marketing strategy taking into account cultural idiosyncrasies;

– tackling legal differences in Europe’s Member States; – implementing suitable payment systems;– learning how to propose different delivery options (home

delivery 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 European associations such as ACSEL, whose aim is to provide greater international coordination.

Harmonization

The institutions which regulate this activity could not possi-bly be excluded from the list of e-commerce stakeholders. The European e-commerce ecosystem is a regulated one. It is not simply part of the socio-technical environment, it helps produce decisions taken by institutions, the implementation of standards and public policy such as the Digital Agenda for 2020 and other policies on trans-European networks. The Union’s activities tie in with national policies (with the transposition of European directives), and even at regional and local policy level, for exam-ple with standards relating to public delivery facilities in urban areas.

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-commerce in retail sales (currently 3.4%), and that of the internet sector in European GDP (currently only 3%) by 2015.

It is quite true that players involved in online commerce, faced with various different legal and taxation systems, dread a legal vacuum almost as much its complete opposite. Among other possible options, they recommend better coordination between



common law and contract law, between the Charybdis of self-regulation and the Scylla of technocracy.

Considering the very nature of the Union in an increasingly diverse Europe, it seems that harmonization is still a better option than standardization – but there is not much hope. The objective is legal security, transparency and above all consumer confidence.

StrategiesCross-border commerce offers a larger market for retailers to implement their strategy and sales tactics within the planned time frame and the various stages of deployment. The retailer faces 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 size of the company, the activity sector, the objectives and the avail-able funds, where operations are based and the new markets to be conquered.

If we can claim that e-commerce is an ecosystem, it is precisely because 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 European e-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 structures have 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. We also know that the information technology sector is now working towards achieving this combination.

In the same perspective of “maintaining the delicate balance between what must remain common to all and what must be done to allow singularity”, a suitable resolution exists for those in charge of regulating e-commerce and the rest.

***


17

Diversity in the single marketThis publication provides an update of the information published in the 2008 edition2 and analyzes the situation from a slightly different angle. The main aim is to convince players in the online business sector that cross-border trade offers a host of opportuni-ties for development. It performs an analysis of the obstacles to border crossing which result in reluctance on the part of retail-ers and consumers alike. This reluctance is excessive, but doubts about whether a transaction being successfully completed lead to them opting out.

While acknowledging that European diversity is indeed a source of difficulty and at the same time offering the possibi-lity for new momentum, the book explores the various ways and means of developing trans-European online commerce. Hence the paradoxical challenge of building diversity in the single market.

The previous book rightly focused on the barriers, such as the difficult “Europeanization” of marketing campaigns and the heterogeneous payment and delivery processes. There was a clear message to the institutions: “Give us Europe and we will take care of European e-commerce”. But as long as in a reciprocal manner, e-commerce also contributes in its own way towards building Europe, the combined initiatives by private and public stakeholders need to create a “virtuous cycle” and adopt a colla-borative approach in sum, to borrow the expression often used to describe networking.

2. Europe, an opportunity for e-commerce, ACSEL (2008).

Introduction



It is worth adding that in the face of competition from America and Asia, capitalizing on previous European experience is a good form of preparation for the conquest of new territories. This is made possible by the linguistic, cultural and historical affinities that 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 it remains nonetheless realistic. An indication of this is in the title itself: cross-border e-commerce was chosen as, contrary to common beliefs, 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 between the different nations that they are used to separate.

Remaining realistic, we decided to focus on ways and means that have already been explored in the past by those working in the field, providing illustrations by way of references and case studies.

Co-building of the European e-commerce ecosystem? The high-lighted term has probably been used too often, but this can also mean that it is probably a topic we will be discussing for some time to come. Whatever the case, it does at least signify that European e-commerce “constitutes a system”, and that this sys-tem is controlled by various players and decision makers who interact.

The message is therefore addressed not only to retailers and other service providers, but also to Internet users and consum-ers as well as all of the different public institutions involved in building Europe. In reality, everybody has a role in the building process, whether as citizens, Internet users, professionals or con-sumers, especially with the existence of social networks.

The prospects are bright despite the scaremongering

What has changed since 2008 is first and foremost the size of this sector of activity, which despite some uncertainty can be esti-mated at approximately 200 billion Euros for the Union’s 27


19Introduction

Member States. This amount is much higher in absolute value when compared to American e-commerce (in the United States) for a population that is also considerably higher (approximately 500 million inhabitants compared to a little more than 300). One document we refer to in this book is the study carried about by 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 retail sales is almost 7.8% (7% in the United States in 2010), with a peak figure of 12% in the United Kingdom.

For the patchwork of European states, the e-commerce figures, like for any economic activity, vary significantly from one country to another and from one major geographical region to another (North and West, South, East). In terms of market share, Poland and also Spain represent approximately 3.1%, four times less than the United Kingdom, and Italy with 1.3%. However, what is common to all European countries, is the high level of growth, that is in two figures in each case, and significantly higher than the average in those countries “lagging behind” the most (33.5% in Poland between 2010 and 2011 according to the aforementioned study). It would therefore seem clear that they are catching up.

The overall perspectives for European e-commerce do there-fore seem to be quite encouraging. It is true to say that the changes that have taken place since 2008 are moving in the right direction.

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 this respect, 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 distance selling and even less so with home shopping, and expressions such as “proximity e-commerce”, which seemed a paradox not



so long ago, are now perfectly meaningful. Some may object that the contribution of smartphones is irrelevant to the subject we are dealing with, but it is worth noting that the majority of cross-border retail transactions are carried out by tourists and business travellers, and more and more of these people are using smart-phones. Once again, e-commerce even when it is cross-border can produce surprises.

Most well informed observers believe that social networks will have a considerable impact in many ways, to the extent that it is already producing new terminology, such as s-commerce (S as in social, as if all forms of retail are not already “social” in nature) and even f-commerce (F as in Facebook). But it is difficult to estimate 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 can be said that the communities that are brought together by social 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 that social 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 extensive social exchange.

The result is an increasing number of Internet users who are better 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. At the 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 front as well as acquiring the necessary experience and skills also con-cern the e-retailers themselves. We are seeing the development of online retail tools and “e-commerce solutions” and platforms, not to mention the different operations that make up the e-commerce supply chain (marketing, payments and delivery…).


21Introduction

In all of these areas, we will pay particular attention to changes that may contribute significantly to the development of trade between 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 the scaremongers have to say. Their argument is that an economic cri-sis could affect household confidence, consumption and retail in general. 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 bubble with some companies which have far from delivered the goods find their 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 behind in 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 on costs borne by companies in the sector, bearing in mind that lower prices are an important reason for online shopping.

Nonetheless, the leaders in charge of the digital economy remain very optimistic, as shown in the ACSEL-Ifop barometer published in 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 growth in e-commerce is achieved at the expense of traditional forms of retail, in the same way the development of cross-border e-com-merce will lead to the dealing out of a new hand of cards (between exporters and national players) rather than increasing the stakes. This reasoning is questionable, since it does not take into account the 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



hand it offers the possibility of broadening catchment areas and reducing costs by eliminating the additional expense that results from border crossing. But on the other hand, it provides the “promise” that better prepared competition can be expected and not only of European origin.

But e-commerce still has a long way to go to reach the stage whereby protectionist measures could be required: between opportunities and threats, let’s say that cross-border commerce also broadens the scope for e-retailers to deploy their sales strategy and tactics.

Cross-border commerce: when in doubt, they abstain

What situation does European cross-border e-commerce face today?

It appears relatively weak and in particular, there does not seem to be much progress: although approximately 40% of European consumers purchase online, only 10% purchase from sites located in a different country to where they live, and it is also worth underlining that roughly 4% of them purchase in non-European countries, mainly the United States. It would seem 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 into three categories: the linguistic and cultural differences within the Union; inadequate trans-European service infrastructures (notably for payments and delivery); lack of coherence between the legal and taxation systems of the member countries of the EU, 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 irrational but fuelled by uncertainty. Moreover, if these obstacles were to be removed and their directly related costs thus eliminated,


23Introduction

this could have a cumulative effect by allaying fears and lead to trade development, enabling those who have the potential to forget their doubts and join in.

In the meantime, obstacles and reluctance have an impact on the 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 is propping up other proven solutions. International develop-ment must also face linguistic and cultural differences, espe-cially when they have “hard” legal protection: for example with the protection of personal data and intellectual property legis-lation.

As far as delivery logistics are concerned, there is currently more choice since the emergence of the “fast delivery” stan-dard, the arrival of new players in e-logistics and a number of leading e-retailers who provide logistics on behalf of third par-ties. But trans-European delivery is still experiencing problems operating in certain countries or regions, as well as the addi-tional costs of border crossing and even difficulties with return management. Again, consumer preference and habits remain part of cultural diversity.

The payment sector is also experiencing unrest because the 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 include Internet service and telecommunications operators. Everyday payment methods differ greatly from one country to another, which further complicates the equation.

Enough choice, but not spoilt for choice: in these three key segments of e-commerce, the market is expecting a number of consolidations to safeguard competition and innovation and to limit the effects of heterogeneity across individual countries.

Consolidation is taking shape with the increased presence of platforms and other marketplaces capable of managing all or part of the e-commerce supply chain, working for players (and



not only small businesses) who lack the necessary resources or who prefer to concentrate their efforts on their own business. Without question, these platforms, which in most cases are operated by companies that are used to international trade, are the key means of access to cross-border retail.

Multichannel

Multichannel is another source of diversity, which initially described the combination of marketing communication channels before being extended to include retail distribution, thus breaking the dichotomy between e-commerce specialists or pure players (home delivery) and bricks and mortar retail shops. Now everything claims to be multichannel (including payment systems). Apart from a few niches, e-retailers who plan to develop their activity now need to substitute the “and” for “or”, and even more if they want to sell their products abroad, where they risk facing other options. But consumer choice is limited by economic “sustainability”, and environ-mental issues in the case of delivery. This results in another form of consolidation where multichannel is implemented over time, like the different phases of a strategy: a pure player waits until reaching a certain critical mass before setting up a physical form of business in the targeted country, indepen-dently or by building partnerships with local retailers.

Regulations and policies

The public, European and national authorities and even regional and local authorities (for delivery in urban areas for example) intervene in our area of business by implementing standards and introducing policies and specific programmes which sometimes concern public facilities.

At European level, e-commerce has a directive (2001) and since March 2011 a special parliamentary work group. Apart from the single market, online retail is also concerned by con-


25Introduction

sumer rights and intellectual property, as well as by standards and policies relating to environmental protection. E-commerce is also part of the European Digital Agenda (A digital strategy for Europe).

Without a doubt, it is within this domain that we have seen the least significant progress since 2008, an illustration of this is the stagnation of cross-border online purchases. But things should start to change in the years to come, since politicians have reiterated their intention to develop trans-European trade 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 accept both a longer period for withdrawal and goods returns, pay-ment of the shipping fees for returns as well as the obligation to deliver orders from any member country of the EU. The text in question has since been amended, but what is important to remember is that certain forms of rigid, “top-down” regulations, which apply the strictest standards to all involved, without taking 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 book is divided into five parts.

The first part focuses on characterizing the European Union, by pointing out the most significant elements from a point of view of identifying the barriers and opportunities for cross- border e-commerce.

The second part presents the state of play with statistics regarding e-commerce in Europe, without concealing the diffi-culties experienced when drafting such an evaluation as even the

3. From our point of view, the regulation of e-commerce and more generally any public, national and European 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.



definition of e-commerce has become quite uncertain, but also by providing full details regarding the various growth factors.

The third part focuses on cross-border e-commerce, with an analysis and in particular an evaluation of the obstacles to its development.

The fourth part sets out the different arguments in favour of development of cross-border e-commerce and explores the means of 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 sector and 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 different cases that will enable us to go into detail with practical illustra-tions.

***




29

Chapter I

Europe: Diversity inthe single market

Theoretically, Internet frees commerce of a number of constraints relating to space and time and which have an

impact on traditional commercial activities. For a European e-retailer, his catchment area would be extended if not to the entire 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 only political, but also linguistic, cultural, legal and tax-related. Once a transaction has been carried out online, delivery of the goods needs to overcome all of the territorial constraints that are part of our physical world. And what applies to the world also applies to Europe, even if this continent has been involved in the political process of unification for over fifty years.

Europe of diversities

Where exactly does it stand, this “European Union”? For an e-retailer setting out on his adventures to cross these borders, it represents a huge patchwork of different territories.

Europe, even if we consider it in its reduced Union status, is in truth still a political, cultural, economical and legal object that remains poorly identified.



We are having difficulty finding a definition for it, even the fundamental texts of the Union first of all explain what it is not, and only then do they underline its singularity: “In reality, it is unique […] a new international legal order”. It is neither a federal 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 EUROPE

If 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”) preserve their 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 a position to do if each country were to act individually”.

Two rulings of the European Court of Justice describe the community as a “new international 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 its geography, even its more recent history if we remember that the iron curtain only fell towards the end of the 20th century. Major countries such as Turkey (a candidate), Russia (not a candi-date) as well as Ukraine are not members of the Union, but they nevertheless can claim to have a totally European dimension. These close relatives are still very much keen on building trade,


31Chapter I/Europe: Diversity in the single market

notably electronic forms of trade with a Union which itself is made up of a number Member States that differ in size, popu-lation and wealth.

u Linguistic diversityThe Union officially recognizes twenty-three languages, some of which, like English are spoken by large populations outside of Europe. This represents an advantage in terms of influence and also as far as business is concerned. This is without forgetting a number of different dialects that are spoken too. Conversely, a number of immigrant communities that have settled in Europe speak other languages, including Russian in the Baltic countries and Turkish in Cyprus for example.

DO YOU SPEAK ESPERANTO?

The ECSC which represented the foundations of the Union, was already made up of four official languages (French, German, Italian and Dutch). The EU now totals twenty-three languages and three different alphabets. Three languages (English, French and German) are both official languages and working languages (EC Regulation No. 1/1958 of 6 October 1958).

The Grin report on The Teaching of Foreign Languages as a Public Policy in 2005 indicated that the adoption of a single language (not English but Esperanto) would represent a saving of 25 billion Euros per year (17% of the budget). But why are we unable to consider that being multilingual adds value and creates jobs in the field of intercultural 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 new perspectives for non-European worlds: French for the Maghreb countries, Africa or Canada, Spanish for Latin America, Slavic languages for Russia…

For English, the case is a little different: apart from the fact that is advantageous for companies doing business between the United Kingdom and the United States (this is clear to



see if we check the data relating to British e-commerce, which is heavily boosted by its exchanges with the USA), English is becoming the lingua franca of Europe, notably in the Scandinavian countries or Holland, and it also has a tendency to be widely used across European institutions despite the official use of multiple languages.

But language does not totally dominate cultural diversity, even within a same linguistic area. The Germans from the North and from the East, the Bavarians, the Austrians, the Swiss Germans, in theory speak more or less the same language but their culture remains different nonetheless. This is confirmed by spe-cialists in localization of e-website marketing, who pay attention to 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-website is linked to the buyer’s country.

Cultural differences are particularly noticeable in the choice of means of payment: for bank cards, for example, and according to the European Central Bank, the annual number of transactions per inhabitant varied in 2009 from one to four between the most frequent users (Sweden, Denmark, United Kingdom) and users in the countries that use it least (Italy and Germany).

Although European institutions have been particularly care-ful in avoiding mentioning their religious origins, we cannot overlook the cultural particularities (and indeed different eating habits) that exist because of the various religions in Europe that are predominantly Christian, but without forgetting the native form of European Islam or Islam resulting from immigration. It is therefore clear that countries also show great diversity in their national public opinion on essential issues such as the use of nuclear energy: 20% of French and British people are against it, compared to 28% of the Spanish population, 55% of Germans and 58% of Italians (survey carried out after the Fukushima disaster in Japan in July 2011).

But all of these differences can also be a driving force for intercultural forms of trade, with demand for “identity related”



u Economic heterogeneityEuropean heterogeneity is also clear to see when we consider the economical situation, and in particular since Europe was opened up to the former Soviet bloc nations. Although the EU pro-duces almost 30% of GDP, significant inequalities exist between the nations, and even more so across the regions: when compa-ring average European wealth (100 index), the wealthiest region represented 343 and the poorest 28.

There are also great differences in population count, between Germany (80 million inhabitants) and Malta (400,000). For a

EUROPE IN THE GLOBAL VILLAGE

The graphic designer Toby Ng had a great idea of imagining and presenting on his website* a global village with a population of 100 inhabitants representing today’s world. The village has a population of 70 adults and 30 children with 52 women. 17 inhabitants speak Chinese and only 9 speak English (with 3 French speakers). 14 do not know how to read, only one person has pursued some form of higher education and 48 people have no freedom of expression with the risk of a prison sentence of worse. 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. In addition, 30 villagers use the Internet and this number increases every year.

* http://www.toby-ng.com/graphic-design/the-world-of-100/.

products or services, or even a form of cross-border retail aimed at serving various communities scattered across the continent.

Even where the 500 million Europeans Union nationals are divided into twenty seven nations, where they populate three hundred and fifty regions and countless numbers of commu-nities that are native or otherwise, this does not include the diasporas living on a number of archipelagos scattered across the European Union (the British Iles, for example), who could find digital networks extremely beneficial for their cultural, economi-cal and even political development.



total of 27 countries, 4 have a population of over 60 million inhabitants (53% of the total) and 7 have a population of over 20 million 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, which represented 28.2% of world GDP. In terms of purchasing power parity it exceeds that of the United States (25% of world GDP), but the population is much higher, which means that in GDP per capita (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 its different nations and regions. If we now refer to the Eurostat data produced by INSEE1, again for 2009, it does indeed indi-cate that the GDP per capita in purchasing power standards varied between 41% and 268% of the average (EU27=100).

If we leave aside Luxembourg (index of 268), the wealthier nations are between 15 and 35% above the average: Ireland, Netherlands, Austria, Sweden, Denmark, United Kingdom and Germany. 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% below the EU27 average. Finally, the poorest countries (other Eastern European and Baltic states) are between 30% and 60% below the average. If we take a look at the different regions, the differences are staggering, with 343% for Inner London and 28% for a poor region 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: the formerly industrialized North and West Europe; Southern Europe; 1. Figures are expressed in purchasing power standards (PPS), in other words a common currency that eliminates the differences in price levels between countries thus allowing meaningful comparisons to be made. 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).



a Europe consisting of the majority of the former Soviet bloc countries – not to mention the Balkan countries of Europe, and without even including the major countries that are not part of the EU.

These different groups also overlap quite well with the levels of development in the digital economy. The result is a recurring statistical profile for Europe: an average of the 27 (which France is often close to) and strong dispersion, the extremities are in general the Scandinavian countries on one side and the countries of South East Europe on the other, and added to all this, there are one or several exceptions depending on the cases measured. The reduction of these gaps is a sign of the progress made in European construction.

u Digital dividesWhat is the state of play with European digital technology? In terms of community infrastructures and personally owned and therefore services and applications for online business in particu-lar, the European Internet is just as diverse.

Half way through 2010, the EU represented 340 million Internet users (two thirds of the population), who are unevenly distributed, but to a lesser extent in comparison to other eco-nomic and social indicators: 65 million Internet users in Germany but still the same 22.5 in Poland2. But if over 40% of European consumers purchase goods and services online, the rate increase to 70% in Scandinavia, compared to less than 25% in Spain or in Poland.

A Eurostat3 survey showed that in 2011, 58% of Internet users in the EU’s 27 countries ordered goods or services via the Internet in the twelve months preceding the survey. The largest propor-tions are observed in the United Kingdom (82%), in Denmark and 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).



u Digital Europe in a global contextWhat 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.

Internet users who purchased goods or services via the Internet in the previous twelve months, 2009-2011 (% of Internet users).

Source: Eurostat

90

80

70

60

50

40

30

20

10

0UK 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

2009 2010 2011



(almost 4 billion inhabitants), slightly more than 900 million users (24% penetration rate). Finally, Africa (1 billion inhabit-ants) only has a penetration rate of 11% (120 million Internet users).

All of this information is to be taken with all due care, but we can underline what is of direct interest to European e-com-merce if we adopt an optimistic point of view: a potential 340 million customers, and much more if we take into account those countries that are not included within the EU but which remain more or less accessible. In total Internet user terms, it indicates that Russia (60 million users) comes between Germany (65 million) and the United Kingdom (51.5 million); Turkey (35 million, is between France (44.6 million) and Italy (30 million); Ukraine (15.3 million), is between Poland (22.5 million) and the Netherlands (15 million).

