Europe Embraces eCommerce as Dotcorps Strike Back

97% of European businesses report using eCommerce, says Accenture study

PARIS, September 6, 2000 - The overwhelming majority of European firms are now embracing eCommerce, according to an Accenture study released today. Based on interviews with senior business executives and work with major clients, the study, Connecting the dots?, shows that 97 percent of major European businesses are engaged in eCommerce in one form or another.

Until recently, dotcoms were seen as the most active in eCommerce, but the dotcorps are now taking at least as big a role. Significantly, the report finds that the key driver of eCommerce initiatives is fear of competition. Seventy-five percent of established European businesses say they are trying to keep up with competitors, and seeking to secure a strategic position in their industry.

Furthermore, almost 80 percent of businesses report plans for exploiting further eCommerce opportunities, and 72 percent report that they have developed an eCommerce strategy. The survey also shows that approximately 72 percent of European firms now use eCommerce for sales and marketing, up from 53 percent last year; 47 percent of companies said they are using eProcurement, compared with only a few percent in 1998. There is continued usage across logistics, financial accounting, product development, human resources and payments, according to the study.

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

Some concerns remain, however, for established companies. The survey shows US firms as well as European dotcoms taking a much more entrepreneurial approach to eCommerce than many established European businesses.

But no fewer than 93 percent of established businesses said that despite the market correction they had not changed their plans for use of eCommerce, and an even greater number of dotcoms (95 percent) said they had not changed their eCommerce initiatives in the aftermath of the correction. It is clear that eCommerce start-ups with a real business case behind them, that are able to combine strong management and operational excellence, have good prospects. It is equally clear that large corporations can prosper in the new environment if they are willing to pursue eCommercial innovation and revitalise their entrepreneurial spirit.

The study stresses that companies are still learning to prosper in an environment where customers have more power and the boundaries between organisations are changing constantly. In this new environment buyers, suppliers and intermediaries have very different roles, mass customization can be critically important and the winners will be those who not only get the proposition right but execute it well. In effect, the new and old economies have begun to converge, mixing the sound business principles, experience and expertise of one with the agility and customer-responsiveness of the other.

Examples that illustrate this convergence are numerous. Until recently, most attention has been focused on the business-to-consumer (B2C) market. However there has been significant activity in the business-to-business (B2B) sector. In the chemical industry, 39 of the leading chemical companies have invested $70 million in Chemconnect, the largest global Internet exchange for chemicals and plastics.

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

Despite this, there is evidence of a growing wave of confidence in Europe, where 60 percent of executives believe that the continent can become the hub of a global network economy. This confidence appears to be reinforced by features of the European eCommerce landscape which have made it more difficult than expected (though by no means impossible) for outsiders, such as US companies, to prosper in the European marketplace. The multiplicity of languages is one factor, but the survey provides much evidence of subtler differences in culture, and a range of stages in the development of European eEconomies, which are probably even more significant. Differences in regulation and infrastructure are additional obstacles. European businesses also seem to have a firmer understanding of the need for localization and cultural sensitivity than US companies. The survey shows a significant decline in the number of US firms aiming for international expansion of their eCommerce initiatives.

European companies’ greater understanding of the complexities of international eCommerce trade can be one source of competitive advantage. This applies not only at home but also in helping European firms make the most of Europe’s linguistic and cultural links with other parts of world, now that eCommerce is making physical distance less important. But in the long term, this advantage might be eliminated if European companies assume that the greater complexity of trading internationally will offer them inherent protection from competition. A series of very successful overseas firms shows that companies from outside Europe can and do learn how to compete successfully in European eCommerce markets.

The study identifies clear advantages or "pockets of excellence" in Europe. Firms are very well positioned to reinforce their competitive edge with emerging technologies such as mobile telephony and digital TV. These technologies have begun to challenge the dominance of the PC as the medium for eCommerce. In this area, Europe [and Japan] lead the way but unless they can capitalise on that lead, Europeans could once again find that the business value of a technological advantage is lost to more dynamic competitors.

The study identifies two substantially negative factors for the continued growth of eCommerce in Europe: an increasingly evident shortage of key skills, and a legal and business climate less favourable to entrepreneurs than that of the United States. The latter, already on many CEOs’ minds in last years’ report, continues to cause concern. In supporting the eEurope initiative, a major effort to improve Europe’s eCommerce environment, the European Commission is clearly committed to helping businesses embrace eCommerce across the continent. The European Union is also beginning to move with a welcome urgency. The speedy introduction of the eCommerce directive and of competition in local telecommunications services are significant steps in the right direction. But more progress is needed - from both public and private sectors. While an entrepreneurial culture has been reawakened in many parts of Europe, the active help of governments and established businesses is still needed if Europe is to make the best of its opportunities and compete with the United States, says the study.

"We’re no longer talking about eBusiness so much as the "e" inside business," said Vernon Ellis, International Chairman, Accenture and sponsor of the study. "It is vitally important that the continent’s leading players, from business to government, understand that getting the "e" right is not only a matter of utilising the power of information technologies but it’s essential that this is linked to revitalised entrepreneurial spirit."

This report is the third in a series published by Accenture to monitor the progress of eCommerce in Europe. In 1998, we saw European businesses confronted with a choice between, on the one hand, the dead end of an indefinite wait-and-see approach and on the other, a dynamic strategy of developing eCommerce applications and building on pockets of technological excellence. In 1999 it was clear that Europe was not merely on the right path. European eCommerce had developed to the point where eEurope could confidently be said to be taking off. Today we can begin to trace the longer term features of European eCommerce markets. There is no question that Europeans are taking advantage of eCommerce, but significant concerns remain over how entrepreneurial they will be using it and how successfully they will be able to compete with firms from other parts of the world.