Restrained Use of E-Commerce as a Sales Channel to Reach End Customers

Since the overwhelming success of the internet has seen its entry into private households, there has been much discussion regarding its potential as an online sales channel for products and services. Comparison of these optimistic expectations to the actual situation, however, is somewhat sobering. Private customers in fact play a very small role as buyers of goods and services made available over the internet (B2C).

Business to Business sales (B2B) make up the greatest proportion of all sales achieved via e-commerce. This is the finding of a representative survey carried out in the fourth quarter of 2002, by the Centre for European Economics Research (ZEW), in Mannheim, with financial support from the Landesstiftung Baden-Württemberg. A total of 4,450 businesses, active in the manufacturing industry and in selected service industries, which employ 5 or more staff members, took part in the survey.

The results of the survey indicate that in the manufacturing industry, approximately 85 per cent of online trade is B2B. Approximately 9 per cent of trade is B2C. Service providers have significantly more success than businesses selling products, when it comes to reaching clients through the internet. A third of the online-sales achieved by service providers were B2C. This is likely to be largely due to the fact that around half of the online sales achieved by retail businesses, as well as banking and insurance services, are made to private customers. As well as other businesses and end customers, other buyers, such as public institutions, also play a role. The significance of such buyers in online trade, however, remains small.

Businesses mainly use e-commerce for the procurement of goods, and to a much lesser extent for sales. In regards to sales, around twelve per cent of businesses participate in an electronic market place; only nine per cent manage their own online store. Almost as many businesses publish tenders online. The e-commerce activities of many businesses involve making direct contact with their business partners. Only a small proportion of businesses make use of special B2B market places or B2B auctions as a sales channel for products or services.

More than half of the businesses surveyed admit that the high costs of setting up and maintaining an e-commerce system reduce their readiness tosell products or services over the internet. Almost as many businesses report that their customers are unwilling to make purchases online. In addition, around 45 per cent of the businesses surveyed consider that their products are not suitable for online sale. It is primarily businesses in the manufacturing industry which remain sceptical in this respect; approximately 56 percent of manufacturing businesses describe their products as unsuited to online sale. The respective figure for service providers is 43 per cent. Significantly fewer businesses, however, report that logistical issues, a possible negative impact on sales achieved via conventional sales channels or problems completing the payment process act as an impediment to e-commerce activities.

Contact

Dr. Julia Häring, E-mail: haering@zew.de