Top 10 Internet Countries in Europe – March 31, 2011

Basis: 476,213,935 estimated Internet Users in Europe in Q1 2010Copyright © 2011, Miniwatts Marketing Group

Source: Internet World Stats – www.internetworldstats.com/stats4.htm

0 5 10 20 7015 25 30 35 40 45 50 55 60 65 75

Germany

Russia

United Kingdom

France

Turkey

Italy

Spain

Poland

Ukraine

Netherlands

65,1

59,7

51,4

45,2

35,0

30,0

29,1

22,5

15,3

14,9



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 50 and 80% of the population (compared to 75% in the United States). The average percentage of regular users was 66% for people aged 16 and over. During the period ranging from 2003 to 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 Internet is now less than 25% (but still 45% in Italy, 39% in Poland and 36% 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 users probably do not represent the most profitable segment for e-com-merce, which already “creamed off ” the best elements of the population, or those who are both the most motivated and the most “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 Europe have high speed access (we use the conditional tense here due to uncertainty regarding the high speed threshold). In 2009, only 30% of inhabitants had a high speed Internet connection, but this indicator does not mention use in the workplace, which is not negligible. At the top of the hit parade, as usual, we have the Scandinavian countries, Switzerland and the Benelux countries; Germany, France and the United Kingdom are slightly above the average, 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.



More significantly, and according to the telecommunications regulator7 this time, at the beginning of 2011, 22 million French homes had high speed or super-speed Internet access (fixed net-works, mainly ADSL), but only 520,000 homes had super-speed connection on a cable network or a fibre optic network – and here is where we encounter the first warning sign alerting us of the risk for Europe of lagging behind in this field.

u SmartphonesDesktops, laptops, tablets, mobile phones and smartphones, not to mention games consoles or media players: the increasing num-ber of ways in which Internet can be accessed also increases the opportunities users have to access services and online commerce. 7. Source: ARCEP, quoted in the newspaper Les Échos, 3 June 2011.

SMARTPHONE: THE ITALIANS ARE LEADING THE RACE

According to ComScore, there were 60.8 million smartphones in Europe in 2010. If we study the percentage of smartphones compared to all mobile phones, the ranking of 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 and for all mobile phone types combined! But this enthusiasm is not rewarded: with few specific services available, they make relatively little use of their smartphones for the applications 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 Internet with their smartphone (Ofcom 2010), to the extent that the percentage of Internet connections per mobile is increasing rapidly: already 33 % on average, between 44% (Sweden) and 14% (Poland) and France as so often is situated around the average figure with 37%. The 3G connection rate is also another area where great differences exist. 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 trend is clear, and the number of smartphones should exceed 50% of the European mobile phone market in 2012 or 2013, despite a slow-down in growth.



We know that the smartphone, this universal terminal, is con-sidered as a powerful means of developing e-commerce with the arrival of m-commerce, which combines online purchases which have shifted from the desktop computer to the mobile phone, purchases of applications or digital content from the App Store or 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, and some would say that it is revolutionary. This has even given rise to new terminology, such as s-commerce (S as in social) and even f-commerce (F as in Facebook), and we will soon have t-commerce (T as in Twitter)... Retailers who use Facebook and Twitter must adopt these codes. This socialization of retail is already replacing a certain amount of commercial waffling, replaced by the liberty of expression we associate with social networking.

Their impact on cross-border trade is more problematic. Although we readily stress the global, planetary and borderless nature of the Internet, it is worth noting that communities which are united by social networks are much localized – with a few possible exceptions represented by diasporas scattered across Europe. This does not mean that social networks have little impact on cross-border issues, but it does mean that e-commerce can have a tendency to relocate them as long 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, online banking services (record levels in Sweden and Norway) and for a wide range of shopping services, which does not necessarily always result in an actual online purchase. 8. For more information on this, refer to: Services mobiles, la rupture (in French), ACSEL (2011).



We have already seen that the estimations concerning the percentage of Europeans who purchase online can be variable according to their sources and the country used for the sample, and that they represent roughly 40%, with the usual differences between the group with over 50% (again Scandinavia, the United Kingdom, the Netherlands and Germany) and the other group of those with 20% and less (Eastern Europe and also Spain and Italy).

But we should also underline the fact that although European e-commerce exceeds that of the United States in volume and in growth rate, Internet remains broadly influenced (if not domina-ted) by the United States. Not only in terms of technology, where such names as Google and Microsoft speak for themselves, but also as far as innovation in online applications is concerned and here we have the illustration of the social network phenomena with Facebook.

On top of all that, all across Europe, Amazon and eBay top the leader board for the highest number of website visitors. Even in the payment market, the duopoly Visa-MasterCard dominates the market, during which time the Monnet European payment card project is struggling to emerge9.

The single market and Union policies

The 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 three approaches 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 of rights groups with a broad variety of interests, and who no longer hesitate 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



As far as implementation of standards is concerned, politics determine what action is taken by institutions, legislation and other regulatory frameworks that economical activity is subject to. Generally speaking, legislation “toughens” somewhat, it har-monizes, clarifies and proscribes standards which often originate from ideologies, customs and other cultural idiosyncrasies. The latter 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 the different national legislations adopted by the Member States which remain sovereign. Although the EU may sometimes need to abolish some standards (those which include some form of dis-crimination between the nationals of Member States), more often its role is to harmonize them. Note that this is directly relevant here, because harmonization may be implemented top-down (by generalizing the strictest standard) or bottom-up, by imposing a minimum obligation which if the Member States can “toughen” if necessary, as long as they do not introduce some form of discrimination by doing so.

Overall, the EU creates many more standards than it abolishes. The “noblest” ones (Europe sees itself as the cradle of human rights, for example) inspire and provide the framework for the most practical applications such as the protection of personal information in the digital world. In the areas of interest to us, the different Member States’ national legislation on consumer rights are in the process of being harmonized and they are expe-riencing difficulties. There are also all sorts of customs and practices 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 community regulations which are totally and directly applied, are “trans-posed” into the different national legislations.

The creation and implementation of standards requires great amounts of work, including the need to carry out preliminary studies to analyze the impact of a planned directive and count-



less reports and assessments. It has brought along with it a special category of technocrats known as “eurocrats”: the European public service has approximately 35,000 civil servants and staff, which represents a large workforce but this is nothing compared to the numbers of national civil servants.

Without caricaturing the situation, it is worth remembering that, in addition to the European Commission, which embo-dies eurocracy, the legislative process involves the European Parliament, whose members are elected by direct universal suffrage. It also involves the Council of Ministers, represen-ting the Member States whose democratic nature is a condition for membership within the EU. It is our sincere hope that the deployment of online social networks, that is having the great political 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 lot of response from consulting firms and in particular plenty of lobbying activity by defence groups representing corporate inter-ests and other social groups, including consumers represented by the BEUC (The European Consumers’ Organisation). It should be noted that it introduced the “digital rights” that are part of consumer contracts in its eight priority activity areas.

Whether or not we agree with it, it represents the reality that the players involved in online retail have to deal with, even if they 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 free circulation of goods and services, capital and also people. No financial penalties (such as customs duty) and no discrimination between 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 relocates shops and thus provides open access to consumers wherever they live. Otherwise, today’s BtoC cross-border purchases are mainly



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).

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).

>>



The impact of information technologies on the economy and society far outweighs the 5% of European GDP that is indicated by statistics. But the contribution made by cross-border e-com-merce in the development of the digital economy in Europe is one of its most visible aspects.

A Europe which is primarily cross-border?

As we have already seen, European construction involves the coordination of all levels of governing authorities surrounded by borders that do not just simply represent a separation of Member States. Between the global level (the EU) and local level, and as well 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 cultural borders: Eastern Europe, a Europe of religions and the major lin-guistic areas.

There is no doubt that progress made in the construction of Europe has reduced borders, or it has at least made it easier to cross them. But the troubled history of part of the continent has 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 regional movements who aspire to a form of political existence could also end up creating new divisions or reviving old ones. The finan-cial crisis has revived an old division between the countries of the North and the West, who are considered economically “vir-tuous”, and the South, whose initials are unfortunately used for the term PIGS (Portugal, Ireland, Greece, and Spain) and who are judged less virtuous, while the Members who joined recently from Eastern Europe (CEE) are moving towards achieving the standards required by the EU…

But what is more surprising are the new borders that the EU institutions themselves create so to speak, the most famous of these being the Euro zone with its common currency for the seventeen Member States. In the same way, immigration creates



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.

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.

>>



The strongest indicator of this progress is that the least econo-mically developed countries and regions are catching up by capitalizing on their competitive advantage in order to be part of the EU economy. Generally speaking, these countries and regions appear 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 a crossing 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 than borderless for some time to come.

In particular, this logic governs commercial activities because from the retailer and consumer point of view, the “good borders” are those that can be crossed, without any dissuasive costs or financial penalties. The EU itself has no firmly established exter-nal limits simply because it is still enlarging its membership. As far as online commerce is concerned, Turkey, Ukraine or Russia are major market targets that are also moving towards entry to the digital economy. The situation is the same for countries and regions in the rest of the world which form linguistic and cultural communities with a number of Member States.

The EU, Europe in the broader sense, the rest of the world: are they all steps leading to cross-border e-retail?

The European model

It might appear as a paradox today if we extol the virtues of the European Union. The crisis threatening its single currency, the difficulties encountered when trying to save the Member States who were most harshly hit, and more generally, the “debt cri-sis”, are today a cruel reminder of the shortcomings of Europe with its twenty-seven Members. It is also experiencing difficul-ties dealing with emerging countries or the United States, who



although also extremely weakened, still play a dominating role in technologies that are redefining the economy and society with their new applications. And finally, Europe is faced with a population decline accompanied by population aging, never has the term “Old Continent” been more applicable to Europe than it is today.

It is true that this decline is counterbalanced by waves of immigration that the EU is struggling to control and this just goes to show how attractive a target it is. Can it still be consid-ered a model? The economist Jeffrey D. Sachs12, believes that it can:

“The European Union (EU) is the best model to be able to understand how neighbours bogged down in long standing conflicts have succeeded in joining forces for their mutual ben-efit[…] The EU has created a peace zone in an area which was once the scene of endless battles. It has provided the institu-tional framework required for the reunification of Western and Eastern Europe. It has created regional infrastructures. The sin-gle market has played a key role in turning Europe into one of the most prosperous regions on the planet. And the EU is a global leader in the field of environmental sustainability. It is for these reasons that the EU represents a unique model for other regions that are caught up in conflicts and experiencing the effects of poverty, insufficient infrastructures and the envi-ronmental crisis”.

The EU thus continues to play an important role on the world stage, from the confines of this Europe so unsure of who does 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 languages spoken in the EU. The majority of them owe part of their newly acquired wealth to the fact that Europe is their main customer. And the extreme diversity which endangers European 12. 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 the Millennium Development Goals.



unification is also proof of the multiple advantages that it has at its disposal.

The retailers, and in particular all players involved in online retail, need to fully integrate these European char-acteristics wherever the opportunities (single mar-ket, single or common currency as well as the different European and trans-European linguistic and cultural areas) come up against obstacles (cultural, monetary, legislative and tax differences). Especially when, from another point of view and depending on the situation and the strategic intelligence of the players, the obstacles are converted into opportunities.

And, for the most ambitious, perhaps Europe is only the first step on the road to conquering world markets.

***




51

Chapter II

The contrasting landscapeof European e-commerce

What is the current state of European e-commerce and what direction is it expected to take? This is not an easy

question to answer, especially when the definitions of these two 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. Certain reports only cover some of these countries, whereas others do quite the opposite (even the same ones) and include countries which are not members, such as Switzerland and Norway, or even Russia, Ukraine and Turkey.

This is the case for two recent studies which we will provide as examples to illustrate, among other things, the current state of play in European e-commerce: the CRR-Kelkoo study1, already mentioned as well as the IMRWorld2 study on global e-com-merce in 2010. The aforementioned concerns 13 European countries3, less than half of the total number of EU countries, but which account for 80% of its population and the major share of its GDP; but it includes two countries that are not 1. 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, forecasts and country profiles of leading and upcoming countries in the world. April 2011 (last updated: 11 May 2011). 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 of thirteen member countries that we will discuss later.



members, Switzerland and Norway. The IMRWorld study presents a slightly different sample of European countries: 23 countries, including Switzerland and Norway, but also Russia and Turkey.

This variation in the geographical scope of the studies is awkward, but paradoxically it may be useful if we look at it from a “cross-border4” point of view. Our attention is also drawn to EU border countries such as Turkey and Russia (one is candidate and the other not) where specifically the volume of e-commerce business is currently quite low but it is expected to grow strongly. We would therefore be wrong to underestimate cross-border expansion to countries included in the “broader definition of Europe” and further afield.

The multiple facets of e-commerce

What is more problematic is the difficulty we have in reaching agreement on the definition of e-commerce. It is increasingly difficult 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 between online and bricks and mortar retail, or “traditional” retail as it is currently referred to.

How can we separate online retail when the majority of com-mercial transactions involve an Internet connection at one point or another in the transaction, without the whole transaction necessarily being carried out on line?

In the most advanced countries, it is estimated that over three quarters of consumers plan their purchases using the Internet in some way or another. In contrast, some people prefer to see the products in store before making their purchase on line. This diversity is even clearer when it comes to delivery services, to the home or to a pick-up location, and also sometimes at the ware-house or store, or even at a drive-in, where a customer orders

4. To simplify presentation in this book, we will refer to the term “cross-border” to represent “commerce or cross-border e-commerce”.


53Chapter II/The contrasting landscape of European e-commerce

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).

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.

>>



All in all, the different approaches to European e-commerce are not essential to our subject, which aims less at providing an exact, precise and single representation (supposing that this project is still 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 that the notion of “distance” shopping remains relevant for cross- border e-commerce as a channel offering a buyer the option to shop in a retail store outside of the native country.

We are going to analyse the study carried out in January 2012 by the Centre for Retail Research (CRR) in Nottingham (United Kingdom) for Kelkoo. The sample of thirteen countries is quite representative of European e-commerce, but does not assess the inequalities so much as it includes only one Eastern European country (although it is the biggest one), and that is Poland.

Based on the data collected and analyzed by the CRR, on research reports and government publications (including those of the 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 of merchandise (including software) and any related services such as shipment or installation, purchased over the Internet by the end consumer. The study was carried out in accordance with the GEMS standards, but excludes online spending on the following goods and services: tickets, travel, cars, fuel, pornography, insu-rance and financial services.

Another important source is the IMRWorld study on global e-commerce in 2010, and what is interesting about this study, apart from the fact that it relates to world commerce, is that it 7. Online retailing deals with the sale or transfer of merchandise (including software) and any related services 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 the Netherlands. The report deals with retail spending (as defined in the new standard) and excludes online spending on tickets, travel, cars, fuel, pornography, insurance and financial services. We believe this is the first study to be published that is fully consistent with the new standard.



systematically provides information about each of the countries studied (country profile). This enables us to get a better understanding of e-commerce (state of play and perspectives) in an economic and social context. This study is also based on the GEMS standard, but this one includes spending on travel and ticket sales.

We will mention other sources to complete the picture, pro-vide details or present information from a different angle.

European market estimations

E-commerce is growing very strongly in Europe, with a volume of business close to 200 billion Euros, which represents more than a third of world e-commerce: 36%, whereas the GDP of the EU accounts for 28% of world GDP. Roughly 40% of European consumers have purchased over the Internet in 2010 whereas they accounted for less than 30% in 2006.

According to CRR-Kelkoo, online sales in Europe in 2011 reached 200.5 billion Euros for the 13 European countries. Three countries represent more than 70% of the total: the United Kingdom (59.4 billion), Germany (45 billion) and France (38.6 billion).

Behind these three leaders, two groups generated a volume of business of almost 10 billion Euros, they were Italy and the Benelux countries. Spain represents 9.3 billion, followed by Sweden (5.7) and Switzerland (5.4).

At the “bottom of the table”, we clearly need to distinguish between the smaller highly developed countries (Scandinavia) and Poland, where the turnover of e-commerce (4.5 billion for a population of 38 million inhabitants) is lower than that of Norway (4.8 billion for a population eight times smaller).

We can therefore observe a “gap” between the three leaders and the major countries that follow them, representing a ratio of 3 to 1 in online sales volume. Obviously, Poland and also Italy and Spain are all mission countries for local and foreign e-retailers, as clearly indicated by the rates of growth observed.



u The American benchmarkTo get a better idea of how European e-commerce stands, it is always useful to compare it with that of the United States. To do so, the CRR refers to a Forrester Research study carried out in 2010.

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 the United States), they are very close in terms of GDP. The tur-nover for e-commerce in the United States totalled 173 billion Dollars, compared to 172 billion Euros for the thirteen European countries.

More significantly, European e-commerce is growing fas-ter: after a drop to 2% in 2009, growth increased to 11.4% in 2010 in the United States (20% in Europe), but Forrester consi-ders that 2010 is a peak in American e-commerce, which should fall back to growth rates below 10% to reach an amount of 250 billion Dollars in 2014.

BRITISH 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 1,773

Dollars per household. This is not to be seen as a record, as the British do better (1.4

times better) than their American cousins and 1.8 times better than the French. The

British 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 the

French and 631 Dollars for the Americans. The same goes for food purchases, where

the amounts totalled 228, 79 and 33 Dollars respectively. There is one reason for

this: 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).



Finally, the share of the online retail market in overall retail (another notion which requires discussion8) is above that of the United States in several countries. The 12% of market share observed in the United Kingdom in 2011 (CRR-Kelkoo) may be considered as a medium term objective for the entire EU, with an average of a little under 7.8% in 2011.

The IMRWorld study on world e-commerce in 2010 provides turnover 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 North America and Canada) compared to a little less than 175 billion for Europe (almost equal therefore in absolute value in 2009). They confirm that Europe would have exceeded the United States, but only in 2010 and to a lesser extent than in the observations of the CRR-Kelkoo study (IMRWorld estimation: 214 billion in Europe compared to only 200 billion in the United States). But the 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.

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.

In billions of Euros, except for the United States (billions of Dollars)



What is interesting about this study is that it provides figures for the rest of the world thus enabling comparisons between major geographical regions. Global e-commerce should almost double 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 United Kingdom, and among the emerging countries, we have Brazil which can be compared with Italy or Canada. As for China, its rate 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 RMB in 2010, compared to 128 billion in 2008. While less than 10% of the population had purchased online in 2006, this figure had risen to 23% in 2010 and is expected to almost double by 2015 to total 44%, thus reducing the gap with the United States and other developed markets.

China had 457 million Internet users in 2010, 52% of them located in urban areas compared to only 18% in rural areas. As for the number of online shoppers, they are expected to increase from 145 million in 2010 to 329 million in 2015! By way of

10. The World’s Next E-Commerce Superpower: Navigating China’s Unique Online-Shopping Ecosystem. The Boston Consulting Group (2011).

2009 BillionEuros

2010 (estim.) Billion Euros

Growth 2010/2009

World 478 590 23%

Europe 175 214 22%

North America 185 211 14%

Asia-Pacific 93 130 40%Source : CRR-Kelkoo, 2011



comparison, this growth represents on average the equivalent of the Canadian market, which each year would be combined.

Finally, the BCG estimates that online purchases currently represent 3.3% of retail and should total 7.4% in 2015. China should therefore become the biggest world market for e-com-merce by 2015, with an average growth of 33% per annum.

Differences and adjustments

As is the case for the majority of indicators used to report EU eco-nomic characteristics, averages are relatively insignificant because the gaps between the Member States are so large. Still, they are not completely staggering. If three countries (the United Kingdom, Germany and France) account, as we have already seen, for over 70% of the total, they owe that to the size of their economy, even if 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 (not in the EU) and Poland is striking, but the growth rate is much stronger in Poland.

Yet still, the leading countries do not seem to have reached the level of maturity that would bring the rate of growth to less than two figures, contrary to what is expected in the United States from 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 much more in the United Kingdom (12%), in Germany (9.0%), in Switzerland (8.7%) and in Denmark (8.0%). These last figures are important because they probably indicate a reserve for growth for the countries that are less mature with regard to e-commerce, such as France with 7.3 % in 2011, but with an expected rate of 8.7% for 2012.

