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

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Although approximately 40% of European consumers purchase online, only 10% purchase from sites located in a different country to where they live. Why and what challenges are ahead. The European ecommerce landscape described in this report from Acsel.


  • 1.Cross-bordere-commerce> a digital europe at the heart of trade A DIGITAL EUROPE AT THE HEART OF TRADE > 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 EuropeanEconomic and Social Committee and the Committee of the Regions, A digital strategy for Europe(2010). Acsel - Lassociation de lconomie numrique. 45. Chapter I/Europe: Diversity in the single market45The impact of information technologies on the economy andsociety far outweighs the 5% of European GDP that is indicatedby statistics. But the contribution made by cross-border e-com-merce in the development of the digital economy in Europe isone of its most visible aspects.A Europe which is primarily cross-border?As we have already seen, European construction involves thecoordination of all levels of governing authorities surrounded byborders that do not just simply represent a separation of MemberStates. Between the global level (the EU) and local level, and aswell as the twenty seven sovereign nations, we have several hun-dreds of regions that are more or less independent and other terri-torial entities with their own geographical, historical and culturalborders: Eastern Europe, a Europe of religions and the major lin-guistic areas. There is no doubt that progress made in the construction ofEurope has reduced borders, or it has at least made it easier tocross them. But the troubled history of part of the continenthas created barriers that we thought had disappeared, for exam-ple in the Balkans, with the break-up of the former Yugoslavia.Even within the EU and from its Member States, some regionalmovements who aspire to a form of political existence could alsoend up creating new divisions or reviving old ones. The finan-cial crisis has revived an old division between the countries ofthe North and the West, who are considered economically vir-tuous, and the South, whose initials are unfortunately used forthe term PIGS (Portugal, Ireland, Greece, and Spain) and whoare judged less virtuous, while the Members who joined recentlyfrom Eastern Europe (CEE) are moving towards achieving thestandards required by the EU But what is more surprising are the new borders that the EUinstitutions themselves create so to speak, the most famous ofthese being the Euro zone with its common currency for theseventeen Member States. In the same way, immigration creates Acsel - Lassociation de lconomie numrique. 46. 46Cross-border e-commerce/A Digital Europe at the heart of tradePIONEER PROJECTS IN A TWO SPEED EUROPEAirbus, the famous European industry flagship, offers us an interesting example of atwo speed or pioneering approach to the construction of Europe: groups of countriesand companies combine forces for a particular development project. And finally, theEuro, the single currency in the seventeen countries of the Euro zone, is the mostimportant 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 ongoingdevelopment strategy, to cross the borders of their home countries and form one orseveral successive groups with other countries.>> a number of exceptions to the free movement of people within the Schengen area (25 Member countries). Other groups of nations or regions, may be interested in developing special forms of cooperation: there are some European institutions which operate outside of the EU framework, an example of this is the European Space Agency. The EU has only been in existence for half a century11, yet it has accomplished a number of important transformations. But without a doubt, it is capable of doing a lot better! The single market is not complete. Specific policies have encouraged the deployment of trans-European networks, but European logistics and postal services are not functioning seamlessly, far from it. Although the Digital Agenda includes Europe in the digital econ- omy, there is still a need to reduce the digital divides that exist. It is still true to say that the process of unification has pro- duced some spectacular results of historical importance. Among others, this is reflected in the huge amounts of commercial trade and the different industrial and capital related agreements that have all contributed to the integration of the European economy.11. The Schuman declaration of 9 May 1950 is considered to have led to the creation of the EuropeanUnion. Acsel - Lassociation de lconomie numrique. 47. Chapter I/Europe: Diversity in the single market47 The strongest indicator of this progress is that the least econo-mically developed countries and regions are catching up bycapitalizing on their competitive advantage in order to be part ofthe EU economy. Generally speaking, these countries and regionsappear therefore to act like reserves required for growth, in par-ticular with regard to the digital economy and online commerce. But still today, borders receive a lot of bad press and the expres-sion without borders is an indication of this. We have reporters,doctors and managers without borders, why not customs offi-cers too? However, although the border is a barrier, it is also acrossing point, and whether it is busy or not depends on how dif-ferent the two sides are and how open they are to trade. Europeslogic would therefore appear to remain trans-border rather thanborderless for some time to come. In particular, this logic governs commercial activities becausefrom the retailer and consumer point of view, the good bordersare those that can be crossed, without any dissuasive costs orfinancial penalties. The EU itself has no firmly established exter-nal limits simply because it is still enlarging its membership. Asfar as online commerce is concerned, Turkey, Ukraine or Russiaare major market targets that are also moving towards entry tothe digital economy. The situation is the same for countries andregions in the rest of the world which form linguistic and culturalcommunities with a number of Member States. The EU, Europe in the broader sense, the rest of the world: arethey all steps leading to cross-border e-retail?The European modelIt might appear as a paradox today if we extol the virtues of theEuropean Union. The crisis threatening its single currency, thedifficulties encountered when trying to save the Member Stateswho were most harshly hit, and more generally, the debt cri-sis, are today a cruel reminder of the shortcomings of Europewith its twenty-seven Members. It is also experiencing difficul-ties dealing with emerging countries or the United States, who Acsel - Lassociation de lconomie numrique. 48. 