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Overcoming the Barriers to E-Commerce Adoption by Consumers !

Three main barriers to e-commerce adoption a decade ago In 1997 – which does indeed now seem like a lifetime ago – I was responsible for establishing an online financial services business as a subsidiary of a large insurance and funds management group, with an initial concentration on selling unsecured loans, credit cards, and residential mortgages.

It was an opportunity, I reasoned (and managed to persuade the CEO and Board) to establish a beachhead in what would clearly (to me) become one of the dominant sales and service channels of

the future.

I wasn’t alone in this belief and those were the days of the ‘tech bubble’ where there was somewhat of a frenzy in investing in startup IT businesses, with valuations bearing no relation to reality.  So it is not a surprise, looking back, that very quickly the ‘tech bubble’ became the ‘tech wreck’.

As is the pattern with many multinationals, I was to move to a new role in a new country a year after this business was established, and without a ‘champion’ I could see from afar the business slowly wither and eventually be sold to a bank.

This wasn’t a total failure, but nor was it a success, and the reasons for this are many – including the simple inability of the group to get its mind around the totally different cost/revenue profile and valuation process in this category, compared with insurance, pensions and investment management.

But there was one over-arching reason the business didn’t take off like a rocket – and this is echoed by the numerous other startups of a similar era in financial services around the world. In a nutshell, that is because the market just wasn’t ready to embrace the online world in terms of actually transacting business (as opposed to using the internet as a research tool), and the predictions of a rapid uptake in online transactions didn’t materialize – the growth of e-commerce was slower than I had predicted.

What were the barriers to e-commerce adoption by consumers? As this particular experience and many others around the world were analysed and dissected over the succeeding few years (at that time an important part of my regional responsibility), it

!became clear that there were a number of critical factors that were clear barriers to e-commerce adoption by consumers, leading me to conclude by the early 2000’s that until these barriers were overcome, e-commerce would not become ‘mainstream’ and remain a niche within the broader economy.

I saw the following three issues as the most significant barriers to e-commerce adoption by consumers, and believed that all of these needed some form of resolution as a basis for the serious development of e-commerce as a viable business model.

1. Consumer confidence in making financial transactions online

While the average consumer was comfortable using the internet as a means of obtaining information, there was a lack of confidence and a lack of trust that it would be possible to share confidential information online, and overcoming this reticence would require the development of secure methods of data

transmission, as well as some years of experience as early adopters gradually built confidence – which would gradually trickle into the mass market.

2. A universally accessible payment

system

!A means of payment that was available to all consumers and not just an elite was the second item that I saw being a show-stopper until it was resolved. There had to be a way the average consumer could pay for goods and services, and not just those with credit cards (and the necessary available balance on their credit cards).

3. A cheap and universal fulfilment and delivery system

I reasoned that for e-commerce to become commonplace it could not be restricted to virtual products and had to be able to manage

!the delivery of physical items – furthermore that delivery mechanism had to be inexpensive, highly efficient, and global.

!The early carriers to e-commerce adoption are resolved - commerce comes of age

It is interesting to see the way these barriers to adoption of online transactions have gradually been resolved and while there was somewhat of a hiatus during the decade of the 2000’s, by the end of that decade the answers were in place.

• The IT and financial services industry were to a large extent able to

resolve security concerns relating to online purchasing. This led to the gradual adoption of online purchasing with some specific categories (such as movie tickets and air travel) and merchants (such as Amazon) leading the way and providing a sufficiently positive experience for consumers that gave them confidence to broaden their use of online purchasing !

• Two payment options emerged that provided most people with the opportunity to transact online. Firstly the banking industry moved to make

debit cards usable online, allowing people to pay from their current/savings account and not just credit cards. Secondly, and while it is my personal bête-noir and my nomination as one of the most poorly run companies of all time, PayPal has

emerged as a ‘catch-all’ parallel universal payment system • The answer to the final issue of a cheap, efficient, global fulfillment

system came from an unexpected source. For those in the US, Fedex, UPS and DHL are perhaps what first come to mind however on a global basis the true catalyst of change in this area came from the world’s Post Offices, who remarkably seized the opportunity to establish not only a cheap and efficient small parcel delivery system within most countries, but also made this into a global entity through the EMS branding. !

What lessons can we learn from this process of addressing the barriers to e-commerce

adoption? The three issues I identified at the time were simply the items impeding e-commerce moving to the next level at that time.

But as these barriers are overcome and the market matures simple there are more issues that emerge, like a series of mountain ranges to be crossed on the road to the future.

!However if we observe how these particular hurdles were overcome it may provide a glimpse into how future barriers may be addressed.

• In a number of cases, the solution came from an unexpected or

surprising source. Few would have predicted the Post Offices of the world would manage to come up with a

common approach that provided an efficient, cheap and worldwide small parcel delivery system !

• Similarly, few would have taken PayPal as a serious contender in the global payments space let alone emerging as the relatively unchallenged leader !

• A number of organisations have realized they missed this opportunity and are now working overtime to catch up – the logistics companies mentioned previously, for example, and in the global payments space American Express and Western Union, to name just two, have been conspicuously late to the party !

• As we would expect (but can’t predict), as the answers have emerged, the goalposts have continued to move, creating a new set of challenges and barriers. I suspect a decade ago few would have predicted such rapid growth in the uptake of mobile e-commerce, and few would have been bold enough to have predicted the level of penetration of smartphones globally – particularly in emerging markets !

So as we keep these factors in mind,  it will be interesting to revisit this question in 5 or 10 years and once again look back to see how the various new barriers to e-commerce adoption by consumers have been overcome; which new entrants unexpectedly emerged to capture the high ground; and which of the expected leaders are still working out exactly what happened and why they dropped the ball so conclusively.

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!http://inversionpoint.com/barriers-to-ecommerce-adoption/