On the other hand, the major countries which are “lagging behind”, including Poland and Spain have a rate of around 3%,



which is four times less than the United Kingdom and 1.3% for Italy.

Considering the differences in growth between e-commerce and retail in general, online European retail should still gain ano-ther point in market share in 2012 at 8.8%, which would place it on a par with the United States.

u E-consumer demographyFrom a demographic point of view, and as already discussed in the 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 group of those with 20% and less (roughly fifteen EU countries inclu-ding Spain, Italy and Poland), with France situated close to the average, 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 over the Internet and this is also the percentage observed for France. But they represent 70% in Norway, 66% in the United Kingdom and 56% in Germany, compared to 23% in Poland and in Spain and only 12% in Italy.

u Four Europes in e-commerceIn this very diverse set, we see some groups of countries that are relatively homogeneous, enabling us to divide Europe into four e-commerce groups.

The first group includes the Scandinavian countries, Norway (outside the EU), Sweden and Denmark, which have high performance communications infrastructures and make great use of the Internet in general. E-commerce accounts for a large market share there, but less so than in Germany and the United Kingdom. The CRR-Kelkoo study suggests, with caution that this anomaly may be due to the fact that local players have limited capacity to achieve economies of scale because of the size of their markets.



The second group includes the United Kingdom and Germany, whose telecommunications infrastructures are less efficient and which have a lower user rate than the first group, but they account for a larger market share in e-commerce.

The third group includes Switzerland (outside the EU), France and the Benelux countries with average market shares, lower pro-portion of regular Internet users and less high speed access (except that the Benelux countries can boast an Internet user rate similar to that of the Nordic countries!).

Finally, the fourth group (Spain, Italy and Poland) which we refer to as mission countries for e-retail. In this case there are fewer regular Internet users and high speed access is less avai-lable with a low market share in e-commerce… but they do have genuine reserves for growth in cross-border e-commerce.

It should be noted that, according to these criteria, the United States would be categorised in the second group.

u What do Europeans purchase online?Not all Europeans shop for the same goods on line and the reasons for these differences seem to have something to do with the level of maturity of the market. This is only a simple expla-nation since the sector breakdown is also subject to debate. The media products are at the top of the shopping list, followed by clothing and consumer electronics11. Online grocery shopping is a good indicator of how mature a market is, as is the case with the United Kingdom.

According to the CRR-Kelkoo study, which we should remem-ber excludes travel and ticket sales, average yearly spending is estimated at 429 Euros per person in Europe for 2010. It is com-forting to see that this evaluation is consistent with the total turnover figure of 200 billion Euros for the EU.

11. According to a study by the European Union (February 2009), the three most widely purchased product 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 came household 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.



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CRR–Kelkoo Online trends 2012

More significantly, spending per consumer was estimated at 1,221 Euros in 2011. Based on this criterion, the biggest spen-ders (over 1,400 Euros per year) are the Danish, the British, the Norwegians, the Swiss and the French.

It is interesting to note that the travel sector, holiday bookings and ticket sales represent a large share of e-commerce in the broa-der sense, both in terms of the percentage of Internet users who shop on line and relative to basket value: the exclusion of these purchases represents a relatively large reduction in the average basket value.

u GrowthWe are aware of the rather gloomy forecasts for the European economy, both in terms of demand (consumption) and supply (corporate financing). But the majority of online e-commerce growth engines should nevertheless continue to drive activity in 2012 and in the medium term.

In any event, the CRR-Kelkoo study estimates growth in European e-commerce between 2008 and 2011 at over 40% and expressed in current prices. This is explained by the fact that common 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 more advanced 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 should achieve a result of 232 billion Euros. In terms of growth, the champions in 2011 were Poland (33.5%), but also Italy (24.8%), France (24%), followed by Spain (19%). However, countries which were already high up in the e-commerce leaders table, like Sweden, Norway or the Benelux continue to achieve rates over 20%. Quite logically, the two leaders in absolute value are the United Kingdom and Germany and they complete the market table, with approximately 15% all the same.





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If we take a look at one sector in particular, we can see that clothing (including shoes, very popular) should progress in 2011 by almost 40% in France (22.5% in the United Kingdom), and electronics and telecommunications goods by 25.8% (12.7% in the United Kingdom). Another area which is also developing is that of grocery supplies in the United Kingdom (17.5% com-pared to only 13.5% in France for an average growth of 24% in e-commerce).

E-commerce remains a high growth sector in Europe, and even in countries which have the highest levels of maturity and where the overall economy is sluggish. A perfect illustration is the case of the United Kingdom, which leads e-commerce across Europe: the rate of growth in e-commerce is slowing down but it remains several times higher than that of general retail.

But although European e-commerce has every reason to feel optimistic, it still remains confined within national strongholds, where everybody stays at home. This is the case mainly for the bigger 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 at the e-commerce leader table, in each of the major European countries, we can see that the only sites that are foreign to the countries observed are two or three subsidiaries of American cor-porations.

Again, this goes to show that the United States holds the keys to technological environments and service platforms (via Google, Microsoft and now Apple or Facebook to name but a few) and they also represent the only truly “global” players in e-commerce with 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.

***




67

Chapter III

The issues at stake in cross-border e-commerce

The e-commerce landscape is particularly dynamic and the amount of cross-border trade is significant, but it

still 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 the EU, retail is by its very nature a “proximity” or local form of commerce. Before e-commerce came along, cross-border retail spending was mainly limited to travellers, tourists and business travellers. This still remains partly true today.

Data concerning European cross-border e-retail is quite rare and reflects the fact that it still remains quite marginal. However, the already mentioned Eurobarometer study1 indicates that the average amount of European cross-border spending on goods or services is around 7%. The most active customers are in Luxembourg (39%) and Malta (38%). Conversely, we observe less than 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, Analytical Report (2011).



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 landscapeA 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).

The diagram below provides a good illustration of the differences in cross-border spending behaviour across European countries.

EU Cross-Border Internet purchases

100

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MT

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EL

EU 2

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ES PT CZ IT HU

BG PL RO

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 another EU country answers by country.

Source: Eurobarometer, 2011 report


69Chapter III/The issues at stake in cross-border e-commerce

to 33% whereas that of cross-border remains stable at around 7%. Among the consumers surveyed, a third of them do however plan to use the Internet to search for a cheaper or better quality product. 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 of consumers towards cross-border retail indicates that 37% of European consumers made a purchase on the Internet in the twelve months that preceded the survey4. Between 2006 and 2010, the percentage of e-buyers increased by 10 points, from 27 to 37% (drawing closer to the aim of the Digital Agenda: 50% of online buyers in 2015). More significantly, one Internet user out of two purchased goods or services on line. But only 7% of consumers purchased on line in other EU countries, and 4% 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, but not 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 each of the major countries: the only foreign sites in the countries observed (2 or 3 among the first 10 or 15) are American. The two most visited sites in France in the first quarter of 2011 are in fact, according to the data from Médiamétrie/FEVAD, eBay and Amazon.

It is no surprise that the share of cross-border varies greatly from one country to another. Logically, the small countries rely more 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 population surveyed is a sample of citizens aged 15 and over and residents of the 27 Member States (totalling more than 25,000 people). 4. It is interesting to note that a similar number of people purchased a product by mail order or from a catalogue (21 and 13% respectively, and 34% in total).



In the United Kingdom, although happy to purchase goods abroad, Internet users give preference to the United States. This would suggest that criteria such as language, culture or politics weigh heavily in the equation.

u Motivations and reservationsThe same Eurobarometer provides further interesting informa-tion about consumers’ motivations and reservations: the lack of information and the lack of trust, which obviously results directly from it, are decisive factors for 60% of those questioned. Here again, we have illustrations of the differences between Europe’s Members: the most wary consumers are the Greek and the British; the most trusting ones are the Dutch and especially the Irish and the people of Luxembourg. Generally speaking, con-sumers place more trust in local retailers than foreign ones (there are some exceptions): 48% on average, but with scores much higher in the Scandinavian countries or in the United Kingdom (64%!). However, there were some 4% of consumers questioned who trust foreign retailers more.

We must also note that 57% of people questioned expressed fears about encountering difficulties in the event of an incident occurring and 47% were concerned about possible problems with delivery.

It is reasonable to suspect that the real obstacles that lead to consumer reluctance are much less justified, they result from doubts both expressed by purchasers and retailers alike. Indeed, if 18% of distance shoppers who made domestic purchases declared an incident (very often relating to delivery times) and if 6% claimed that they did not receive their order at all, these same 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 more inclined if they received more information and were better advised. This is quite promising, as the proportion of those who claim that they know where to find the information and advice (a third of the sample) increased by 11% compared to 2008.



Men in the age range 25-39 with a high level of education, and likely to be the best informed, are also the least wary.

To put things into perspective, prior experience in shopping on foreign websites is crucial: if only 14% of the e-shoppers questioned expect to spend more on cross-border shopping in the years to come, the percentage rises to 35% for those who already have previous experience.

A further study carried out by Forrester Research5 publishes declarative data that is much more optimistic. Admittedly, the data was collected from e-shoppers (and not consumers) of seven countries. In response to the question “Have you already ordered products from a website in a different country to the one you live in?” 29% responded affirmatively. The percentage is much higher in the United Kingdom and in Sweden (40%) and the Netherlands, but lower in Italy, France (23%) and especially in Germany (21%). This serves as confirmation: the British 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 half of the retailers in the twenty seven European countries were sell-ing online, but only a fifth (21%) were selling and promoting across-borders. The majority only operated in one or two coun-tries, and only 4% traded regularly with ten EU countries or more. As a result, 55% of Europeans had never come across any advertising by retailers from other European countries.

At the end of August 2010, LeGuide.com and the E-commerce Fair in Paris carried out an online survey involving e-retailers in the LeGuide.com database. This survey was designed to assess their opinions on export: seen as a “reality” right from the time the site was created by 41%, a step already taken for 7%; a step to 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 of 5,399 European e-shoppers in seven countries.



u The cross-border “mystery shopper” experimentGeneral difficulties can provide an explanation for customer reluctance. This notion was proved by a “mystery shopper” experiment carried out for the European Union by the firm YouGovPsychonomics6, 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 products that were strictly comparable and divided into 8 categories. At first, the shoppers performed a search for offers that combined national and cross-border goods by using search engines that were set for use in their home country and by searching on price comparison websites. We specify here that the idea was not to draw up a list presenting the offers available, but to find a way of obtaining a diverse sample which would include a large number of cross-border products. The search phase took place between the end of February and the beginning of March 2009; testing of 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 between cross-border offers and domestic offers depends strongly on the countries. Logically, the major countries have a much larger proportion of domestic offers than the smaller ones. For some countries and products, only cross-border offers are available – but this rate is extremely low in Germany (8%) and in the United Kingdom (6%) [France: 28%].

What can we learn from this survey?First lesson: cross-border offers are quite easily accessible, but 82% of shops were only accessible in a single language, 11% in two languages, 3% in three language, 2% in four and 2% in five or more.

6. Mystery Shopping Evaluation of Cross-Border E-commerce in the EU. On Behalf of the EU. Health and Consumers Directorate-General. Final Report, 20 October 2009.



Second lesson: cross-border offers propose better prices, with offers 10% cheaper in more than 50% of product searches (net price including delivery fees). The English are least likely to find these 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 card failed to be completed. This is mostly certainly the most star-tling piece of information, as this failure rate varies from country to country, ranging from 75% (Romania, Bulgaria) to less than 50% in Spain and Austria. As is often the case, France is within the 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 the real failure rate (in the event of a real order) would quite certainly have 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 rate compared to 93% for a domestic sale), when proceeding to pay or when entering the delivery address.

Delivery at the shopper’s home address was possible for 98% of domestic sales, but only for 48% of cross-border sales, for the latter 44% of orders included extra delivery fees: the average domestic delivery fee was 8 Euros compared to 16 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 with regard to the size and weight of the products concerned. The easiest products to deliver being books, films and music, as well as household products. Austria, France and Spain are the countries with the best delivery service, the Eastern European countries fare less well.

The study points out other important issues regarding the availability of multilingual information (or lack of it) on the terms and conditions of sale, complete price details, currency conversion, the right to withdraw, guarantees, after sales service, protection of personal data and eligibility for promotional offers.



These are all possible obstacles for cross-border trade. Be that as it may, this experiment clearly shows that European cross-border e-retail is anything but “seamless”.

Perspectives for cross-border e-commerce

In a European economy that is somewhat sluggish, e-commerce which is growing strongly is a notable exception. Some would object that online retail is only progressing at the expense of tra-ditional retail, and cross-border at the expense of local retail. Both of these assertions may be proven wrong. Cross-border e-com-merce is beneficial to consumers as well as to retailers, notably because it reduces costs. On top of that, it plays an essential role in digitalizing services, and more generally it helps the deployment of both the digital economy and society. Boosted by European diversity, it leads to the completion of the single market, speeds up integration by multiplying the number of exchanges and by modernizing business structures in the countries that have made less progress in this respect. More generally speaking, we will see e-commerce, in its own way, build Europe by stimulating the cre-ation of efficient trans-European infrastructures and multiplying exchanges between EU citizens.

All in all, the factors that argue in favour of development and internationalisation of online commerce in Europe are not only business related. They are also strategic, economic, industrial and even social and political. Cross-border e-commerce also contrib-utes to spreading European influence across the world as well as helping 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 border crossing. In both cases, the macroeconomic effect is insignificant so to speak as e-commerce grows at the expense of traditional retail, and cross-border trade at the expense of local trade. A zero-sum game, you could argue.



It makes less and less sense to oppose traditional and “elec-tronic” commerce. E-commerce is growing not to the detriment of traditional retail but to the detriment of retailers who are recal-citrant to the changes that digital technology is introducing into retail. In other words, electronic commerce is not a competitor fighting traditional commerce. It irrigates retail in general and does so in increasingly different ways, which is part of the reason for the term “multichannel”.

In other terms still, digital technology provides even more room 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 exporters and domestic players, it creates a new dynamic environment for exchanges 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 importance and 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 European countries are lagging behind in terms of GDP, structures, tech-nology infrastructures and applications can also be considered as a potential for growth when the catching up process gets underway, as is the case for Poland for example. In this per-spective, the countries of Southern Europe and even more so Eastern Europe are all mission countries with growth reserves for e-commerce.

It is not surprising that the “technological profile” of a country is also a decisive factor. This profile includes its regional technical infrastructures (their density and performance) and the equip-ment belonging to its inhabitants as well as the services available to consumers and retailers. In other terms: How strong the dig-ital economy and society are in the country where online com-merce is developing.



The level of market maturity would appear to also influence fluctuations in GDP on rates of growth in e-commerce: experi-ence gained by Internet users has a cumulative impact on online shopping. 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 a list of the most favourable elements for e-commerce growth by comparing the populations referenced by each element with the average for all adult Internet users. The most decisive elements were:

– 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. But

the most important criteria of all seems to be … experience of a previous purchase (in the three months before).

Above a certain level which they seem to have reached in the United States, maturity quite logically leads to a slight drop in growth rate. But we can see that this slowdown can in fact be delayed by the opening of other domestic markets that are less developed but with heightened growth. This is the reason why the 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 greater or lesser degree in each of the EU countries and promise an increase in the number of buyers and their frequency of pur-chase. It is true to say that this may indeed have a negative impact on the average basket value.

At the same time, this population is better informed and is harder to satisfy and volatile, but is more likely to cross-borders to shop.

7. Forrester, European Technographics Benchmark Survey (Q2 2009), based on a sample of 4,386 Euro-pean online shoppers.



Other types of technical infrastructures and related services required by e-commerce, these include logistics and payment sys-tems. As far as delivery is concerned, the majority of European countries are well equipped, but crossing borders always involves some kind of obstacle, at least an increase in tariffs. Given the countries’ heterogeneities, this also affects payment systems.

Retailers with established experience in distance selling have an advantage when it comes to online commerce, especially as it is normally involves existing logistics and postal services and a wide use of various payment systems. In this respect, some European nations 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 less established tradition.

u The border, a place for exchangeOther geographical, sociological or psychological factors are much harder to pin down but they can also have a clear impact on how often and for which variety of applications the Internet is used, with the relative cumulative effects(one application leads to another, including online shopping). This is one of the reasons why the long, boring winters are often given as an explanation for the appetite of the Scandinavians for the Internet. On the one side of Europe, as we saw in the previous chapter, the Italians are great fans of new technology, of mobiles and smartphones in par-ticular, even before applications, accessible by these systems, are even 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 the customs that go with it (but not always) would make life easier for European e-retailers, but it is not so. It is however the case for 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 which came together over a half century ago, the differences across Europe are putting up some stout resistance: French touch, British



way, deutsche Qualität or all’italiana are just some illustrations of Europe’s different specialties.

But, compared to all of the barriers that exist elsewhere in the world, the border is a focal point for exchanges that increase when the social groups they separate have strong personalities and are open to exchanges with others, or indeed when they have an appetite for such differences. This is the reason why European diversity may be the source of new dynamic growth in e-com-merce, much greater in Europe than in the United States, where the differences, although they are very much visible, doubtless have less impact on trade between States or regions.

Not forgetting the diasporas living in different communities scattered across Europe (in the British Iles, for example), and migrant populations (at least 40 million legal immigrants in the European Union). Many of them have preserved contact with their 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 of them 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 retail in general, the size of the country has an influence on the fre-quency of visits to websites in other countries. It may appear a trivial remark but it is important in the case of Europe, which has a high number of small countries. Small countries, especially if they are wealthy, are more likely to participate in cross-border shopping. This is not only because the domestic production of some types of goods is limited, whilst the consumer profile of its inhabitants is similar to that of larger countries, but also because local players only gain minor benefit from economies of scale, compared to countries with huge retail markets.

Obviously if we idealize things, e-commerce provides people in small countries with access to the same shops that people in bigger countries can shop in.



u Gains for consumers and retailers alikeCross-border serves the common interests of consumers and retailers. When asked their opinion, the reports we have studied highlight the fact that both parties would apparently seem eager to develop international trade.

For consumers, online cross-border retail relocates retail stores: a product which is simply not distributed in a certain country is made 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 players involved 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 experience and skills.

Of course, the ways in which consumers and retailers allocate these gains can also differ: price reductions expected by some, preservation of margins for others and in the end competition usually arbitrates.

For retailers, the main advantage of cross-border is the oppor-tunity to expand their catchment area. The hope is that there will be a quantitative impact (selling the same article to a greater num-ber of people) as well as diversification and its qualitative effects depending on the specificities of domestic and regional markets. It also enables better market risk management, as the economic situation is never exactly the same throughout the EU, and this is also another ripple effect of European diversity. On top of that, cross-border opens access to the Russian, Ukrainian and Turkish markets, which represent this “new frontier” between European e-commerce and the global market.

Crossing borders requires a number of activities, skills and 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



platforms that will be needed by e-retailers and small busi-nesses in particular.

Finally, the international market will teach e-retailers the skills and provide them with the know-how they need by providing them with the opportunities to “take on” new consumer popu-lations and find solutions to the difficulties they encounter. The resources they acquire can be just as easily applied to their domes-tic markets as they can be used to cross new targeted borders, this time outside of Europe.

u Welcome to the competitionThe fact remains that, from the e-retailer’s microeconomic point of 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 local e-retailers can be intense: for example we know how competitive the British market is.

Generally speaking, the structure of European e-commerce has favoured the emergence and consolidated the position of power-ful national players who are difficult to match, particularly because they have perfect marketing knowledge of the market and its particularities.

Challenged from outside the borders, the same retailer will be faced with new competitors to his market, which was more or less protected until that point. But e-commerce still has a long way to go to reach the mature situation whereby protectionist measures could be required. In competition, “what does not kill me, makes me stronger”: the energy and intelligence required to cross or avoid obstacles are the strengths needed by European players to face competitors arriving from America or Asia to con-quer Europe. It is a question of choosing to pay premium prices to acquire strong national players or attempting to confront them.

Between threats and opportunities, in any event, cross-border retail creates more room for retailers to deploy their strategy and tactics.



E-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 harmonized legal framework. There is something else that many e-retailers are also hoping for and that is a harmonized taxation system. However if we highlight the “lack of Europe” too often, we tend to forget that e-commerce has its own way of building Europe. We could even dare suggest that the approach adopted by the players involved in online retail across Europe, this “variable geometry” Europe of archipelagos, could inspire a pragmatic approach that would be positive for future European integration.

