The rise of ecommerce and the return of the old order

Established companies embracing ecommerce and ebusiness stand to make life difficult for upstart dot-coms. Helen Beckett examines what new research has to say on this subject...

The dot-corps have shrugged off their hesitation about ebusiness and are going online to reach customers and streamline their business operations, a new report confirms. A survey by Andersen Consulting reports that 97 per cent of major European businesses are now engaged in ecommerce, with management consultants identifying e-procurement, sales and marketing and HR as the key 'e' functions. In the past the main motivation for bricks and mortar companies to embrace ecommerce has been the fear of losing out to competition. However, two factors are ensuring that European bricks and mortar players are surpassing the dot-com upstarts and rivals from the US when it comes to ebusiness. These are their superior ability to 'act local' and their willingness to adopt new economy business models according to Rosemary O'Mahony, managing partner EMEA at Andersen Consulting and co-author of the report. "A surprising finding was that even though the internet is a global medium, ecommerce is not yet global. There is a need to have a local site and local partners," said O'Mahony. Acceptance of new economy business models and management styles was always going to be essential if old economy companies were to catch up with the dot-com young Turks. According to venture capitalist and incubator, EStart, this is now starting to happen. "Corporates are investing in start-ups or are forming joint ventures. Better still, they are doing it for themselves with more entrepreneurial management and flexible organisation," confirms Jamie Mitchell, marketing director at Estart. Certainly more and more dot-corps are spinning off their ebusiness concerns into separate legal entities. The French Insurer AGS is one company doing this on a permanent basis, and the Andersen report 'Connecting the Dots' cites the resulting site, Okassurance, as proof of the success of this approach. Other established companies, while preferring the clicks 'n' mortar approach that integrates off and online operations, nonetheless recognise the momentum that a temporary spin-off can generate. Dresdner Bank is an example of a key player opting for this strategy. Whichever model is adopted, the Andersen report points to big increases in ebusiness activity this year and sales and marketing emerges as the most popular function. A total of 72 per cent of dot-corps are implementing S&M compared to 53 per cent last year, and 47 per cent said they are using e-procurement. Meanwhile, both the management consultants and VCs conclude that reports of cheap prices on the internet taking precedence over branding are premature. However, the report's conclusion that different European territories demand local websites supports the view that brand will remain critical in Europe for the time being. The EU agenda to create a more homogenous business climate by harmonising consumer protection across all its states suggests this will take some time. The report recorded some key differences in perception between the regions. In Germany 91 per cent of executives believe ecommerce will help them secure strategic positioning compared to 33 per cent of French executives. O'Mahony said: "Culturally we're in a strong position. Europe dominates some of the most ancient trade routes such as those between Spain and the Latin Americas, and from Germany to Eastern Europe. We have the opportunity to open up the electronic equivalents of these trade routes." Logistics and fulfilment remain a strong suit for the dot-corps, emphasised by the dot-coms' lacklustre view of these disciplines. A report by PricewaterhouseCoopers (PwC) released last week found that only 15 per cent of dot-coms believe fulfilment is important to short-term success, compared to 31 per cent of their bricks and mortar counterparts. Bill Bound, European E-business Consulting Partner at PwC Management Consulting Services said: "Traditional companies' emphasis on fulfilment is the result of years of experience, whereas the dot-coms believe that strong marketing will persuade customers to log onto a website and order goods that never actually get delivered." Meanwhile, the challenge ahead for the dot-corps is to become more customer-centric, concludes Andersen's O'Mahony. "Oftentimes, they don't know much about their customers. In ecommerce they have the chance to segment according to profitability and other criteria," he concluded.