U.S. E-tailers Still Leery of Global Markets

Close to 300 million use the Internet worldwide — over half of whom log on outside North America — and yet the challenges of conducting international business online still discourage many U.S. businesses from profiting from global e-commerce.

Difficulties in adapting company infrastructure, re-targeting marketing efforts and dealing with complicated customs and tariff procedures make it easy to understand why so many e-commerce firms have elected to stay at home in domestic markets.

Nevertheless, no amount of obstacles can alter the fundamental reality that global markets have an overwhelmingly larger buying pool than national markets. Smoothening out the implementation process may make the difference for e-businesses that are going global.

Tremendous Opportunity

A recent United Nations report claimed that there are now over 1.5 billion Web sites worldwide through which billions of dollars (US$) are traded, yet fewer than five percent of the world’s population is online.

Studies have shown that most of the new growth in e-commerce will occur globally and not be restricted to the United States. Research firm International Data Corporation (IDC) estimated that 60 percent of the world’s Internet users in 1999 were not U.S. residents. IDC Director of E-Commerce Research Barry Parr expects that number to rise to 67 percent within the next 5 years.

IDC also predicts that e-commerce sales in Europe will soar from last year’s $5.6 billion (US$) to $430 billion by 2003. In Asia, online sales are expected to surpass $72 billion by then, compared with last year’s $2.7 billion. The Forrester group estimates that global e-commerce will amount to $6.8 trillion in trade by 2004.

Flexibility Rewarded

According to many analysts, going global is not an option but an inevitable reality for e-commerce companies. Those who fail to adopt a flexible approach to e-globalization may not be competitive in the future.

“Companies need to be preparing for this now,” Parr told the E-Commerce Times, “and the first stage is to make sure your company has a system that is flexible enough to deliver in multiple languages and currencies around the world.”

Researchers at Forrester agree. Last fall the research group found that the leading complaint among companies attempting to implement a global strategy was “internal obstacles and politics,” followed closely by the tension experienced by companies who resist balancing their local e-commerce strategies with their global aspirations.

Companies with strictly centralized corporate structures — especially in their Internet technology (IT) and operational procedures — may need to allow for more latitude when they expand overseas. Vendors, taxes and variances in local infrastructure can complicate the most smoothly laid-out plans.

For example, one participant the Forrester study complained of frequent power outages in both China and Malaysia, as well as inconsistent telephone service in India — adventures which corporate headquarters had not anticipated.

Advertising Boom

As the number of Internet users worldwide increases, so, too, does the amount of dollars that e-tailers dedicate to Internet advertising.

In June, Internet and e-commerce research firm Jupiter Communications, Inc. (Nasdaq: JPTR) reported that online global advertising will balloon from $4.3 billion (US$) last year to $28 billion by 2005.

Jupiter also said that the amount spent on Internet advertising in the next five years will comprise almost six percent of all global advertising revenue. The increase reflects the growth in the number of Internet users.

The challenge persists for e-businesses to practice balance and learn from the advertising industry’s foray into world markets over the past several decades.

Parr concedes that while mass-market advertising that caters to each locale remains difficult, “there’s a recognition that it’s not enough to build a site for the U.S. only. A company must build sites for Tokyo and Paris as well.”

Don’t Sweat the Small Stuff

In many aspects, e-businesses can benefit from the globalization experiences of non-Internet businesses. Many commonly referred-to problems need not develop into major hurdles to a company’s success overseas.

IDC’s Parr noted, “The Internet is not the only thing that is driving globalization. This is a trend that has been evolving for more than 20 years.”

Firms also note tricky customs rules that complicate shipping orders and make e-commerce more effective in some companies rather than others, but Parr plays down the inconveniences.

“Express companies can help companies manage the issues of getting something delivered overseas. There are ways around the problem.”