In any event, the European institutions have clearly added cross-border online commerce to their political projects which include a number of ambitious objectives. As we already pointed out, the Digital Agenda indicates that 50% of Europeans are expected 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 the single retail market is now complete.

But there are numerous other efforts being made by e-com-merce with regard to its participation in European construction and they are just as important.

u Speeding up the modernisation and integration of less advanced countriesWhen it involves local players, based on a multichannel approach for example, cross-border trade accelerates the modernisation of structures and business practices in all countries. It can stimu-late European integration by speeding up the catching up process involving the least advanced Member States.

E-commerce data collected in these countries prove that things are already well underway. In the advanced countries where the rate of growth is lower, we noted that open international trade delays the slowdown brought about when their home market reaches maturity.



u Contributing to digitisation of the European economyE-commerce creates and fosters activities, investments, expertise and practices that go far beyond the retail sector. The e-services involved in the different segments of the e-commerce supply chain play a role in converting the service sector to Europe’s digital economy. It enables awareness of the general public towards digital practices.

Finally, cross-border e-commerce can contribute to the opti-misation of the economical and environmental effects of freight systems, across all territorial levels, including transcontinental distribution 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 have been tested in various urban zones can be adapted to the rest of the EU (with a multichannel version of deliveries), this could further optimise logistics processes. It is interesting to note that

HOW THE INTERNET BOOSTS THE ENTIRE ECONOMY

In March 2011, the consulting firm McKinsey published a report on the impact of the Internet on the French economy*. The report reveals that the Internet created 1.15 million 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 creations in 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 other related 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 to measure a country’s Internet connectivity, the quality of its infrastructures, the uses of Internet by its corporations, administrations and private individuals, as well as the 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 the United Kingdom (4th).

* McKinsey/Google study, Impact of the Internet on the French economy. Taken from an article by Maxime Amiot, “How the Internet has boosted French growth”, in the newspaper Les Échos, 9 March 2011.



optimising logistics also concerns the consumer himself, who represents an “ideal logistics manager” involved at all levels of the distribution chain right up to final delivery.

u The emergence of European multichannel distributionMultichannel initially described the combination of marketing communication channels (different channels are used to com-municate with the consumer) before it was extended to involve logistics (several delivery methods), before blurring the dis-tinction between pure player e-commerce (home delivery) and “bricks and mortar” retail represented by traditional stores. But now everything, including payment systems, claims to be multi-channel. It is even going beyond simple generalisation, there are also hybrid versions as it were, to the extent that some commen-tators talk of networked distribution, just like the Internet, where data 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, orders goods before picking them up (click & collect) or, vice-versa, asks for 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 from a warehouse or store, provides the perfect illustration of how creatively consumers can combine supply and demand to find the 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. In the 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 form of e-commerce. On the supply side, increasing numbers of retail stores now sell goods online and try to offer their range of goods via the two channels. It is equally important to follow changes in customer demand as it is to build and maintain customer loyalty.



Apart from in a few niche sectors, e-retailers will need to replace the term “and” by “or”. Or go even further if they plan to sell their products abroad, where they will need to provide additional delivery options. The range of alternative solutions expands to take into account local particularities that may impact either delivery, means of payment, marketing issues or customer relationships.

But the variety of choice available to consumers is restricted by 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, like the different phases of a strategy: a pure player waits until reach-ing a certain critical mass before setting up a physical form of business in the targeted country, independently or by building partnerships with local retailers. Conversely, a brand adopts the Internet sales channel and ensures that it has a physical network of dealers that are either their own or that operate as franchises or simple 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, and some would say that it is revolutionary. This has even given rise to new terminology, such as s-commerce (S as in social) and even f-commerce (F as in Facebook), and we will soon have t-commerce (T as in Twitter)... Retailers who use Facebook and Twitter must adopt these codes. This retail socialization is already replacing a certain amount of commercial waffling, replaced by the liberty of expression we associate with social networking.

Their impact on cross-border trade is more problematic. Although we readily stress the global, planetary and borderless nature of the Internet, it is worth noting that communities which are united by social networks are extremely localized – with a few possible exceptions represented by diasporas scattered across Europe. This does not mean that social networks have little



impact on cross-border issues, but it does mean that e-commerce can have a tendency to relocate them as long as they are outward looking, with all kinds of specific affinities, including consumer tastes and preferences.

u Spreading European influenceOnline commerce enables international exchanges of goods and especially services and develops European sociability. It is a form of 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 for new opportunities offered by social networks, these networks for their part, have a tendency to socialize the retail sector. Although they do have their own interests in mind, the efforts made by ser-vice providers to overcome the language barrier and any other problems arising from cultural differences are an example for others. The extended catchment area is thus transformed into an area devoted to broader social exchange.

The aim of EU policy is to spread European influence across the world. Once more, e-commerce has a role to play: with a focus on countries that are not (yet) Members of the EU such as Norway or Switzerland; countries bordering the EU (Turkey, Ukraine, Russia…); linguistic communities outside Europe and well beyond.

European e-commerce will be better armed to tackle other borders that are more difficult to cross, like China and Asia in particular.

Within a digital economy which remains dominated to a large extent by American players, only the European dimension can help players to emerge, players who have the required scope and broader influence than the current domestic leaders.

The digital economy is gradually transforming every sector of the economy, which means that players who have already mas-tered what brought about such transformations have a reasonable chance of controlling these sectors. This is the mainstream effect applied to the economy. Just to provide an example, the arrival



of Apple or Google in telephony, books, the press or television speaks 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 “major crossroads”.

ComScore carried out a very enlightening study8 on the leaders of cross-border e-commerce which confirms this diag-nostic. In terms of world audience, Amazon and eBay are way ahead of the rest of the field. Among the ten strongest, there are seven American sites, two Asian sites (Alibaba.com is third and Rakuten fifth), two European sites (Otto Group is ninth and the 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 as three major retail distributors or distances sellers: two Europeans and Wal-Mart.

What is more important is that Amazon, Apple and to a lesser extent eBay and Hewlett-Packard are the only players that are genuinely cross-border, in that their audience is evenly spread out between North America, Europe and Asia-Pacific. eBay does even 8. Visitation View of Leading Global Retail and Auction Sites, ComScore (August 2011).

“The United States on its own accounts for almost half of the sector’s profits. They

generate huge amounts of revenue by controlling content delivery platforms, like

Google or Facebook. They profit from the fertile technology sector (Silicon Valley),

abundant capital funds and a unified market. Contrary to what has sometimes been

suggested, 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 heart

of retail, like Amazon, and they lack critical mass. Behind the scenes at international

summit meetings, it is the real issue at stake in the economic war that has just

begun”. Philippe Escande,“Internet adulthood”, Les Échos, 25 May 2011.



better in Europe (46.9%) than in North America (34.6%). The others are “localised”, in that more than 75% of their audience can be found in their continent of origin.

The costs of fragmentation: the flaws of cross-border

From 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 consolidated further, 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 list of the shortcomings according to the major segments that are characteristic of e-commerce transactions: technical infrastruc-tures for Internet access, online payment, marketing and logis-tics. Obviously, these elements ultimately result in surcharges due to fragmentation, but it is essential to understand how they func-tion on a European scale and what part they currently play in overall market dynamics.

u High speed access infrastructuresEurope is well equipped with technical infrastructures, even if they are unevenly distributed among the Member countries of the EU. But although the percentage of high speed connections is even higher in Europe than in the United States, the outlook is less reassuring for super-speed connection which as we know, is an accelerator of online commerce, at least for some types of products and services.

According to the OECD, the number of high speed Internet subscribers (DSL, cable and fibre/LAN) is 37% in the Netherlands and in Denmark, and around 30% in the United Kingdom, Germany, Switzerland, Norway and France. The rates are much lower, around 10%, in the Czech Republic, Slovakia and Poland. In the United States, the rate is 26%. But according



to the European Commission (2010), only 1.2% of European homes have access to super-speed Internet, compared to 4.8% in the 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 half of them at a rate of 100 MB in… 2012. It seems out of reach. In the United Kingdom, the government is expecting the sector to develop with fibre optic technology offering up to 100 Mbps for 85 to 90% of the country by 2015. But how many other European countries will follow?

Even in terms of high speed access, real performances observed are often lower than the rates stipulated. Demand for capacity will explode in the coming years, increased by the use of telecom-munications for television, video and other social media. The use of video on the Internet accounted for 1.26 PB (petabyte) in 2008, 2.97 in 2009, and it could rise to 24 in 20149. Recently, the CEO of France Telecom even mentioned a possible “collapse of the network”10.

It should be noted, however, that the European Commission just announced that it has reserved 9.2 billion Euros for the financing of super-speed network infrastructures in Europe in its 2014-2020 Agenda, and the European Investment Bank is going to participate in the financing.

This public sector contribution will be of great benefit, as the lack of bandwidth also poses a threat to “Internet neutrality”, in other words equal treatment for all uses (and users), in favour of a system based on costs for differentiated levels of Internet access.

u Payments11

The 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 an 9. Source: CISCO, June 2010. 10. Les Échos, 25 May 2011. 11. This paragraph was written under the editorship of Patrick Flamant (Ogone).



online shop is not enough to be able to export. A relationship needs to be created with customers, to create a genuine close-ness. Once you have eliminated the language element preventing cross-border sales, by translating all pages containing the terms and conditions of sale, payment security, delivery times and so on, you need to ensure that the means of payment proposed on the website do indeed correspond to the habits and particulari-ties of each country. This will enable you to optimise the rate of sales conversion when exporting.

However, multiplying the means of payment can weigh the system down and be very complicated to manage. It is important to calculate the business interests at stake (forecast of increase in turnover for each new means of payment), the costs (implementation, commissions and administrative tasks) and the risks (notably that of fraud) involved with each means of payment must therefore be carried out before a decision is taken. As far as payment is concerned, the e-retailer will need to combine method, rigour and knowledge of his market to ensure business success abroad.

Overview of the different means of paymentGenerally linked to a country’s history and culture, payment habits differ greatly from one European country to another. Initially, e-commerce attempted to transpose payment solutions used for proximity retail. However, today the French or the English prefer to make payments using their bank card, the Dutch prefer to pay their online purchases by bank transfer, and the Germans by direct debit…

However, e-commerce has matured and new payment solu-tions that are specific to online transactions, are beginning to emerge, aimed at improving user experience by smoothing the purchase 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 mobile commerce (m-commerce).



It is absolutely essential to determine which payment solu-tions exist in each country beforehand and to fully understand the implications of any choice that is made.

Different payment arrangementsImmediate debit as soon as the order is confirmed, debit when the goods are delivered, payment in several instalments free of charge, online credit? Depending on the products or services sold, the payment and refund arrangements differ. Some means of payment are incompatibles with some economic models, and in some cases with local regulations. For example, the sale of digital 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 economic models relying on the flexibility provided by bank cards may experience difficulties exporting their goods in countries where the “card culture”is weak…

Different means of paymentA method of payment enables a retailer to trigger a transfer of funds in order to confirm an act of purchase. These operations are carried out by approved third parties (operator, payment institution, bank, acquirers…) under conditions that entail the responsibility of the different parties involved in the transac-tion.

• Payment cards: the general term “payment cards” also includes a whole range of solutions: domestic cards enabling pay-ment for goods only in the consumers’ home country (Cartes Bancaires (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 used in 65% of transactions, with large differences according to the countries: 86% in the United Kingdom, 82% in France, 58% in Italy and 25% in Germany.



• Online transfers: a voluntary act on the part of the customer (the payment order is issued via the bank to the retailer’s bank), the advantage of the bank transfer is that it is non-repudiable. In its present form, the majority of the time it is not adapted to online business 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 online business, and which represents 60 to 70% of online payments.

• Online direct debit: as in the case of transfers, direct debit is a procedure carried out directly between banks. But, in the case of direct debit, the customer authorises the retailer to debit the amount corresponding to his purchase directly from the bank account and can dispute the payment. Direct debit is widely used in Germany with the ELV solution, which represents 50% of online transactions.

Different payment arrangementsTo make shopping a smoother process, e-commerce has gradually brought with it a range of new payment solutions. The majority of them are based on the “classic” means of payment.

• E-wallets: are specific to online commerce, e-wallets that we could also call “PayPal Like”, are very popular due to the fact that they are very simple to use. All the consumer needs to do is open an 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 pay for orders in stores that offer this type of payment by simply entering login and password details. Although e-wallets are very practical, when there are too many of them it can become tedi-ous for the consumer. It leads to widespread duplication of personal 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 specific needs of some consumers. Solutions such as Klarna, Afterpay or even RatePay enable e-retailers to offer this type of payment and at the same time avoid cash flow problems (when the order is



confirmed, their account is credited for the entire basket amount, less the fees).

• Cash payment/prepaid cards: prepaid cards, topped up with cash transfers, enable retailers to sell to buyers without bank accounts or living in countries where cash payment represents the major method of payment.

• Online credit: available for online purchases for the last few years, consumer credit provides further means of improving the rate of sales/visit conversion, notably for purchases of goods with a high face value. However, although some credit companies have branches in several countries across Europe, the conditions gov-erning these payment solutions vary from one country to another.

• Mobile payments: The emergence of smartphones has favoured retail development using this media. It is relatively easy to transpose card payment information to a small screen. Nonetheless, the need to ensure a smooth customer experience is often difficult when it comes to entering bank card infor-mation. To improve conversion rates, numerous initiatives are being 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 even Buyster. The majority of these solutions rely on the payment card system: the latter is used to transfer funds to a user’s “mobile payment” account, or is linked to the m-commerce solution when the user subscribes to the system (the user’s bank account is then debited periodically).

Mixed payment solutions: taking into account the differences between each countryTwenty seven countries in Europe, that means twenty seven ways of buying and therefore just as many ways of paying! An e-retailer will therefore need to take into account the differences between each country and adapt its payment mix to the countries it tar-gets. The list of available payment options can soon become a very long one. Indeed, if France and England have a very strong



“card culture”, this means of payment represents only 25% of online transactions in Germany. On the other hand, the Germans overwhelmingly 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 national means of payment – almost a third of transactions in Portugal are processed with Multibanco (based on the reception of a code and then the payment is delivered via an ATM cash machine) as well as the usual domestic bank cards: Bancontact/MisterCash in Belgium, Cartes Bancaires (CB) in France or even Dankort in Denmark.

There are a number of considerations to be taken into account before multiplying the means of payment offered to customers. The direct or indirect costs involved can weigh very heavy on online store operations and therefore significantly reduce the benefits of a given method of payment.

Multiplying the means of payment and avoiding the stumbling blocksApart from the technical costs involved in the integration of each new 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, from one country to another and/or from one bank to another. If you leave the Euro zone, we strongly advise you to offer pay-ment options in the national currency. Apart from exchange risks that are borne by the merchant, the aforementioned must be equipped 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



a bank account in the country, along with all of the linguistic and administrative constraints that this implies. Solutions such as payment collection services are a way of getting around this problem. Or of reducing its effects, by using the services of an international and multilingual payment operator capable of offering local support to merchants.

• Fraud management: fraud has been increasing for several years now and e-commerce is not immune to this danger. Albeit limited to a relative extent, the risk does exist and must be taken into account. The more means of payment available, the greater the risk. Transactions using certain means of payment are in fact repudiable (or questionable, under certain conditions) as is the case for ELV in Germany or with payment cards.

Well what is best… a risk of fraud or losing customers? Faced with a risk of fraud, different strategies exist and they vary accord-ing to the sector of activity, the type and price of the goods or services sold and the business policy… as well as in which coun-tries the companies sell. Basically, we can say that there are 4 main types of actions:

– integrating the cost of fraud in the prices of the goods or services;

– 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 merchant and/or the end customer. In each case, only an in-depth study of the specific characteristics of each e-retailer and the economic issues at stake can provide the right balance to handle the risk of fraud and avoid losing customers. Whatever the solution, merchants will need to change their protection strategy and adapt to the techniques and methods of fraudsters who are ever more creative.

• Managing returns and reimbursements: accepting product returns and reimbursing dissatisfied customers is part and parcel



of all forms of commerce. By automating such procedures, con-siderable productivity gains can be achieved, but not all means of payment offer the “click and reimburse” functionality on the management interface. This concept must be taken into account when selecting any new means of payment.

• Bank reconciliation and complex administrative proce-dures: by multiplying the number of available payment methods and price quotations, merchants will also be complicating their accounts (each payment system will need to be consolidated and bank reconciliation needs to be carried out and so on). Not to mention the impact of some payment methods in terms of cash flow when payments are only “really” cashed several weeks after the purchase took place. Of course it is not an impossible task but it is an additional aspect to be taken into account. However, the impact is greatly reduced when the retailer uses an integrated payment management platform.

• Future payment practices: although it is already very firmly established as part of our everyday spending habits, e-commerce is still developing rapidly. New channels are emerging, includ-ing mobile retail, or even social networks. The retailer needs to ensure the availability of enough room as possible for manoeuvre by transferring operations to a payment platform with open APIs and capable of perfectly integrating any future means of payment that are introduced with these new sales channels.

Creating trust and ensuring a smooth buying experience As far as mixed payment is concerned, it is impossible for us to imagine a single model: it is up to each retailer to create an own “ideal” solution according to relevant business strategy (customer acquisition or customer loyalty), the geographical markets and product ranges. The aim will be to optimise conversion rates without increasing handling costs too much and with the risk of fraud 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 are familiar with and which they trust. With this in mind, some



payment methods inspire trust: it is not even a question of using them, the simple fact that they are available on payment screens is enough. This is the case for PayPal for example which is particularly important if you are targeting the American or Anglo-Saxon markets.

Finally, it is worth noting that the mixed payment solution is a “living process” that evolves over time to adapt to tech-nological modifications and customer needs in the different markets involved. The e-merchant has to keep close watch on new developments and new payment solutions in his market in order to 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, but there are also legal obstacles too. In particular, each country has a different approach to the protection of privacy and the use of personal data for commercial purposes. The possibility of using the same terms and conditions of sale applicable to all European countries can still be difficult for e-retailers and this is one area which provides a practical illustration of the importance of har-monising European regulations.

Conversely, marketing service providers know how each individual markets works and can help organise campaigns at European level. This is especially the case for e-mailing: the group Come&Stay is a European digital agency specialising in online acquisition and loyalty strategies. It offers its technical expertise and knowledge of different consumer profiles in many different countries. Brands can also organise European cam-paigns instead of simply targeting national customers.

Leading players in search marketing such as Google, makes it easier to customize advertisements for each country and there-fore centralise international campaign management. Search engines such as Kelkoo, LeGuide.com or Twenga adapt price comparisons according to cultural preferences, tastes and holiday calendars, etc.



Despite these tools, there is still quite a steep learning curve when starting up in international e-marketing and many e-retailers will confess that with each new country you need to redefine best business practices while bearing in mind that what works in one country may not necessarily work in another. There is nothing like past experience and we therefore recommend that you refer to the Testimonial section of this book for more infor-mation.

u LogisticsAs far as delivery logistics are concerned, there is now a wider choice with the gradual arrival of the “Fast delivery” standard that has been adopted by e-commerce players and new entrants to the 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 of third parties. Other players, including wholesalers or central pur-chasing bodies, could also enter the market with new services and benefit from the development of e-commerce to adapt their range of services to the BtoC market.

But trans-European delivery is still experiencing problems operating in certain countries or regions, with different levels of efficiency between postal services and the extra costs of bor-der crossing. There are even difficulties with “return goods” and related costs. Here again, differences in legislation and delivery services are combined with contrasting consumer behaviours from country to country. Germany is well known for having the highest return rates for distance selling, and this requirement partly explains why the traditional players are at the top of the leader table in e-commerce.

Unlike the United States, Europe does not have a single postal service capable of covering the entire continent like the USPS, and even less so a postal monopoly, which is still the case in the United States. Unfortunately, the American exam-ple is not such a good one as the USPS is currently battling to avoid bankruptcy.



