Electronic commerce is on the rise on the World Wide Web. But there are still a number of problems in this new market place, write Alex Brummer and Nicholas Bannister
There comes a point with a technological process when the world wakes up to the possibilities of what can be achieved.
A decade ago the cellphone was a bulky item of limited range, high cost and minority interest. Now it is everywhere as much a fashion item as the wristwatch is, as the cost, access and availability of mobile networks have expanded exponentially.
The personal computer and its communicator with the rest of the world, the modem, have been around for nearly two decades now. But it was only in the mid 1990s with the explosive growth of the Internet and the World Wide Web that the possibilities for commercial development of these facilities have opened.
Almost everyone has recognised that the opportunities are there.
During the 1997 British election political parties, like Labour, saw its website as a critical way of targeting younger voters.
Universities have recognised the value of e-mail for speedier intellectual exchanges and large corporations are using their websites for disseminating information to shareholders, suppliers and customers.
It has long been recognised that the holy grail of the World Wide Web is e-commerce – doing business over the Web. But while companies in the computer field, like Dell, long ago realised their website was a cool way of reaching potential customers, more traditional manufacturers, retailers and providers of financial services have trodden warily down the e-commerce route.
But in many ways, e-commerce is simply part of a continuum which dates back to the last century and catalogue/mail-order shopping. Some of the greatest fortunes of the 20th century have been built on mail order. The busy or rural customer found it easier to shop from a catalogue delivered to the home and offering easy credit terms, rather than travel to the high street.
In recent times, with the increasing number of families with single parents or two working parents, downmarket catalogue retailing has been replaced with the highly fashionable home shopping concept.
The masters of the wired catalogue of the 21st century potentially will have the possibility of making the same fortunes as Sears Roebuck, Littlewoods and Empire have in the past.
This is clearly the nettle which Gap, the San Francisco-based clothing group, is seeking to grasp. With its focus on “preppie” American style from the chino pants and button-down cotton shirts, Gap was a fashion winner on the high streets of the United States and the United Kingdom until imitators, who saw their market share falling, moved on to its patch.
The decision by Gap to launch itself on the World Wide Web is an attempt to stay ahead of the predators moving into its territory. It is counting on an overlap between its upper- income-level young customers and Internet users. Statistically, it would appear to be on the right track.
A study recently published by the British Department of Trade and Industry (DTI) provides some impressive data. The proportion of population, not just with PCs but actually online, is surging.
In the US, the world’s largest consumer of goods, some 21% of the population is now reckoned to be online, with Britain in its wake with 10%, followed by Japan, Germany and France, with the penetration much lower in the latter three countries.
According to the DTI data Japanese companies have surged into the lead on this front with 45% of them now having a presence on the Web. They are followed by US firms where 41% of companies have websites and the UK where the numbers have reached 37%.
This is not just some passing fad for commerce. Business has learnt over recent decades that information technology is a critical key to commercial success on any scale.
In the City of London the arrival of screen- based markets is driving the old open-outcry form of trading off the map, as is currently being seen on the options and futures market, Liffe.
Nearly all share transactions, whether they are conducted by big or small investors, are now done electronically. An increasing volume of small shareholders are checking their share prices online. Moreover, they have signed up with financial services companies who provide them with programmes which allow them to deal in shares electronically; e-commerce is making popular capitalism that much easier.
In fact the financial services companies, building on the experience seen in markets, are among the first to see the opportunity of the Internet.
They have responded to public demand for facilities where consumers can pay their bills, select insurance products and carry out banking transactions in their own homes.
Nobody is certain, as yet, what the dominant financial services technology will be. But as more people are connected to the Web and the cost of being connected falls, the PC offers perhaps an opportunity.
There are, however, all kinds of resistances to be overcome before e- commerce becomes a serious challenger to the high street.
In purely practical terms a constraint on consumer e-commerce is security. Customers worldwide have been concerned that credit card and other banking data put on to the Web, to make purchase at the globe’s largest bookshop, Amazon, or buy an insurance policy, will leave behind a footprint which even the novice hacker could decipher.
The British government announced recently that it had dropped a mandatory licensing scheme, offering companies guaranteed safe trading on the Internet, and had decided to go with a voluntary scheme instead. This will promote measures like “electronic signatures” to authenticate electronic trading documents.
It was required to abandon a more formal approach after it found that many companies saw compulsory encryption as difficult to operate.
Until the corporate sector can be assured that electronic contracts are valid and the consumer that their finances will not be plundered, this will be a naturally limiting factor on e-commerce.
Other problems for e-commerce include pricing strategies and social impact. In terms of pricing, a company like Gap, with prices set differently in the US and Britain, will have to decide if it is willing to give up higher prices for success on the Web.
But perhaps the most overwhelming difficulty for the World Wide Web is that it is not democratic.
The cost-inhibiting factor from telephone lines to subscriptions to Internet providers means that it is only easily available to the better-off A and B income groups, with a smattering below.
That may be great commercially, but will increase the gaps between the haves and have-nots in society.
Until telecoms and communi-cations regulators and providers can devise a means of providing a universal service at a lower price, e- commerce will remain a divisive technology.