E-commerce taking off, but not a high flyer

February 09, 2007 - Germany

Deutsche Bank AG says innovative digital technologies have wrought fundamental changes in the trade in goods and services. Digital web portals provide greater transparency in business-to-consumer (B2C) e-commerce as a more sophisticated form of global distance trading. This transparency is making B2C e-commerce popular across broad sections of the world’s population. An analysis of the shops, shoppers and goods traded in B2C e-commerce reveals numerous peculiarities.

It is striking that shops that are new to B2C e-commerce are, on the one hand, seeking to strengthen existing customer relations through online marketing and, on the other, seeking to attract new customers. Many shops have realised their need to catch up especially in cross-border trade.

Currently, two-thirds of all German shops offer their goods and services via web platforms. The cross-border share of total sales is less than one-tenth at four in five of these shops.

As regards the goods traded, the bestsellers of classic mail order business also dominate B2C e-commerce. At the top of the list of items traded over the internet are physical goods (such as PCs, books and clothing). Trailing far behind are offers from the following three categories: web services (e.g. dating agencies, classified ads), digital goods (e.g. software, computer games, videos, music, audio books) as well as events and travel (e.g. hotel reservation services, tickets).

E-shoppers are quoted as giving major consideration to security issues. However, sensitivity regarding security issues differs widely depending on the e-shopper’s sex, experience with B2C e-commerce and age. As a rule, men attach greater importance to technical security than women.

Besides, inexperienced e-shoppers tend to have more confidence in websites with an apparently trustworthy design. Also, one in two senior shoppers has very strict limits to his e-shopping activities and only relies on well-known and thus confidence-inspiring brands.

While the internet is being recognised as a sales channel by a growing number of companies and consumers, the market share achieved by B2C e-commerce as a share in total sales is still relatively small. The quite modest progress is attributable to the fact that online shops still fail to respond to the special requirements of distance trading in the anonymous digital world. In particular, there is a wide gap between delivery and payment both in terms of location and time in B2C e-commerce.

The risk inherent in the payment transaction, which has to be borne by one of the two – mutually unacquainted – business partners, is seen as a great challenge. So it is particularly the conventional payment systems that stand in the way of success for B2C e-commerce as they cannot adequately meet the special demands in performance settlement. Especially smaller e-shops without adequate financial and personnel resources or their own invoicing department – which make up the bulk of online providers in B2B e-commerce – are struggling with the lack of tailor-made payment systems.

Despite these obstacles, turnover in B2C e-commerce in Western Europe looks set to grow at double-digit rates up to the end of the decade. This respectable growth is from a relatively modest base, however, i.e. current annual turnover of roughly EUR 130 bn or one-seventeenth of total retail sales in western Europe. So, in absolute figures B2C e-commerce will remain some way below potential on amedium-term horizon.

The Study concludes:
- Innovative digital technologies have wrought fundamental changes in the trade in goods and services
- Digital web portals provide greater transparency in B2C e-commerce as a more sophisticated form of global distance trading
- This transparency is making B2C e-commerce popular across broad sections of the world’s population
- An analysis of the shops, shoppers and goods traded in B2C e-commerce reveals numerous peculiarities ...