In addition, a lack of services is not a general problem across Europe. So there are no real difficulties in BtoB and nor are there in express deliveries – and that is without a monopoly. In the first case (BtoB), the problem is solved by volumes and a system capable of optimising traffic. In the second case (express delivery), 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 marketing strategy 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 the problem of which comes first, the chicken or the egg? For the service to be feasible it requires sufficient volumes… something that is difficult to achieve without a universal service! It is only above a certain volume of trade that freight consolidation can be envisaged based on the BtoB model.

u Fragmentation is costlyUltimately, the difficulties more often than not lead to extra costs for those who adventure into this activity. The costs of fragmen-tation increase considerably with the number of countries that are 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 cost of the fragmentation relating to consumer rights. Administrative costs incurred by the distance seller are 5,526 Euros if the afore-mentioned operates in their own country, compared to 9,276 Euros if they sell in one or two other countries of the EU. Where operations are envisaged in the 27 countries of the EU, simple administrative 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).






101

Chapter IV

Moving towards a cross-border e-commerce ecosystem

Development 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.



E-commerce is not only a technological, economical and social environment, it is also an institutional, legal and political one. Although it was found that over 60% of cross-border e-commerce transactions 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 Union and 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 common law. As a result, the players sometimes fear a lack of common law (the dreaded “legal vacuum”) and sometimes find that regulators have gone too far and risk paralysing activity. We agree with the measures in favour of smoother transactions, but we disapprove of those which lead to an increase in costs (sometimes the same ones!).

In essence, each time a new legislative proposal is submitted (a European directive for example), the reactions on the part of e-retail associations and commentators differ and they share two contradictory beliefs. The immediate reaction is to deplore the obligations and additional costs, seen as a handicap to e-com-merce. But upon further thought, others believe that these measures can streamline the market and raise the level of trust in e-commerce, especially if such measures apply fairly to all retailers 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 legal systems within the European Union are barriers for cross-border trade, even more so when there are also differences in taxation systems. These difficulties are a cause of fear for some (buyers) and reluctance for others (merchants).


103Chapter IV/Moving towards a cross-border e-commerce ecosystem

E-commerce at the heart of the European internal market2

With turnover up by 29.5% between 2008 and 2010 for all European countries, the European online sales sector has grown significantly.

Online retail offers European consumers a number of advan-tages and plans to provide various new possibilities: a broader range of goods and services, improved access to products (Internet is available 24 hours a day), easy comparison of products and services on offer as well as product evaluation systems. In addi-tion, the sectors in which consumers can buy goods and services never stop growing (tourism, household electrical goods, cloth-ing, household goods, cultural products and food).

The Frenchman, Michel Barnier who is currently European Commissioner in charge of the Internal Market and Services has decided that the development of the digital economy will be the major priority during the second half of his term of office which ends in 2014. His department has prepared a major action plan to help speed up the development of the European e-commerce market and build the confidence of players involved in online retail, professionals and consumers. This action plan has four major objectives: creation of an attractive framework for devel-opment of the range of electronic services, improved protection of European consumers, better payment systems and improved e-commerce logistics, and finally a more secure and fairer digital environment.

u Encouraging e-retailer activity in the internal marketLegal fragmentation has been identified by the European Commission as being one of the main obstacles to cross- border trade between the Member States of the European Union for e-retailers and in particular for the smaller structures.

2. This paragraph was written under the editorship of Marc Jamet (Euralia).



For retailers with operations in the European Union, the main regulatory 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 applied vary considerably from one Member State to another, and this creates a complex business environment that is costly and unpre-dictable for companies which plan to sell their products online and across their national borders.

Community institutions have set up a certain number of texts that provide a framework to encourage online intra-Community retail.

The most important Community text regarding the develop-ment of e-commerce in Europe is the Directive on Electronic Commerce3 which was adopted in June 2000. In article 3 relat-ing to the “Internal market” it stipulates that “the Member States may not, for reasons which fall within the fields coordinated by this directive, restrict the free movement of information society ser-vices between Member States4”. This same article 3 also states that information society providers are subject to the legislation of the Member State in which they operate (country of origin rule) and guarantees the necessary legal security required by profession-als to develop their activities beyond their national borders. This country 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 to similar services if they were supplied by other means), make life easier for many companies with activities in e-commerce. In its report on how the e-commerce directive has been implemented, expected at the end of 2011, the Commission emphasises that it does indeed represent a light regulatory framework, but one which is coherent. There are no current plans for in depth review of the directive text. It would seem rather that the Commission 3. Directive 2000/31/CE, of 8 June 2000 regarding some of the legal aspects of e-commerce in the internal market. 4. See article 3.2 of the aforementioned directive.



is seeking to ensure uniform application of the provisions of the directive in the different Member States as well as to strengthen the basic principles and notably with regard to the liability of intermediaries. It will also prepare guidelines for implementa-tion within a specific e-commerce framework of article 20 of the Services directive5. This directive includes a ban on undue dis-crimination with regard to a country of residence or consumer nationality (geographical restrictions on merchant sites).

The Commission nevertheless clearly states that rules govern-ing relations between professionals and consumers are mainly dealt with by national laws. Since there are twenty seven different national policies on consumer rights and much uncertainty about the contracts that apply to distance selling, this situation remains a major obstacle for e-retailers. The new directive on consumer rights6, the provisions of which will take effect from 20137, is a first step towards reducing the differences between national con-sumer laws within the EU, but it does not represent a text that will provide full harmonisation, and therefore it will not elimi-nate all legal uncertainties that hamper companies.

To reduce legal fragmentation, a new solution was proposed by the Commission on 11 October 2011 with the publication of a draft regulation on a common European sales law8. The aim of this 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 with this new European sales law, whether the customers are compa-nies or individual consumers and without having to comply each time with national rulings of countries in which they wish to conduct business. However, this new system would be limited to cross-border contracts between companies (BtoB) and between companies and consumers (BtoC) for the sale of goods and

5. 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 two years of its publication in the OJEU. 8. Draft European regulation on common European sales law – COM(2011)635..



the provision of digital content as well as other related services (repairs and maintenance). In these areas of business, the two parties to a contract would remain free to decide whether or not to opt for European sales law. In the case of BtoC contracts, this choice of strategy must be made with sufficient “awareness and information” by the consumer, backed up by a specific declara-tion and the possibility to withdraw from the contract at no extra cost if some of the information required from the merchant has not been received. The Member States will also have the possi-bility to authorise the use of this optional instrument in contract law for sales that take place at national level. The Commission considers that this new instrument could drastically reduce the costs involved with legal compliance, which are estimated at 10,000 Euros on average for each new export market that a com-pany attempts to enter. For consumers, it offers the advantages of a broader choice of products for sale that can be purchased securely with a high degree of consumer protection. The draft regulation must now be adopted by the two European co-leg-islators, the European Parliament and the EU Council. But, in the same way as the directive on consumer rights, which has just been formally adopted after a three and a half year procedure, the draft regulation, which will represent a large step towards an integration of European consumer rights, will doubtless lead to much opposition.

Apart from the question of contracts and consumption, there is also the problem of the Community taxation laws.

The complex nature of VAT systems is considered to be a huge obstacle to the development of cross-border e-commerce in the EU. 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 their operations to the Member States. They often end up facing com-plex administrative procedures that are costly and sometimes need to be dealt with in several languages. The creation of a single point of contact requested by many Member States but techni-cally complicated to implement, would enable professionals who



sell in several Member States to register, declare and pay VAT in a single Member State. The single point of contact already exists for non-EU electronic service providers and this will be extended in 2015 to providers of electronic services to non-taxable cus-tomers in the EU9. The Commission conducted an extensive consultation process on the future of the VAT system10, and this should lead to a complete overhaul of the intra-Community VAT system, in particular for distance selling of goods and services. The European Parliament has for its part taken a stand with its non-legislative resolution of 14 October 2011, in favour of a VAT system based on the place of consumption, both for goods and services. It also invites the Commission to present a pro-posal to simplify cross-border taxation issues before the end of December 2012.

To make life easier for companies and to ensure coherence at European level, the Commission should also adopt several initia-tives to improve electronic authentication systems. It is preparing a proposal to amend the e-Signature directive11, in the first half of 2012. In conjunction with the European Multi-Stakeholder Forum on Electronic Invoicing created in 2010, the Commission will undertake a number of initiatives in 2012 to develop wide-spread use of e-invoices. On 23 November 2011, it also proposed an amendment of the directive 2003/98/CE12 on the reuse of public 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 and directly 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 2011 9. 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.



by the EU Council and is currently pending publication in the OJEU, is the quality of information given to consumers before signing a contract with a professional. The European directive provides a uniform list of information that the professional must supply to the consumer before signing a contract. Professionals must also clearly mention beforehand whether the buyer or the seller will pay the return delivery charges in the event of with-drawal by the buyer. An estimation of these charges must be supplied if they are chargeable to the buyer. The new directive also 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 the consumer to exercise this right to withdraw from a sale, the directive also introduces a standard withdrawal form which can be used to withdraw from any contract concluded at a distance.

Among other advantages for consumers, the text of the new directive also obliges professionals to indicate the total cost of the product or service purchased, before signature of the contract. It eliminates all hidden costs and charges behind free service offers and also bans pre-checked boxes on websites. In the instance of credit card payments, professionals will no longer have the right to invoice consumers charges over and above what this service provision actually costs them. Professionals who use special tele-phone lines enabling consumers to contact them for information about their contract can no longer invoice these calls at above normal rates.

The European framework for the protection of personal data is also undergoing a complete overhaul. The European Justice Commissioner, Viviane Reding, has indeed suggested that all of the European texts on the protection of personal data be reassessed before the end of 2011. The aim is to ensure both an adequate level of protection for consumers and the harmoni-ous and controlled development of new economic models and challenges represented by activities such as behavioural advertis-ing, social networks and cloud computing… The Commission is



also preparing several sector based initiatives for example within the online games sector, for which it will submit an action plan in 2012 that could well lead to the adoption of European legislation.

Apart from the legal issues, the Commission would also like to strengthen consumer rights regarding information by pro-moting trustworthy comparison websites that are independent and 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 currently underway and will determine if one of the Internet giants is abus-ing its dominant position in this sector. To strengthen consumer rights to information, the European Commission will also edit a new European online guide to consumer rights similar to the eYouGuide published in 2009.

u Improving payment systems and logistics in 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 survey14 mentioned previously and carried out by the independent con-sulting firm YouGovPsychonomics on behalf of the Commission states that 60% of cross-border transactions failed because the retailer could not handle delivery of the product to the buyers’ countries or did not offer the adequate means of cross-border payment.

Beyond the problem of available payment means offered by online sales professionals, it seems that, to this day, consumers do not place enough trust in the security offered by online pay-ments. The Commission has implemented a vast plan to create a single Euro payment zone (SEPA).

14. Mystery Shopping Evaluation of Cross-Border E-Commerce in the EU, YouGovPsychono-mics,(2009).



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.

>>



they will need to address the delicate issue of multilateral inter-change fees for bank card payments. A legislative initiative may be introduced in 2012. In 2012, the European Commission will also 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 of logistics services varies greatly from one country to another for very different reasons: the national habits in terms of distance selling, the size and density of the country, competition and the market and consumer habits… These variations intensify each time a parcel crosses a border. In 2011, the Commission pre-sented the results of a study it commissioned from the British consulting firm FTI Consulting on the postal costs involved in delivering cross-border parcels. As a result of this study, in 2012 the Commission will propose a green paper on the delivery of parcels, and in particular cross-border parcels, which will target the problems encountered by companies and consumers in the area of e-commerce logistics. The green paper will identify the best European practices for direct delivery, delivery at pick-up locations, home delivery at set times, “drive-in” options and even the creation of highly automated parcel pick-up systems. u Civilizing the European digital environmentBy way of a final phase in building consumer and company trust in 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 of appeal in the event of abuse or disputes.

To fight against counterfeiting, child pornography, libel and piracy, the Member States have gradually implemented stron-ger procedures for controlling Internet sites and especially web hosting providers when they are informed of illegal content on their site.

Nonetheless, professionals are faced with uncertainty and increasing legal fragmentation in this area due to increasing



important 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, there are currently no plans to call into question the principles of the Directive on e-commerce, in particular with regard to disclaimers issued by technical intermediaries who host or provide content on the Internet. Instead, the Commission plans to propose a new European text in 2012 which will harmonise notification proce-dures and the removal of illegal content from the Internet. It will also propose an amendment of the directive on intellectual prop-erty rights16. Finally, the Commission is currently analysing an implementation by the Member States of the directive on unfair trade practices17 and the directive on misleading and comparative advertising18, and specifically in e-commerce.

If e-commerce is to be truly efficient and secure, European consumers must be provided with a fast and inexpensive solu-tion when they encounter problems with a good or service they purchased online. This is not the case today, because consumers are not always aware of existing appeal procedures and are often discouraged from using the traditional procedures to lodge an appeal (national courts), because they are complicated, expen-sive and slow. To offer a solution to this situation, the European Commission will propose a legislative text at the end of 2011 which will facilitate the implementation and the widespread availability of alternative systems for the settlement of disputes, and notably an online dispute settlement solution, which can also be applied to cross-border cases.

As part of the action plan set up by the European Commission to develop e-commerce in the European Union, the European legislative framework for e-commerce will need to change greatly in the coming years. We will need to pay particular attention to ensuring that all new initiatives remain coherent, and that their effective 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 the European market. 18. Directive 2006/114/EC of 12 December 2006 on misleading and comparative advertising.



u Is the ecosystem under threat?The overview would not be complete if we did not pay a little attention to what the scaremongers describe as threats to retail in general and to e-commerce in particular.

Their argument is that an economic crisis could see a drop in consumer morale, which will affect spending and retail in gen-eral, with growth prospects often lower than 2% – and still, this assumes no unforeseen events. On top of all that there are doubts about 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 the overall 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 the types of goods they purchase. It is even worth asking oneself if reduced spending would not favour e-commerce, at least because it could offer lower prices than the rest of the retail sector.

E-commerce remains a dynamic sector in Europe, even in the countries that are close to maturity and whose economic situa-tion is far from brilliant. The case of the United Kingdom, which leads e-commerce in Europe, speaks for itself: growth in e-com-merce is slowing but remains several times superior to that of traditional retail.

Others are dreading a new Internet bubble with some compa-nies which have far from delivered the goods finding their shares over valued, whereas many others, and notably e-commerce com-panies, are experiencing difficulties funding their future growth and international development projects. But even if some abuses can justify this fear to a certain extent, the digital economy is no longer a simple promise, as it was at the beginning of the 21st century. It has certainly delivered on its promise since then, and the 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 published in France at the end of March 2011 by ACSEL and Ifop: 93%



of leaders were confident 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 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 if they are small companies. Four directors out of ten claim that their 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 investors for help, compared to only 31% who turn to banks and 5% to the Stock 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 is used to seek further growth and move on to higher levels. If we want to create international champions, this matter requires reflection, with consideration given to not only the weak confidence of French private 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 facing expansion of cross-border e-commerce are the linguistic and cultural differences within the EU, the lacking trans-European service infrastructures (notably for payment and delivery) and the incoherencies between the legislations and the taxation sys-tems of Member countries of the EU. Such problems are also the result of the complex political structure of the EU. These obsta-cles reunited create a feeling of reluctance, that is quite justified in most cases, but which tends to be worsened by uncertainty, both on the part of consumers and merchants. And even where it does not end in the failure of a transaction, it results in extra charges to retailers and ultimately to the consumer.



But each of the three barrier types requires different types of action 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 creates new targets for European e-commerce. We can deal with the costs of diversity (costs of intercultural exchanges) by consider-ing that they finance quality jobs and that they will also affect non European competition. On the other hand, gaps in our ser-vice infrastructures, incoherent standards or taxes and all of the extra costs involved with fragmentation require coherent public and private initiatives.

u Providing access to European e-commerce for small businessesAs previously mentioned, European e-commerce brings together companies 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 rarely even at European and international level. But at the end of the day, does the size of the e-retailer really have a direct impact on how far he can extend his catchment area? If in the future, access can be secured to cross-border services, small and medium-sized businesses will also be able to perform trans-European transactions with distant customers.

It is obviously quite clear that cross-border is adapted to players with European and even global projects, or at least those players capable 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 that are part of the e-commerce value chain (marketing, payment, logistics…), starting with “e-commerce solutions” and right up to all that is necessary to reach the marketplaces, including all systems that improve the transaction process and allow econo-



mies of scale. To help small businesses, we need to eliminate any barriers 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 inside the EU, but also the EU borders that are less distinct between other countries of Europe and indeed the rest of the world.

u Integration platforms We believe that integration platforms play an essential role in the implementation of trans-European e-commerce. Software platforms“E-Commerce solutions” enable businesses to substitute variable costs 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 international transactions, the majority would give up before they even get started.

“All in one” solutions such as Oxatis and Powerboutique, or open source solutions like Prestashop or Magento are integrated service platforms which provide the required functions to get an e-commerce business and marketing strategy up and running. Payment solution platforms such as Ogone also perform the same role and enable businesses to reduce the costs of integrating the various means of payment required for e-commerce develop-ment across Europe. Finally, the marketplaces of e-retailers such as Amazon, Pixmania or Rakuten offer access to a cross-border clientele by offering products and services to customers in several different countries.

Logistics platformsIn the last chapter we detailed the various problems encountered by trans-European delivery logistics, by comparing them with 19. 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 future development projects.



the maturity of BtoB solutions and express delivery, whose tariffs, however are not always adapted to entire e-commerce segments and are reserved to high value baskets.

In any case, two factors can play a leading role here in the development of logistics platforms: the separation between the logistics function and the transport function (several logistics companies use a same transport network for the freight of their respective customers), and a shared information system to ensure optimal overall coordination. These service platforms can belong to a single operator with sufficiently large operations, or a group of operators who have signed agreements or partnerships. Finally we already mentioned the fourth party logistic providers (4PL), who also claim to be integrated service platforms which manage a large number of service providers.

The logistics example clearly shows the importance of coor-dinating continental lines (delivery) with last mile and even last metre delivery everywhere in Europe, to meet the effec-tive demands while at the same time optimising the stock and flow logistics equation from an economic and environmental perspective.

More generally speaking, platforms are necessary for all areas of 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 control the timing of a steady business deployment – this is obviously inconsistent with the obligation to provide services in every EU country. These integration platforms are there to remind us that e-commerce is capable of increasing its processing power at a simply amazing rate. This rate is even ten times greater for the European countries that are in the catching up process.

More subsidiarity and virtuous combinations

To close this chapter, we may suggest two principles on which to base development, but also regulation and governance issues, for



what we have called the European e-commerce ecosystem. The first one is taken from the idea of European construction and the principle of subsidiarity, and the other one is taken from the Internet with the principle of collaboration.

In simple terms, the principle of subsidiarity involves letting each player or group of players perform to their maximum ability rather 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 The French Corporate Governance Institute, observed that “pyra-midal governance forces large companies to introduce formal functioning and monitoring systems that are very costly. By stan-dardizing work, the top-down transmission of power reduces the scope for local creativity which is the main source of value cre-ation…”, not to mention the “cumbersome bureaucratic controls in top-down systems”.

Inversely, when authority is delegated bottom upwards, the “bottom level” enjoys the most legitimacy and a greater degree of freedom to operate. The organisation is therefore similar to a city, this city that Europe has invented, between ancient Greece and medieval Italy. The collaborative social networks provide a new lease of life, whereas economic theory (notably that of Elinor Ostrom, who was awarded the Nobel Prize in Economics in 2009) rediscovers and measures the economic efficiency of asso-ciations.

Subsidiarity appears in the Single European Act (1986): article 5 of the Maastricht Treaty establishing the European Community states:

“The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive com-petence, the Community shall only take action in accordance with the principle of subsidiarity if the objectives of the planned

20. “Renouer avec la subsidiarité comme principe de gouvernance”, (Re-establishing subsidiarity as a principle of governance) (article in French), Le Monde, 13 June 2011.



action cannot be properly achieved by the Member States and that because of the extent of the action or the expected impact the objectives can be better achieved at Community level”. As for the collaborative 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, the collaborative encyclopaedia that has now become a reference, this principle is now being adapted to all kinds of applications: from business applications to the political arena as well as in all areas of social and occupational life, where the abilities of players can be increased by resources available online.

When asked21 about their attitude towards cross-border com-merce and consumer protection, three quarters of the consumers consider that they would be in a better position to defend their rights if they could join together with other consumers who had experienced the same incidents.