48Cross-border e-commerce/A Digital Europe at the heart of tradealthough also extremely weakened, still play a dominating rolein technologies that are redefining the economy and societywith their new applications. And finally, Europe is faced with apopulation decline accompanied by population aging, never hasthe term Old Continent been more applicable to Europe thanit is today. It is true that this decline is counterbalanced by waves ofimmigration that the EU is struggling to control and this justgoes to show how attractive a target it is. Can it still be consid-ered a model? The economist Jeffrey D. Sachs12, believes that itcan: The European Union (EU) is the best model to be able tounderstand how neighbours bogged down in long standingconflicts have succeeded in joining forces for their mutual ben-efit[] The EU has created a peace zone in an area which wasonce the scene of endless battles. It has provided the institu-tional framework required for the reunification of Western andEastern Europe. It has created regional infrastructures. The sin-gle market has played a key role in turning Europe into oneof the most prosperous regions on the planet. And the EU isa global leader in the field of environmental sustainability. Itis for these reasons that the EU represents a unique model forother regions that are caught up in conflicts and experiencingthe effects of poverty, insufficient infrastructures and the envi-ronmental crisis. The EU thus continues to play an important role on theworld stage, from the confines of this Europe so unsure of whodoes not belong (or not yet?) to the Union, but whose influ-ence reaches even the most remotely located emerging coun-tries. Some of the latter have adopted one of the many languagesspoken in the EU. The majority of them owe part of their newlyacquired wealth to the fact that Europe is their main custo-mer. And the extreme diversity which endangers European12. Jeffrey D. Sachs is a development specialist, Director of the Earth Institute at Columbia Univer-sity and a specialist consultant appointed by the United Nations Secretary General to examine theMillennium Development Goals. Acsel - Lassociation de lconomie numrique. 49. Chapter I/Europe: Diversity in the single market49unification is also proof of the multiple advantages that it hasat its disposal. The retailers, and in particular all players involved inonline retail, need to fully integrate these European char-acteristics wherever the opportunities (single mar-ket, single or common currency as well as the differentEuropean and trans-European linguistic and cultural areas)come up against obstacles (cultural, monetary, legislative and taxdifferences). Especially when, from another point of view anddepending on the situation and the strategic intelligence of theplayers, the obstacles are converted into opportunities. And, for the most ambitious, perhaps Europe is only the firststep on the road to conquering world markets. *** Acsel - Lassociation de lconomie numrique. 50. 50 Cross-border e-commerce/A Digital Europe at the heart of trade Acsel - Lassociation de lconomie numrique. 51. 51Chapter II The contrasting landscapeof European e-commerceWhat is the current state of European e-commerce and what direction is it expected to take? This is not an easyquestion to answer, especially when the definitions of thesetwo terms, Europe and e-commerce are uncertain, they have avariable geometry so to say. It is difficult to obtain homoge-neous data relating to the twenty seven EU countries. Certainreports only cover some of these countries, whereas others doquite the opposite (even the same ones) and include countrieswhich are not members, such as Switzerland and Norway, oreven Russia, Ukraine and Turkey. This is the case for two recent studies which we will provideas examples to illustrate, among other things, the current state ofplay in European e-commerce: the CRR-Kelkoo study1, alreadymentioned as well as the IMRWorld2 study on global e-com-merce in 2010. The aforementioned concerns 13 Europeancountries3, less than half of the total number of EU countries,but which account for 80% of its population and the majorshare of its GDP; but it includes two countries that are not1. Online Trends 2011. Research Report Commissioned by Kelkoo. Based upon our analysis of trade estimates,research reports and government publications. CRR, Nottingham, 9 December 2010.2. B2C Global e-Commerce Overview 2011. Containing total B2C e-Commerce, statistical data, forecastsand country profiles of leading and upcoming countries in the world. April 2011 (last updated: 11 May2011). Study sponsored by Oban Multilingual.3. Here is a reminder of some of the countries: Germany, Belgium, Denmark, Spain, France, Italy,Luxembourg, Norway, Netherlands, Poland, United Kingdom, Sweden and Switzerland. A Europe ofthirteen member countries that we will discuss later. Acsel - Lassociation de lconomie numrique. 52. 52 Cross-border e-commerce/A Digital Europe at the heart of trademembers, Switzerland and Norway. The IMRWorld studypresents a slightly different sample of European countries: 23countries, including Switzerland and Norway, but also Russiaand Turkey. This variation in the geographical scope of the studies isawkward, but paradoxically it may be useful if we look at itfrom a cross-border4 point of view. Our attention is alsodrawn to EU border countries such as Turkey and Russia (oneis candidate and the other not) where specifically the volume ofe-commerce business is currently quite low but it is expected togrow strongly. We would therefore be wrong to underestimatecross-border expansion to countries included in the broaderdefinition of Europe and further afield.The multiple facets of e-commerceWhat is more problematic is the difficulty we have in reachingagreement on the definition of e-commerce. It is increasinglydifficult to separate the type of retail we describe as electronicfrom the other forms of retail or even from the rest of the eco-nomy, without mentioning the traditional opposition betweenonline and bricks and mortar retail, or traditional retail as it iscurrently referred to. How can we separate online retail when the majority of com-mercial transactions involve an Internet connection at one pointor another in the transaction, without the whole transactionnecessarily being carried out on line? In the most advanced countries, it is estimated that over threequarters of consumers plan their purchases using the Internetin some way or another. In contrast, some people prefer to seethe products in store before making their purchase on line. Thisdiversity is even clearer when it comes to delivery services, to thehome or to a pick-up location, and also sometimes at the ware-house or store, or even at a drive-in, where a customer orders4. To simplify presentation in this book, we will refer to the term cross-border to represent commerceor cross-border e-commerce. Acsel - Lassociation de lconomie numrique. 53. Chapter II/The contrasting landscape of European e-commerce53 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 se...