On a more positive note, the collaborative principle sug-gests the contribution of “consumer players” who help perfect and even design products and services. This same concept can be found in professional Anglo-Saxon literature with what Ian Jindal suggests should be called “purchandising”. In an editorial featured in the November 2010 edition of the magazine Internet Retailing, 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, a high 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 scope of the first is significantly broadened when the “empowerment” 21. Flash Eurobarometer no. 299, March 2011.



of 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. This notion is also to be found in what is commonly referred to as cloud computing, which the sector’s giants (Google, Microsoft, Apple Hewlett Packard and Amazon to name but a few) are all battling to control with mobile terminals such as smartphones and tablets.

Does the institutional future of Europe also depend on the development of cloud platforms? If such an event were to occur, then you can be quite sure that cross-border e-commerce will have played a leading role in this regard.

In any case, cross-border e-commerce cannot underestimate the importance of redistributing the roles between all parties involved: demand, supply, mediators and those who regulate relationships between them.

THE CLOUD IS BORDERLESS

Joseph Reger, the Technical Director of Fujitsu Technology Solutions, underlines that, in a speech at the Davos World Economic Forum, the EU Commissioner Neelie Kroes emphasized how important it is to establish a European strategy for cloud compu-ting, within the framework of the Digital Agenda. “The European Economic Area is a complex system, which includes a large number of countries and therefore just as many stakeholders. We are faced with the major challenge of building a unified and stable infrastructure». It is necessary to build a unified legislative framework for the management 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 in collaboration with governments and regulatory authorities”.*

* “Les Européens doivent faire cause commune dans le ‘cloud computing’” (The Europeans need to join forces in “cloud computing”) (in French), Les Échos, 26 August 2011.



It is remarkable that the construction of Europe in general and that of the e-commerce ecosystem and its infrastructures with the establishment of trans-European delivery networks are all facing the same challenge. What is even more remarkable is that a com-mon response is being formed with these virtuous combinations that are inspired by the key principles and materialised by infor-mation technologies.

***


122 Cross-border e-commerce/A digital Europe at the heart of trade


123

After 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 points we developed in the previous chapters. But the comments of these leading figures also remind us that, when there are no signposts along the way, you need to be determined, take one step at a time, avoid any obstacles and adjust to the real-ities, even if it sometimes means taking a small step back to make further progress… with plenty of experience, however difficult 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. They also refer to all sectors, and in particular the clothing sector, which seems set to trigger the emergence of “mass” cross-border e-commerce.

The authors would therefore wish to thank all of the players interviewed for accepting to share their experiences in this book, and thus improve the understanding of this subject of ours… which is above all, theirs.

Chapter V

Pioneer figures of cross-border e-commerce



BUBBLEROOM: building a strong brand in Europe

After a career in the fashion media, Svante Tegnér, the founder of Bubbleroom, an online clothing and accessory web shop, adapted his past professional experience in content writing and applied it to online selling.

Launched in 2009, the site is a store and a place for exchange revolving around fashion: blogs and social networks provide the site with fashion related content and the most popular of these are rewarded financially.

Initially opened in Sweden, the site opened a year and a half later in Denmark, Norway, and Switzerland and more recently in Poland. After a year of activity abroad, 60% of sales are now coming from outside of Sweden. To support this development, Bubbleroom was acquired by a Swiss distance selling company which also contributes with its knowledge of distance selling.

For the founder of Bubbleroom, easy international expansion is one of the major advantages of e-commerce.

“When you are already present abroad, opening in new countries is easier, and increasingly so in the light of experience gained, even if, of course, there is always a risk. Compared to traditional retail, this is a huge advantage”. The time required for Bubbleroom to open a 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 like England or Germany are very competitive and expensive to access”, explains Svante Tegnér.

Three steps are essential and can be difficult when building foreign presence:

– adapting to the language and the services in the countries;– building a list of customers who recommend the brand to

launch marketing campaigns on social networks;– generating enough orders to raise the budget required to set

up the business.


125Chapter V/Pioneer figures of cross-border e-commerce

“Our biggest challenge is to build and develop brand awareness abroad, this is why marketing is our biggest project”, adds the CEO of Bubbleroom.

At this stage of its international development, the organisa-tion is managed centrally in Sweden. The Bubbleroom site has a special “ .eu” website dedicated to Europe and delivers to all European countries from its base in Sweden. In the countries where its activity is most developed, orders are sent by ship from Sweden to distribution warehouses and then delivered to the end customer via national postal services. Logistics arrangements are the 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 differences which need to be taken into account: cash on delivery is not always possible in all countries, the rates of instances are higher in Finland, free return delivery and the frequency of returned goods in Germany are all factors to be taken into account in the economic model”.

The founder of Bubbleroom is optimistic about e-commerce prospects in Europe. The future is very promising for those who have 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 a truly European brand. u



DUKAN is now launching its globally successful diet on the Web

Due to the worldwide success of his book, published across 30 countries, translated into 16 languages and read by 25 million people, the Dukan slimming method was adapted for the Web for the first time with the launch of online coaching in France in 2008. “Very quickly, the demand for information on the foods that are part of the Dukan slimming programme was very strong and it led us to develop an additional service to distribute food and diet related 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 web are complementary and the constant exchanges between the two are part of the brand’s global strategy The success of online sales therefore encouraged the brand to set up a multichannel distribution system at physical points of sale. “Part of the pharmaceuticals range was available from June 2010 and this was a phenomenal success”. The company works in partnership with Monoprix and Casino in France to develop its sales 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 reach out to a broader target audience. The online shop currently offers 110 products and roughly fifty different flavours. This amount of choice for slimming diets and the different flavours on offer take into account consumption habits 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 in England that is much less in demand in France!”, according to Philippe Mascaras.



At the same time as the online coaching was expanding abroad, the company opened the associated online shop. This was how they proceeded in Spain, England, the Netherlands, and Italy and in Poland in 2011. Their opening in Germany is planned for the end of the year.

“It took us two months to open in each country. But England and the Netherlands were slow to get started because of strong competition and a number of very specific local differences. In contrast, in Spain and Italy, the sites functioned well right from the start. In countries outside of Europe, the shop is already launched in the United States and China and Brazil are in the planning stages. By the end of 2012, we will be global players. Today, cross-border development depends on the Internet”, according to the Managing Director of Dukan.

When choosing a location, the selection criteria used by Dukan take into consideration the project’s target, in other words the countries where book sales were successful and where a large number of people are very overweight, and of course the size of the local e-commerce sector.

“The differences in terms of consumer behaviour led us to recruit market managers, who are natives of the countries in which we locate our operations. Promotional campaigns, prices and payment systems are different and the market managers can adapt them rapidly due to their excellent knowledge of the local market. In this way, we are able to save time”.

The sites are quite similar across the different countries but each market manager draws up individual product descriptions and adapts the packaging and visuals, which vary according to the countries and pricing strategy.

“Our service provider Orium gave us a degree of flexibility and speed for out internationalisation project by setting up a num-ber of local solutions, while maintaining a global vision of our activity: there is a warehouse in each country for storage purposes, pricing is relatively well adapted and we have a choice of transporters who all offer quality service. They also offer administrative support from time to time if needed by introducing other service providers or possible partners”.



Dukan’s operations are managed centrally in Paris with tax representation in each country. “The advantage of e-commerce is that we can manage all of our activities in Paris. As far as tools are concerned, we use the same platform in all countries. What we do lack is an information technology solution to cater for our specific business needs that rely heavily on the notion of a community based method. 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 one hand we have free circulation of goods within the internal European market, but the number of constraints that are encountered make this 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 in Germany, cash on delivery in Poland, bank card in France), many different export and import regulations, different terms and conditions of sale, not to mention the various VAT systems...

Finally, the single market is not uniform in terms of levels of development 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 process of internationalisation for many merchants and service providers in Europe. The ways in which organisations function are unclear and many abusive practices also exist. Some take advantage of the complex situation to invoice market research services that could be simplified and better shared”, claims Philippe Mascaras.

His advice: It is important to focus on the quality of human resources. He believes that this is the key to a good market under-standing that enables you to save a lot of time. Finally, you need to be well supported with regards the administrative and regula-tory aspects of your business. u



ELECTROLUX: moving from the BtoB model to BtoC without disturbing the distribution network

With 40 million products commercialised each year in 150 coun-tries, the Swedish industrial group Electrolux figures among the market 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 key countries using our warehouse dedicated to BtoB activities. Each country was doing more or less its own thing up until 2007, when I was named manager for European markets. Two years later in 2009, Electrolux decided to create their international BtoC activity, which also includes countries outside of Europe and which I am in charge of ”, explains Wilko Klaassen, Director of Commercial Development B2C Unit.

“Today, no brand can afford to be absent from the Internet because large numbers of our customers use it”, adds Wilko Klaassen. But this 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 directly on line by Electrolux. Across Europe, this represents a cata-logue of approximately 500 items, including a long list of several thousands of spare part items that are difficult to find in the distri-bution network. “We do not sell finished products which are reserved to our distributors”. But this rule could soon be broken following the announcement of direct vacuum cleaner sales in the United States in September. «Such products are easy to ship», explains the Director of BtoC Development.

“We are not talking about washing machines, for example, which require two people for home delivery. In addition, three of our main competitors, including the brand Dyson, already sell their vacuum cleaners directly via Internet in the United States. We could not avoid doing the same thing”.

Belonging to a group operating on an international scale enables easier access to suppliers and in the majority of cases



it provides the structures and resources that are very useful to get online activity off to a rapid start. “The disadvantage is that these infrastructures are not always adapted to BtoC commerce, which is not a priority for a group like ours. They sometimes lack flexibility and reactivity, which increases the time required for products to reach the market”, explains the Director of BtoC Business Development.

Most of the e-commerce activity is controlled from the Head Office in Stockholm in Sweden, including site creation and management, the definition of the products and range as well as the sales price. Finally, company marketing strategy is also set out at company head office. The countries directly manage their customer relations services, product returns and the translation of 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 of countries. It works with a small number of service providers to cover the last mile and deliver products to consumers or to the pickup points. “From my point of view, it would be better to have a dedicated BtoC warehouse, but this is not scheduled for the moment. We could also make savings on packaging too. We have the same ones for products delivered in BtoB and in BtoC, which is not a satisfac-tory solution. But in a large group like Electrolux it takes time to change such arrangements. Of course it also requires investments”, explains Wilko Klaassen.

The main difficulties facing European e-commerce are linked to the fact that the differences in each country need to be taken into account: specific retail regulations, tax policies, language and currency management (even if the Euro exists) and also in the organisation of logistics. To add to these technical problems, it is important to be capable of keeping up to date about consumer needs in each country so that the site offers an adequate solution, and in a situation whereby there is no physical store enabling us to evaluate the state of the market. u



MANGO: a centralised e-commerce organisation that relies on the presence of local shops

Launched in 1984, Mango, with its 2,050 shops has operations in 105 countries. It is a brand with a strong international dimen-sion which generated a turnover of 1.27 billion Euros in 2011. As early 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 by opening our first site, based on the example of other e-commerce web-sites in the United States”, explains Elena Carasso, who manages the brand’s e-commerce division.

In 2000, the brand opened its first online sales websites. Today, Mango delivers in all European countries and is present in Turkey, China, Russia and Korea. 80% of its online activity is carried out in Europe, the remaining 20% is mainly carried out in the United States, Russia, China, Turkey and Korea.

Opening a physical store in the country always precedes the opening of their website. The site deployment times are quite short, from 4 to 5 months between the decision making phase and 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 well known. In contrast, in Turkey purchasing via the Internet is not so common, but our brand is very well known, which is the reason why we opened the site”.

For Mango, the physical presence of stores is indeed an advan-tage, as it makes it easier to internationalise its e-commerce activity notably because it enables the brand to gain a certain level 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 on the Internet, but we also need to adapt certain things when we open a store, there is not much difference”, explains Elena Carasso.



The Mango collection is universal and varies little from one country to another. The adjustments mostly concern services and business practices: free delivery in England and the USA; service quality which is more important than costs in Germany for example, competitive practices, special payment methods, sales campaign habits. There are a number of differences notably in the United States and in England, where the fashion season starts earlier, or in Spain and in France, where sales periods start later. Sites are therefore different depending on the countries but the adjustments are only minor.

As far as legislation is concerned, the brand has not experi-enced any serious problems. “We offer our customers conditions that are always better than those required by legislation and we do not have any serious disputes within the European Union thanks to the various directives. The Commission is showing a lot more interest in 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-commerce organisation systems in Spain. The marketing and information technology teams, photographers, designers and warehouses are in Spain. The brand cultivates a “home based” spirit and seeks to control both logistics and information technology developments. “Our e-commerce platform was developed in-house as we would like to maintain control over the functionalities and developments in areas where we would like to innovate”.

In terms of logistics, the European countries are delivered directly from Spain within 2 to 5 days. For Elena Carasso, delivering to consumers in Europe does not create any particular difficulties. Outside of the EU, this become a lot more complicated. Difficulties are encountered with the cus-toms services, delivery costs and delivery times are much too long. The solution for Mango was to open warehouses to serve local markets in Turkey, Russia, the United States and China. In Europe, goods returns are handled by the Post Office – the



goods must be returned either to Spain or to stores. “We have rather 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-commerce director.

The development of mobile services is our next major project at Mango, as well as videos and editorials.

For Elena Carasso, e-commerce is very much in a growth phase (if we leave out the USA and England, which are already very mature markets), it is just the right moment for brands and retailers to ensure their presence. The more online retailers there are and the broader the range of offers, the stronger the demand will be. For Mango’s e-commerce director, supply will attract demand, 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 of distributors like online supermarkets, will further increase the amount of choice for online shoppers and will participate in the growth of e-commerce. Moreover, Mango expects to double its online 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 Italy

Launched in 2003, Oclio, a family run business has succeeded after only a few years in gradually becoming one of Europe’s leaders, selling products for children aged 0 to 4 years on the Internet. The company operates in France, Belgium, Luxembourg, Spain and Italy and currently employs 22 people.

Their example proves that international development can be achieved by e-merchants of all sizes.

“Oclio started its e-commerce activities selling child safety products: baby seats, plastic corner protectors and baby phones.



“Around 2006, thanks to the reports supplied by LeGuide.com that monitored where the traffic on our website was originating from, we discovered that the majority of our traffic resulted from the keyword ‘pushchair’, in other words a single item in our catalogue of safety products”, explains Laurent Censier. Bearing this in mind, Oclio expanded its range to include all types of baby equipment includ-ing pushchairs, baby scales and bottles... But the childcare market is a niche market representing only 1 billion Euros in France. The catalogue has evolved to include furniture, food, toys and con-sumables (nappies and clothes).

“By the end of 2008, Oclio was generating a turnover of 2.7 million Euros. It raised the issue of what we could do the following year to increase our turnover other than by doing our work. It was at that moment that we started to look abroad”, explains Laurent Censier. He also added: “We were quite arrogant at that time and were steered by our intuition, we knew we were only a small com-pany and not particularly strong, you know what it is like to be profitable in e-commerce. We were earning a little money and were keen 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, we quickly understood and closed. We also did a lot of foolish things…”, admits Oclio’s founder. When deciding in which countries we could surely expand our catchment area, we based our decision on 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 10 to 33 Kg for pushchairs with car seats), and the logistics would have been too complicated for far distanced countries, and the cost of delivery far too expensive. For this reason, international expansion was first planned in French speaking countries as not so many special adjustments were required and they were situated near France. These countries were Belgium and Luxembourg. In Switzerland, customs problems led the company to abandon their



plans. “But it will not prevent us from trying again in Switzerland: it is a small market, but with a high standard of living”, explains Laurent Censier.

In 2008, Spain was very busy “catching up” as far as e-com-merce is concerned. By adding the Italian market, Oclio could target double the numbers of potential customers. The Spanish and the Italians give birth to less babies than in France but they spend 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 envisage our strengths: if you enter 30 keywords on Google and you check the first 4 pages of the search results, you will discover the identity of your competitors”, explains the founder of Oclio.

The United Kingdom was left aside, notably because the price competition 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 product range and the same prices, only the consumables such as nappies and small jars of baby food with indications in French only were removed. “We left the website on line for a few days and noticed that logistics were functioning well. After a few days of activity, when we 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 undercutting market prices”, tells the founder of Oclio. We adapted prices after a few negotiations and we either increased prices or reduced them according to the market.

“With the Internet, you find out straight away when there is a problem and you can react immediately. A multinational starting up business will not do things like we did. It will check that all is in order before launching and preparing everything”, explains Laurent Censier.

The company is based in Aix-en-Provence and employs native speakers of the countries in which its activity is deployed.



On the logistics side, Oclio works with Crosslog who have a ware-house in Lognes. It launched operations in Spain and Italy with UPS which provided a convenient and simple setup, although the solution remained expensive. After a few months, the volume of orders in Spain was high enough to switch to a direct ship-ment method. Rather than handing parcels over to UPS as they became available, Crosslog prepared the orders of the day and shipped them on pallets by lorry to Madrid or Rome. Locally, the local postal services are used to cover the last mile. “There is a real saving of about 20% for us, even if it results in longer delivery times for the end customer”.

The means of payment differ depending on the countries. In France, Oclio proposes bank cards and cheques. In Spain and Italy, the cheque was removed from the list. “In Spain, the bank card offers us a competitive advantage, because in this country, card payments are expensive for retailers due to commission charges. In addition 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 paid by bank transfer were not paying! They were ordering, receiving the e-mail with the details of the French bank account and cancelling their orders in 40% of cases. To solve this problem, we opened a local account 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 as some elements could be duplicated based on France, like mar-keting channels or the corporate strategy adopted for keyword generation. Oclio recorded a turnover of 8 million Euros in 2010.

The next phases: the countries where lots of babies are born and where e-commerce is strong, for example Brazil and Turkey, with 1.4 million babies born each year, which could double Oclio’s market. Poland also offers a large customer mass and would offer the company an opportunity to be present in the Eastern 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



easy to find out what is going on in a country as far as com-petition and consumption are concerned and to be confident enough to start up. I can’t even remember saying once that “we shouldn’t have done it”. We take things step by step just like in an e-marketing campaign. You spend a little, it works and you go a little further. If you encounter a problem, you solve it, and so on. What can be deadly is when things go too well all of a sudden. From one day to the next, you find yourself delivering lots of parcels, and if your terms and conditions of sale are not precise enough you could find yourself with legal problems with your clients. You need to build up business gradually to have time to rectify and change things as and when 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 Europe

Created 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 Dutch company. It was at that time that the company launched its online activities, with a European expansion strategy.

The brand is present in nine countries: Germany, the Netherlands, 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 European countries 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, the volume of online searches, the market size and the legislative constraints.

“We are a European company with a Californian culture», says Jerome Orlemans. «Our team is multicultural, the experience of each



member becomes a driving force helping our brand to adapt in each country”, adds Jerome Orlemans. The cultural diversity in Europe, the seasonal differences in each of the countries, demands genuine forms of adaptation. The consumer behaviours are also heteroge-neous: “Some countries tend to focus on the quality of a product and on the technical characteristics, like Germany. Whereas in other coun-tries, we notice that the consumer is more interested in the price, like in 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 are represented by our shops in all countries, we can gather enough information about the specific nature of the local market”.

O’Neill proposes a different collection that depends on the continent, and their marketing approach and strategies are well targeted: “In Europe, we propose a broader range of online products than we offer in physical stores. We change prices slightly, but in general you could say that we have a quite harmonious European pricing policy”. The sites are 80% identical. Differences lie with our marketing campaigns that are specific for each country.

u The Internet channel is growing a lot stronger than the traditional retail channelThe Internet channel accounts for a high share of our sales and is increasing better than it is in traditional retail. For Jerome Orlemans, “in e-commerce, the key to succeeding when you launch international activities is to build strong partnerships”.

O’Neill works with PFSweb, which is already very experienced when it comes to launching international online retail activi-ties. “Our service provider provides us with a solid e-commerce and stock management platform. It also handles orders and customer ser-vices, managing payment means and fraud protection… Knowing how to localise our online activity is essential”, admits the brand’s European e-commerce manager.

O’Neill has locally based organisations in the countries. However, CRM is handled centrally. The brand uses means of payment such as PayPal, iDeal and bank cards. “In Germany, you



can pay by bank transfer, the goods are reserved for 14 days and are sent after payment is received. We have opted for different methods of payment that are adapted to the countries and this increases our conversion 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 service provider receives the returns and describes the reason in order to improve the process. Where there is a fault, the article is returned to Head Office, otherwise it goes back into stock.

“I have noted significant positive progress within the framework of the single market, such as the European legislation which recently cancelled the German law obliging the seller to pay the return costs for 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 strict in other countries of the EU than in Germany. “This forces us to introduce complex procedures and to take a number of initiatives legislation wise”.

Jerome Orlemans is optimistic as far as the development of the e-commerce market is concerned. “I expect strong con-solidation and considerable growth within the European online market. 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 what Google will do with its online shop (Boutique.com, Boutique.com stores and Google Shopping). ‘Think global, act local’ is certainly fundamental for Europe if we consider the different cultural, legis-lative and multilingual contexts”, concludes Jerome Orlemans. u



ONESTOPPLUS EUROPE: the USA, a real life test location before adapting to Europe

OneStopPlus was launched at the end of 2006 in the United States by the online fashion and decoration distribution group Redcats. They wanted to use this leading e-commerce country to develop and test a pure Web concept with this site dedicated to large sized clothing.

“Right from the start, the objective was to launch the concept throughout Europe. France was always considered as a foothold in Europe, but not as an end in itself. Our objective was to establish our European presence rapidly and firmly”, explains Antoine Menet, Senior Vice President and Director of OneStopPlus Europe, who returned 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 was and how to adapt the concept”. The launch of French operations, the first in Europe, took place in June 2010, eleven months after the decision was taken to launch. Today, the site is open in 10 European countries: France, Belgium, the UK, Sweden, Norway, Finland, Denmark, Portugal, Spain and Switzerland in the last six months; or 10 countries launched within twelve months.

The learning curve when launching sites in the different European countries increases exponentially. It took almost four years to go from the first site in the USA to the second in France. But then, only four months were required to open the Belgian site, then four weeks to launch activity in the United Kingdom and roughly four days for Sweden, where the site was inaugurated in 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’t necessarily mean that we are going to open up in each new country within four weeks or even four months! We have however adopted a



rhythm which in the next six or twelve months could help us double the number of countries in Europe”, adds Antoine Menet.

For the Director of OneStopPlus Europe, if the site had not belonged to a major International group, it would doubtless not have arrived in Europe, or in any case not as fast. The presence of Redcats on the two continents has without a doubt facilitated and speeded up the transfer of the concept to Europe. The site is open in countries where Redcats is already present. The priority coun-tries were chosen according to their potential and the strength of the group’s presence locally.

The American site offers over 200,000 products and attracts 1.5 million single visits per month. Today, 50 to 60% of brands sold on the site are sourced and developed directly by Redcats. The share of external brands present on the site is increasing since the line of development on the other side of the Atlantic is to broaden 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. “Without any doubt, it was the condition for the creation of the site. The brands would not have accepted that we have our own turnover as they would have seen it as internal competition”. With 80,000 products, the site proposes the broadest choice in the specialist area of fashion for the larger sizes.

The ambition of OneStopPlus is to offer identical products across the different European countries. “I am curious to see, if over time, differences will appear with regards the best-selling products sold from one country to another or if selling pace changes according to the country. You can expect there to be differences between Scandinavia and Spain, for example. But on the basis of my experience in the USA, reasoning on a continental basis seems sensible. In the United States there 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 State to another”, explains Antoine Menet. The sites are similar in the different European countries. Advantages also lie with the deploy-ment of information technology. “There is not much difference in



experience levels between web users from one country to another. The arrival of new terminals, smartphones and tablets, will no doubt result in great changes in the way people browse and much more so than 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 to Redcats. In some cases, I opted for Redcats solutions and in others external providers, like for the front-office IT”, explains Antoine Menet. For the back-office solution, however, the site relies on the 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 from the 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 have created an alternative logistics system to that of the group, but it would have taken longer. To simplify things, I adapted to existing group processes. However, what I was looking for from the start, I cannot exactly achieve with the existing internal logistics systems. This is the case for the service level, with regard to delivery times in particular, and also the logistics flows are sometimes quite complex. We are currently operating as if we are in the launch phase. If we wanted a perfect system from the start, it would have taken us two or three years to develop”, explains Antoine Menet. The site also relies on the company’s own sales advisors for their cus-tomer relationship services. The group has a call centre for each country. The site’s teams visit them regularly to maintain contact and provide information.

For the Redcats group, OneStopPlus is the opportunity for them to question their usual operating practices. Within six months, between June and December 2010, the small team of 6 people based in Paris launched four sites in four countries. “This sparked off a degree of competitiveness internally and resulted in



the launch of other sites, with other brands. Redcats opened another dozen sites across Europe in 2010”.

For Antoine Menet, the other major advantage of the OneStopPlus experience for the group has been that it has led to product restructuring at European level. “Up until then, our brands were too closely associated with their respective countries. By creating these “trans-brand” systems (logistics, information systems) for OneStopPlus, we also provide the necessary conditions for exchanges between the other brands within the group”.

Today, OneStopPlus has a team of between 5 and 6 people based in Paris. This team represents the very soul of the site in Europe, providing sales promotion support: product selection for home pages, choice of marketing strategy and pace... It is also in charge of managing the French site and promoting the network internationally. Outside of France, the team includes two peo-ple in the United Kingdom, one in Sweden and one in Belgium for local assistance. Finally, in each country there is also a Redcats team. “We are currently carrying out tests to see if we can maintain such agile operations in a network configuration, with a small team based in Paris and a relay group responsible for escalating informa-tion (with local awareness) and deploying the concept. These relay teams are also asked to help bring about changes in the shopping cul-ture in these countries, which is still heavily based on home shopping catalogues, and find themselves faced with a pure player concept”, concludes Antoine Menet. u



PIXMANIA: pioneers showing the way

With 65% of its turnover generated outside of France, Pixmania is undoubtedly the leading European cross-border e-commerce company. The Pixmania adventure began in 2000 with the open-ing of the first site focusing on the Rosenblum family’s initial business: the development of photos. Very soon after, their range was extended to include cameras and it now currently proposes 22 product categories. Right from the start, the European dimen-sion was important, the idea being to place “Europe as their economic playing field”. Pixmania is now present in 26 countries and generates a turnover of almost 1 billion Euros.

“The first key to success when internationalising e-commerce activities is the product. Are you offering a product that people want? What added value are you providing locally? In this respect, Pixmania was able to develop very rapidly because the initial products it was selling, digital cameras, were indeed adapted: the user manuals were already translated into different European languages; the objects are small in size and are not subject to high transport costs”, explains Pingki Houang, Executive Director of the Pixmania group.

With all of these barriers lifted, six months after launching its site in France, the company initiated its activities simulta-neously in Germany, England, Spain, Portugal and Italy. Every year, countries were added to the list, and continuing at this rate, 18 countries were opened after 2004. The following step was to position the brand as the “multi-specialist” in its category. At first, Pixmania broadened its activities to consumer electronics and 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 fact that you are broadening your activities also means that you need to have sufficient customers and a certain degree of brand notoriety”, adds Pingki Houang. At the present time, although Pixmania has 9 million customers, these customers do not repeat their



purchases often enough in the area of electronics (an electronic device lasts six years on average), which explains why their strategy is to broaden their range of products. Becoming a multi-specialist only makes sense if you have access to a strong audience. To do so, either you need to benefit from a very well known brand, or become powerful enough on the web to acquire strong brand notoriety. It is also a virtuous cycle: the more you expand the range and the more attractive your site becomes and with it, the number of potential customers.

In the case of Pixmania, the strategy of the best product at the best price, immediately available with the best quality service and a presence in 26 countries enables them to benefit from strong European brand notoriety.

u The limits of centralised organisation when competing with specific products in local marketsPixmania’s activities are managed entirely from France. “Maintaining a limited range at the beginning and operating with native teams (half of the 700 people working at the Head Office are not French) is essential for a sound start. It is also very important to develop tools capable of operating in the Euro zone. For exam-ple, an information system which does not take this into account will not be capable of managing complex taxation rules”, advises Pingki Houang.

To streamline costs, the group also centralised its logistics within a single warehouse in the Paris area which serves the 26 European countries. Their promise is to self manage approxi-mately 700,000 products, 98% of which are in stock. “Pixmania’s history and experience as well as well negotiated contracts with trans-porters enable the company to maintain good quality service. Europe has made it easier to export: for example, to send a local product in Germany using DPD, a subsidiary of GeoPost, the cost is almost the same as a delivery to France. We can also envisage opening other points, but only if activity reaches a certain threshold”. Pixmania is large enough to obtain good conditions and terms from its suppliers and to compete with local players. On the customer



relationship side of things, 60 people based in Paris deal with complaints. Part of the team members work as outsourcers depending on the language and how complex the queries are.

But as Pingki Houang explains, “if the site now wants to develop further and double its turnover, it needs to start localising its activi-ties in the countries. After ten years of activity, our centralized form of organisation from France has reached the first threshold in terms of 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 Spanish keyboard”.

At present, their local physical presence is limited to their stores. So far, Pixmania has opened 19 stores in Europe, 9 of which are in France. Breaking away from its centralised method of functioning, Pixmania opened a second head office in the Czech Republic, where about 60 people are already busy developing their activity in the North West of Europe.

u Europe should be capable of ensuring the volume required for the development of e-commerce“The finest pure players of European e-commerce were created in France, a country in which it is difficult to create companies, owing to the fact that it is hard to find the necessary financing and also the ability to achieve a critical mass”, explains the Executive Director of Pixmania. These market size problems could disappear thanks to Europe, as it represents a considerable number of e-consum-ers, much more than in the United States. But on the other side of the Atlantic, it is a lot easier to attract a large number of cus-tomers in a homogeneous environment as soon as a product is launched. “Europe is still very fragmented, which makes it more difficult to reach out to consumers and achieve critical mass. Complex legislation (especially with regard to taxation) creates much difficulty for small merchants when they try to reach beyond their borders”.

For Pingki Houang, although the Euro, which has made Europe a tangible reality, has made things easier, there are four very complex issues that need to be resolved: is the product



adapted? When a company reaches a certain size, it faces the problem of regulations; then come the problems relating to logis-tics and after that the language, in other words customer relations and after sales service.

Europe has “harmonised the currencies but not much more!” claims the Executive Director of Pixmania. The VAT changes have had a major impact on e-retailers as they demand a great deal of effort in terms of processing and declaration.

From a regulatory point of view, the most mature countries are the United Kingdom, Germany, Scandinavia, notably as far as consumer protection is concerned. In the South, this approach is not so widely developed. Ideally, we need a more homogeneous situation in Southern Europe (Spain, Portugal and Italy). The North is more complicated as the currency is different (pound, Euro). Scandinavia has a great deal of potential with few players and is of major interest. Finally, Eastern Europe (Poland, Czech Republic, Hungary, Romania, and Bulgaria) represents a large market, even if they currently have weak purchasing power.

“Europe is full of promise, but it is likely that it will still take a long time before the entire internal market can be harmonised”, estimates Pingki Houang.

His advice: if the product is adapted to the market, you can export from France. Foreign consumers are willing to pay more for 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. These represent the early stages of growth and development. u



Internet has become a strategic priority for the international deployment

of RAJA’s BtoB activity

Created in 1954, Raja is today the number one in Europe for BtoB packaging, with more than 500,000 European customers and operations in 14 countries. “Raja’s first Internet site was created in 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 site underwent a complete overhaul which triggered rapid international deployment”, explains Cyrille de Sagazan, Head of E-Commerce and Procurement at Raja. “When we launched our subsidiary in Denmark for example, we were proposing more products on line than we offering in the catalogue”. With the Internet channel, Raja hopes to make the Web a strategic priority for its multichannel approach: printed catalogue, tele-sales teams and sales teams on the ground, merchant website, e-procurement solution, a broader range of products in Europe with delivery within 24 to 72 hours depending on the country.

“Of course, the share of Internet sales is not the same in each country. This depends both on the development of BtoB practices in the different countries and the maturity of each subsidiary in its market. For example in the United Kingdom, e-commerce is widely used, but competition is very strong. This meant that we had to set up a specially adapted e-marketing web strategy with good search engine optimization. The activity in Switzerland, in the Czech Republic and in Denmark relies heavily on the Internet channel because Raja very much focused on this at the launch stage”.

When opening up in a new country, the International Development Department carries out research, studies compe-tition, manages local setup and decides what products will be proposed. “The Internet sites are controlled and administered by the group’s Marketing department, to ensure proper functional-ities and identical structures and graphics for each country site. The group works with common service providers for the management



of SEA, mail routing and design, to be as efficient as possible by sharing best practices. Each subsidiary manager deals with the marketing team which works on promoting sales on sites”, explains Cyrille 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 Head of E-Commerce and Procurement at Raja. Belgium supplies Germany, Austria, the Czech Republic and Switzerland accord-ing to a logistics plan based on the catchment area. Deliveries can also be provided to Denmark within 48 to 72 hours from Belgium and this turns out to be more profitable than creating a logistics centre in Scandinavia.

u A better understanding of each country provides the group with a wider vision to adapt its strategyMarket analysis and research is carried out before any acquisitions are made or before physical location, therefore any problems are identified in advance: “The business models are well established and our logistics function smoothly thanks to our distribution centres. We list all of the legal or taxation constraints, and issue the list to local managers”, explains Cyrille de Sagazan. Gradually, Raja has acquired a deeper knowledge of the constraints relative to each country, thus enabling the entire group to better anticipate any difficulties.

“Nevertheless, unforeseen issues do arise and they need to be managed. Regulations concerning e-mails for example and nota-bly the double opt-in, were not planned for when we started. The legislation regarding e-mailing in BtoB is not at all uniform across the European countries”, regrets the Head of E-Commerce and Procurement at Raja.

When it comes to creating professional customer accounts and the mandatory fields, the rules are not the same: “In some coun-tries, we cannot invoice if we do not have the company registration number and we are therefore obliged to request a cash payment. This poses a number of commercial problems. This slows us down on a



number 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. We had to adapt the site to calculate the tax before deploying the online payment 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 on receipt, or online payment using Ogone. Online payment has been built in to the platform since March 2010.

The transactions between the banks, the payment solution providers and the different subsidiaries are never the same in each country. The local managers sign an agreement with their bank, then a European agreement with Ogone so that the accounts can be activated and the interfaces displayed on line. “Activating an account can take anywhere between three to ten days! It all depends on the acquirer, who sometimes signs a contract with another payment provider, who will be the go-between with Ogone, as long as the subsidiary has already negotiated a distance selling contract with his bank. Then, it takes several weeks for the contracts to be validated by the banks. It would be ideal if the latter could promise the same return times because even when we anticipate the difficulties, management can become complex despite support from global service providers like Ogone”, explains Cyrille de Sagazan.

The same applies for payment security. In Spain for exam-ple, “the implementation” of 3D Secure is mandatory whereas this is not the case in other countries. Therefore, there are a few elements that need to be taken into account at back office level and these lead to additional costs. “Even when we anticipate, we are always subject to these delays and constraints that are all due to demands that are sometimes too extreme”.

For Cyrille de Sagazan, the major difficulty when setting up an activity in BtoB e-commerce in Europe concerns data protection. “We were faced with several demands from different countries asking us to adapt their sites to new legislation on confidentiality. Germany is the country with the strictest rules, and we expect this tendency to



gradually 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 to manage these differences. However, our task of developing activity in 14 European countries often enables us to anticipate problems as the constraints facing a country at a given moment eventually become the common rule for all of the other countries. This deeper knowl-edge provides our group with a wider vision to be able to adapt our strategy!”, concludes Cyrille de Sagazan. u



RAKUTEN, the Japanese giant includes Europe in its quest to conquer international markets

Rakuten, the Japanese Internet giant is including Europe in its international expansion plans by developing a strategy for exter-nal growth. “France was the first step in Rakuten’s plans for Europe with the acquisition of PriceMinister in June 2010”, explains Pierre Kosciusko-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 4 and 5 billion, a volume of business of 10 billion and a growth of 20% per year. The group operates in an e-commerce market-place, financial services and payment solutions. Rakuten is indeed a 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 also one 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 to extend its international influence to match its achievements in Japan. Today, international turnover represents 10%. The Japanese e-commerce leader’s international growth strategy fully reflects this ambition. Rakuten currently has e-commerce activi-ties in ten countries, including Japan.

u International activity to guarantee strong growth and rapid achievement of critical massAlready in 2005, Rakuten started its internationalization strat-egy by acquiring Linkshare, an affiliate network in the United States. “In 2010, English became the official language within the group, symbolising their approach to internationalisation”, explains the founder of PriceMinister.

Rakuten first focused on its presence in Asia. Today, it is the leader in Taiwan and Thailand and its growth across Asia



continues with a recent set up in Indonesia. A year ago, the group negotiated a joint venture with Baidu in China; other countries across the Asian continent will soon be added to this list.

Outside Asia, the group acquired Buy.com in April 2010 and took a 75% stake in Ikeda in Brazil in June 2011. The acquisi-tion of PriceMinister in June 2010 became the spearhead of its European acquisition strategy.

PriceMinister’s marketplace operates in CtoC (between 55 and 60% of business volume) and BtoBtoC, which represents a sector which is expanding more rapidly. The acceleration in BtoBtoC is 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 of volume. The company opened its first European site in Spain at the end of 2006/beginning of 2007 and in England in 2010. To launch its international operations, PriceMinister first analysed market maturity. “Spain is still quite an immature country, there was a possibility to become leader by setting up operations right at the beginning. Looking at it in hindsight, I think it would have been better if we had started activity in England instead. Obviously, the market is more difficult, but it is more influential”, admits Pierre Kosciusko-Morizet. It was a logic based on volume that was cho-sen by Rakuten for its international strategy, with priority given to market leaders.

This strategy motivated Rakuten to rapidly invest both in its first European acquisition with PriceMinister and in the two other leading e-commerce countries in Europe, England and Germany. “The group has a market size-based approach to ensure rapid critical mass for cross-border activities”, explains the founder of PriceMinister. As a result, Tradoria, which holds the top posi-tion in independent retailing in Germany behind Amazon and eBay, was acquired by PriceMinister at the end of July 2011 and the English site Play.com (14 million registered users and 7 million products), in September 2011. The group’s major strate-gic focus is to build a strong marketplace in each country.



u “Cross-border” is fast approaching, we need to keep ahead of major consumer related phenomena “Exchanges between countries represent a strategy priority even if they represent only a small fraction of turnover. Since last summer, we have opened several Japanese online shops in France. In fact, buyers are still in the process of testing our services at local level: if they are satisfied, they will shop globally. It is now that we need to take up our positions. Cross-border is fast approaching, we need to keep ahead of 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, a PriceMinister customer in France will not necessarily purchase on Rakuten. If a shopper purchases on PriceMinister from a Rakuten customer, this marks a break from the brand and it complicates things”. The group’s sites use different technologies according to the countries and there will be more uniformity in the long run. But firstly, the objective is to provide merchants with a One Stop Shop solution. On the logistics side, Rakuten has opened ware-houses and offers its professional merchants an order fulfilment solution for media products (CDs and books). This offer should eventually be available for other countries.

To ensure personalisation of the individual country sites, the group ensures regular exchanges of best practices. As far as user-friendliness is concerned, the sites differ from one country to another. For example, the Japanese site contains plenty of photos in the form of thumbnails. For this reason, Rakuten’s local oper-ations across all countries are guaranteed optimal development conditions for their individual markets. PriceMinister opened an office in London and will do the same in Spain at the beginning of 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 retail market for Rakuten, which has the reputation for being capable of delivering fresh produce to its customers, who are willing to



pay more for quality products. Shoppers order fish caught in the morning 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 to different cultures and consumer habits.

u The Europe of business does not exist, we therefore need to work on an individual country basisFor Pierre Kosciusko-Morizet, legislation is a way for existing businesses to protect themselves from competitors. This is why traditional retailers used certain lobbies to prevent the strong emergence of e-commerce, fearing direct competition for their existing activities. “It is understandable because legislation has to adapt and legal matters take time and this is clearly a barrier when we 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 less tax on e-commerce. Even if we can question the legality of this, it has allowed a few large American companies to become world leaders. There are a few factors that distort competition and com-plicate matters. “The approach adopted by European countries and Japan is more passive. But I am quite optimistic, such matters can be sorted out by the size of the market. Companies are strong enough to continue developing their online activities”, believes Pierre Kosciusko-Morizet.

“The Europe of business does not exist. We therefore need to work on 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. The question is whether some smaller markets will not therefore remain local, at least for a certain period of time. u



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 the obvious catchment area”, explains Thierry Petit, the founder of Showroomprive, second largest site specialising in private sales in Europe.

Launched five years ago, the site boasts 6 million members in France and 1.5 million shoppers.

Showroomprive generated a turnover of 130 million Euros in four 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”, according to Thierry Petit, who estimates that sales outside of France will represent 17% at the end of the year and 30% in 2012. The com-pany was self-financed until it turned to an investment fund for support for its international projects.

“To set up business in Europe, you need a solid structure that has been optimised in France and which can be adapted to other coun-tries. The first internationalisation project is to optimise structure and organisation”, explains the founder of Showroomprive. In his opinion, success in opening European markets relies on pool-ing a certain number of costs and procedures. European turnover is increasing very rapidly due to this system involving pooling resources dedicated to selling, production and logistics.

This is why all of Showroomprive’s activities are managed from France and its only local operations are in Spain. As for logis-tics, the preparation of orders is centralized in France, where the company has 25,000 m² of warehouse space. Stickers for local post offices and transporters are printed and applied to parcels in France. They are then transferred to the countries of destination before being sent to the end customer. Any returns are collected once a week and sent back to the warehouse in France.



The company recruits country managers and marketing man-agers based in Paris and who are native speakers of the countries they have operations in.

The choice of location is based on the potential turnover and the likeliness of short term profitability. Although it is no surprise that the countries considered the most promising in Europe for e-commerce are England and Germany, as far as the specific pri-vate sales market is concerned. France, Spain, Italy and Germany are the most receptive markets.

The first European market to be opened by Showroomprive was Spain because access to this market was very simple. The set-up costs were low and its geographical location very conve-nient. Many French entrepreneurs start international operations by opening in Spain; this was the case of PriceMinister for exam-ple. The Spanish market enables companies to adapt to their new international organisation. Spain already represents a turnover of 12 million Euros, which is quite remarkable. In the clothing sector, Italy is a very important country as brands consider it as the pioneer 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 cultural habits: the Latin countries are generally very sensitive to prices, with similar impulse buying and consumer habits. Germany is very different. Purchases are much more rational and less impul-sive and the Germans use online comparison sites. This country was the founder of the discount concept and Germans are very much used to distance shopping and have very different shop-ping habits. “A German does not hesitate in ordering 3 or 4 pairs of shoes to be sure of receiving one which fits him”. England is a very mature country as far as Internet shopping is concerned, with a low price policy and widespread use of purchase vouchers. Price policies therefore need to be adapted to local business practices.

For Thierry Petit, the main barriers to setting up business in European markets are the language, logistics and currencies for markets outside of the Euro zone. “With the exception of PayPal



and the bank card, roughly 20% of the different locally used means of payment can function everywhere”.

“For countries bordering those we have operations in, local means of payment are not critically important, and the acceptance of Visa cards, MasterCard and American Express alongside PayPal enables us to meet the requirements of our shoppers. In other countries where international cards are not so dominant, we ask for support from our banking partners or Atos Worldline who advise us and accept the adequate means of payment locally”. But the finger of blame is directed more in the direction of the different taxation systems. They create more difficulties than the legal aspects of online sales that are not always very uniform, or different European business practices. “VAT regulations can be very different. Some rates are dif-ficult to understand, and the tax collection processes are not always easy 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 larger companies, notably non European ones, have set up business in Dublin, where the taxation rates are almost zero compared to roughly 33% in France. This creates unfair competition within Europe”.

As for the future, Thierry Petit is considering the countries of Eastern Europe which are growing strongly, even though there are 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 the

collection of VAT in the different countries of the European Union. u



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 for leading fashion and design brands”, explains Federico Marchetti, founder and CEO of YOOX Group. These are the two objectives pursued by the group for the last eleven years: to assist brands in establishing their Internet retailing business in an international catchment area. Today, YOOX delivers products in roughly a hundred countries and is present in Europe, Japan, the United States and Hong Kong and it recently opened in China. The group generates over 78% of its turnover on international mar-kets, according to the half year financial results issued on 30 June 2011. Yoox.com, the first site launched in 2000 by the company, is firmly positioned in the luxury goods sector and proposes a selection of products that are difficult to find. These include an edited range of end of season clothing and accessories from prestigious 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 fashion houses like Balmain, Vanessa Bruno, Diesel, Paul&Joe, Moschino and Margiela to name only a few.

The group also launched Thecorner.com, a site featuring news about creators and selling exclusive collections proposed by 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 online stores “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. It is important to maintain consistency between Internet activities and



physical stores, and this will probably be the challenge for fashion companies in the future. Virtual sales channels and real channels will need 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 trying one of our online stores. In China, some brands have no physi-cal distributor and are only available on line in a mini-store on Thecorner.com.cn. This is the case for example for the Belgian brand Ann Demeulemeester”.

With the Internet, sophisticated monitoring tools enable you to get a better understanding of what the customer prefers and what they like or do not like. This is essential when you are faced with different consumer behaviours on international markets. 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, people generally prefer to buy during office hours, whereas the Americans and the Japanese prefer the end of the day or evening... As far as tastes are concerned, the Japanese and the Italians prefer ties and the Americans have a preference for bow ties”, Federico Marchetti adds, amusingly.

u A global presence and a few local outlets as well as plenty of energy and resourcesYOOX’s activity started in Europe in 2000 with an interna-tional dimension right from the start. This was followed by the United States in 2003, Japan in 2005 followed by more and more countries before their recent arrival in China. The company is currently capable of delivering in over 100 countries through-out the world. “Going international is a complex process and you must consider many different aspects with regard to resources, legal expertise and local partners… YOOX Group decided to be global with 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



proposes a “butler service”, which enables customers to try the article they purchased as soon as it is delivered. A courier waits close by to see if the product satisfies the customer or if it needs to be sent back.

The company has opened 7 local offices in Italy, Japan, the United States, France, Spain, Hong Kong and China. “We decided to open these local offices in the most important markets, where we need to maintain a strong position. To be able to do so, you need people who know the culture and local environment well enough to implement web marketing strategies, public relations and commu-nications, business development and local procurement”, adds the group’s founder.

YOOX Group currently employs around 500 people whose average age is 30 and 58% of them are women. They work in their offices in Milan, Bologna, Paris, Madrid, New York, Tokyo, Shanghai and Hong Kong. The team is a homogeneous group of people of different nationalities and from various cultural back-grounds. “They are curious and innovative, proactive and capable of adapting easily in a constantly changing environment”, insists Frederico Marchetti.

Customer services are managed by 8 centres around the world that deal with e-mails and telephone calls and all customer requirements in the different languages. The group also has local legal 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 in the United States, Japan, China and Hong Kong. These local warehouses enable them to efficiently manage any prob-lems with article returns. In France for example, any article purchased may be returned within seven working days after the date of delivery. A pre-paid UPS airway bill is included in the parcel in case the article needs to be returned by the customer. Customers simply call the transporter to have the article sent back. “Managing a global logistics platform is quite complicated and we have learnt a lot about shipping companies,



customer returns and trade barriers over the last eleven years of activity, in Russia in particular”, points out the CEO of YOOX Group.

As far as payments are concerned, specific credit cards such as Discover in the United States or payment solutions like Alipay in China need to be taken into account. To provide the payment solutions adapted to the market, YOOX works with local banks and also integrates the major online payment solutions such as PayPal.

u Growth boosted by international activity which shows no sign of a slow downThe majority of the markets that the group has operations in recorded a rate of growth similar to the first half of 2010. This is confirmed by the group’s revenue growth due to expansion of its international activities. Italy is still the main market for YOOX, representing 21.4% of its revenue, up by 20.4% compared to the previous year. The rest of Europe enjoyed a strong growth rate of 39.7% compared to the previous year.

The main countries which contributed to the group’s turnover in Europe in the first half of 2011 were France, Germany and the United Kingdom, which all had increased growth rates com-pared to the first half of 2010. Russia also participated thanks to the localisation strategy introduced in the third quarter of 2010. North America continued to record strong growth, at a rate of 33.9% compared to the first half of 2010.

“At the present time, China is a very interesting market which is still in the early stages of its development. YOOX Group played a pioneering role in this luxury fashion market by launching sites such as Emporioarmani.cn, followed by Bally.cn and Marni.cn, Y3-store.cn, Y3-store.cn, Thecorner.com.cn at the end of 2010 and a few weeks ago, Armani.cn”, announced the Head of YOOX.

According to Forrester Research, China is the biggest mar-ket in the world as far as the number of Internet users is concerned. It surpassed the United States to become the



second world luxury goods market, just behind Japan: the two pillars on which YOOX bases its activities.

“International e-commerce is still only in its infancy. There is still plenty of potential for growth. For the moment, we are one of the rare pure players capable of distributing articles globally. With regard to Europe, it is clear that the single market could play an essential role in the success of e-commerce!”, admits Federico Marchetti.

His advice: Concentrate on customer service and techno-logy. They both require regular investments to remain ahead of the rest.

Recommendation for entrepreneurs: “I spent twenty years studying how to become a good entrepreneur and succeed in building my projects as well as gathering ideas to create my own company. But in the end, I rely more on my instinct than on gurus who claim to teach or advise other people”, concludes Federico Marchetti. u

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The partners

• Atos Worldline

www.atosworldline.comAtos Worldline brings together the core expertise of Atos in Hi-Tech transactional services. A leader in end-to-end services for critical electronic transactions, Atos Worldline special-ises in electronic payment services (issue, acquisition, terminals, payment solutions and card processing) as well as eCS (online services for customers, citizens, and communities) and financial services. Atos Worldine’s on-going commitments to research and innovation enable its customers to benefit from award-winning solutions in areas such as mobile payments, secure IPTV, online CRM 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 partner for online retailers

www.colissimo.frLeader in France and number 2 in Europe, the French Post Office’s parcel division specialises in fast delivery to end cus-tomers in France and throughout the world. With over a million parcels delivered each day, La Poste-ColiPoste is right at the heart of exchanges between private individuals and companies.In addition, it plays a major support role ensuring the continued growth of e-commerce and trade between private



individuals. The So Colissimo service is an innovative range of services that enable online buyers to choose the type of delivery and 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 players involved in online retail.

• Orium

www.orium.com Orium is a leader in international e-logistics, combining its e-commerce logistics services with the traditional supply chain, customer relationship, transport and information technology. Its services 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 ability of 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 both in France and internationally. Some of its customers include Nespresso, Smartbox, Nuxe, Pierre Fabre, Rustica, Nielsen, Dukan, Wanimo, Würth Modyf and Marie-Claire.Orium’s organisation is built around its information system, the hub which controls operations on its different international sites. It also has a quality assurance system, which is certified ISO9001 since 2007. Orium use innovative communications and monitor-ing tools that have proved to be highly efficient. The company has 200 employees and approximately ten logistics platforms across Europe (in Portugal, Spain, Italy, Switzerland, Germany, the UK and Poland). Two sales branches in Singapore and Chicago have just been opened.


167The partners

• PFSweb

www.pfswebeurope.comPFSweb is the online retail specialist offering fully integrated, end to end e-commerce solutions for companies marketing their products on the web.PFSweb provides all services required by companies when cre-ating or redeploying their international e-commerce projects in BtoC and BtoB:• retail website creation and hosting;• interactive marketing services, including e-mail and affiliate marketing, 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 and support via the call centre, e-mail and instant messaging with shared or dedicated agents in the following languages: French, Dutch, German, English, Italian and Spanish;• financial services: tax representation, VAT management, online payments, fraud management, invoicing, credit limit manage-ment and collection support; • personalised consultancy services.With operations in Europe since 1999 and in the United States since 1991, PFSweb employs 1,500 people. It provides services in six different languages and provides its customers with over 250,000 m² of warehouse space.PFSweb is the trusted e-commerce service provider for some of the largest international groups: P&G, Xerox, Chanel, O’Neill, Ricoh, LEGO, Proximus, Columbia, Salomon, Clarins, Havaianas, Olympus and many others.



• Chronopost

www.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 Poste Group, employing 3,500 employees and processing 300,000 parcels daily with a generated turnover of 665 million Euros in 2010. In France, Chronopost has built up a network of 80 oper-ational sites including 6 hubs, and delivers to over 230 countries in 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 demands of online purchasers and to make life simpler for online web mer-chants.MyChrono offers «3 services in 1», with the broadest range of express delivery services in France and worldwide. • Transport:– in France, with an express home delivery or delivery to one of their 4,000 Chrono Relais pick-up points;– in Europe, with an economy delivery service taking 2 to 4 days or a 24 to 48 hour express delivery service;– in the rest of the world, with an express delivery taking 2 to 5 days.• Tracking: Parcels are extremely traceable both for the sender and the receiver (proactive monitoring throughout each step of the delivery process and requests can be submitted online).• Support services: to assist e-retailers in their activities: starter kit, web services, returns and exchange goods management, cus-tomer satisfaction surveys and so on.


169The partners

• The group Come&Stay, two strong and complementary companies:

Come&Stay and Social Mix Media www.comeandstay.com and www.socialmixmedia.com or contact us directly at [email protected] > The European player Come&Stay specialises in the online collection of consumer profiles, the aim being to monetize and enrich them for multichannel strategies.Come&Stay has unique technological expertise in behavioural analysis, based on artificial intelligence. It uses this to offer adver-tisers and their agencies innovative consumer profile analysis solutions, 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) value chain, helping with media buying, the integration of social tools on websites (OpenGraph) and creating recruitment campaigns. The Come&Stay group offers advertisers assistance in their Digital Relationship Management (monitoring the performance of e-marketing and social media campaigns) with a broad range of products and services including:• YesPleez® – online service grouping the leading European e-commerce players and providing access to 3 million consumer profiles with over 90 socio-demographic and behavioural seg-mentation criteria.• CarDirect® – the European database containing the profiles of people planning to purchase a vehicle.The Lead Direct range of products, which provides advertisers with the possibility to collect profiles of opt-in consumers on a national or European scale. This range is designed both for acqui-sition and brand notoriety strategies.At European level, the group Come&Stay provides support to customers such as Audi, BMW, BrandAlley, Conforama, Accor Group, Infiniti, La Redoute, Mazda, Nissan, Redcats,



Showroomprive.com, Smartbox, Spartoo, Tourism Ireland, Vente-Privee.com and Walt Disney.The group Come&Stay is listed on the Alternext market of Euronext® in Paris.

• Ogone

www.ogone.frhttp ://twitter.com/ogonefr Ogone is an international online payments operator, with over 30,000 merchants across 45 countries.With its global banking connectivity, the Ogone platform can handle more than 45 international and local payment solutions (bank cards, private label cards, transfers, PayPal and online credit…) with the same tool for an end to end solution, from transaction verification through to accounts consolidation.Capitalising on over eleven years of experience, Ogone also offers consultancy services to accompany their customers whatever their 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 and Austria. In September 2011, Ogone acquired 100% of the capi-tal of EBS (E-Billing Solutions), number two in online payment solutions in India.

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171The partners

ACSEL Association 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 about the 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 the medium 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 economy and understanding how they can succeed in leveraging digital technologies.• Undertaking action to build trust in the digital economyIts cross sector position allows it to gather together all players in the 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 digital economy The work of ACSEL and its committees, covers all of the problems relating to the emergence of digital technology in the economy: paperless procedures and services, development of the retail sector, new forms of marketing and customer relations, new more mobile behaviour, identity management as part of a respon-sible approach to the digital way of life, business to business relationships, new payment solutions…

ACSEL’s mission is to help companies transform the econ-omy at a time when both technologies and their usages are building a new digital society.



• The publication of background materials: “L’e-marketing, la stratégie de la performance” (E-marketing: A performance strategy) (in French) – “L’Europe, une opportunité pour le commerce” (Europe, an Opportunity for E-commerce)(in French) – “E-commerce et distribu-tion, comment Internet bouscule les canaux de vente?” (E-Commerce and distribution, how internet is changing the face of traditional distribution 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-border e-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 recognised by French and European official bodies. The association is based in Brussels and works with representatives of the European Commission.

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175

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

Acknowledgements




177

About the authors

u Jean-Rémi Gratadour is the E-commerce Director at GeoPost.Previously, he was a Project Leader at the IREPP Institute (Institut de Recherches et de Prospective Postales). He was also Secretary-General of the Club Sénat association and is also the Cofounder of the art bookstore DessinOriginal.com.Jean-Rémi Gratadour is Vice-President of ACSEL in charge of international e-commerce. ACSEL’s e-commerce and distribution commission published a book, “E-commerce et distribution, com-ment Internet bouscule les canaux de vente” (about e-commerce and distribution and how internet is changing the face of traditional distribution channels) (in French) in 2009.

u After working as an advisor for a consulting firm, as a public sector marketing director for an IT manufacturer and head of a local authority IT department, Paul Soriano was the director of the IREPP Institute (Institut de Recherches et de Prospective Postales). IREPP already co-edited and published a book with ACSEL 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) (in French) in 2001 with Alain Finkielkraut (published by Mille et Une Nuits) and “Lire, écrire, penser dans la societé de l’information” (Reading, writing and thinking in the information society) (in French) in 1999 (published by Descartes and Cie). He is currently the editor in chief of the Médium magazine. You can consult the articles he publishes in the magazine at: www.paulsoriano.fr.

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179

Table of Contents

PREFACE .................................................................................... p. 2FOREWORD .............................................................................. p. 5

SUMMARY .................................................................................. 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. 16 INTRODUCTION .................................................................... 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. 24

CHAPTER I - EUROPE: DIVERSITY IN 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



• 1.3 A Europe which is primarily cross-border? .................................... p. 45• 1.4 The European model .................................................................... p. 47

CHAPTER II - THE CONTRASTING LANDSCAPE OF 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. 63

CHAPTER III - THE ISSUES AT STAKE IN CROSS-BORDER E-COMMERCE ...................................... p. 67• 3.1 Cross-border in the European e-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 integration of less advanced countries ......................................................................... p. 81Contributing to digitisation of the European economy ................................................................................................. p. 82How Internet boosts the entire economy .................................................... p. 82The emergence of European multichannel distribution .............................. p. 83Socialised e-commerce ............................................................................. p. 84Spreading European influence ................................................................. p. 85


181Summary

• 3.4 The costs of fragmentation: the flaws of cross-border ...................................................................................... p. 87High speed access infrastructures .............................................................. p. 88Payments ................................................................................................ p. 89Marketing .............................................................................................. p. 96Logistics ................................................................................................. p. 97Fragmentation is costly ............................................................................ p. 99

CHAPTER IV - MOVING TOWARDS A CROSS-BORDER E-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 the European Union ................................................................................... p. 109Civilizing the European digital environment .......................................... p. 112Is the ecosystem under threat? ................................................................ p. 113• 4.2 Platforms, cloud computing: How to make cross-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. 118

CHAPTER V - PIONEER FIGURES OF CROSS-BORDER E-COMMERCE ......................................... p. 123• BUBBLEROOM: building a strong brand in Europe ...........................p. 124• DUKAN is now launching its globally successful diet on the Web ... .......................................................................................p. 126• ELECTROLUX: moving from the BtoB model to BtoC without disturbing the distribution network ........................................ p. 129• MANGO: a centralised e-commerce organisation that relies on the presence of local shops ..................................................... p. 131• OCLIO, the website specialising in products for babies, has doubled the size of its market by opening in Spain and Italy ............... p. 133• O’NEILL are hoping that the multicultural aspects of their brand will open the Internet channel in Europe ......................p. 137• ONESTOPPLUS EUROPE: the USA, a real life test location before adapting to Europe ................................................................... p. 140• PIXMANIA: pioneers showing the way .............................................. p. 144



• Internet has become a strategic priority for the international deployment of RAJA’s BtoB activity ............................... p. 148• RAKUTEN, the Japanese giant includes Europe in its quest to conquer international markets ................................................ p. 152• SHOWROOMPRIVE: Europe, an obligation if we want to become large enough to influence the market .................................. p. 156• YOOX Group assisting luxury brands in establishing their Internet business in an international catchment area ................. p. 159

THE PARTNERS ..................................................................... p. 165• Atos Worldline• La Poste-ColiPoste• Orium• PFSweb• Chronopost• Come&Stay• Ogone

• ACSEL, Association de l’économie numérique (Association of the Digital Economy)

ACKNOWLEDGEMENTS ..................................................... p. 175

ABOUT THE AUTHORS ....................................................... p. 177

TABLE OF CONTENTS ......................................................... p. 179

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