The Internet - Profits and Losses

The United States outweighs the rest of the world in terms of the number of people using the internet. In June of 2001, an estimated 83 million people in the US had hooked up to the net.

Europe’s largest internet markets are Germany, Great Britain and France. In Germany, roughly 15 million households have access to the net. In the United Kingdom, the figure is estimated to be one million lower than in Germany and in France, some 13.5 million surf the internet.

E-Commerce recently became the new buzz word in the internet world. The advantages of e-commerce are clear—it’s fast, its simple, it’s cheap. That’s why more and more business is now being conducted via the Internet. But not all e-commerce companies have made big money. Many lacked the right strategy - in other cases, the expectations were simply too high. In addition, many European consumers are apprehensive with regard to buying things online.

Recent European Union data show that e-commerce represents less than one percent of total retail sales in the EU. European consumers rank the invasion of privacy as a top concern with respect to e-commerce and the internet. Current technology enables cyber-marketing companies to register detailed information about consumers as they surf the Web.

Today, the 15 nations that make up the EU boast the most comprehensive protection against the unlawful handling of personal data. EU plans to extend data-protection laws to the Internet have sparked complaints in the business world. New studies warn regulators that companies would be faced with an excessive financial burden if forced to implement secure privacy laws.

The differing ideas on data protection and handling personal data have sparked bitter row between the EU and the United States. But Europeans are ready to pick a fight to defend their privacy, even with the US. A new trade war could be just around the corner.

Case Study: How E-Commerce is Changing the Mail Order Business in Germany

Quelle is the premier mail-order company in Germany. In the mid 1990s, Quelle noticed it was losing business to E-commerce companies. Quelle then invested millions to get onto the internet.

Today, Quelle sends out some 100 000 packages to customers around Germany every day from its logistics center in Leipzig. About 10 percent of the orders now come via the Internet. Turnover from the Quelle website reached 650-million marks last year—about 290 million dollars. And that figure is rising all the time.

Erich R. Jeske is the company communications manager: "It has added a whole new dimension to our business, of course, simply because we are able to reach new customers. And a lot of the new customers we are reaching are young people. who are being drawn in to mail-order shopping. But I don’t think the (printed) catalogue is ever likely to disappear. They will both exist, side by side."

Six years ago it looked as if new internet start-ups would leave established businesses like Quelle behind. Quelle was forced to invest millions to keep up. About 50 people now work in the company’s new media department, designing and refining its internet presence. The project has been a big success - the Quelle website registers about one million hits a month.

"Internet technology offers you a whole range of new possibilities, new ways of presenting products," says Annette Noll-Decke, who is in charge of new media technologies at Quelle. "We can let people see products as three dimensional images, for example, and that has a completely different effect to the printed page. We can show how the product really works, and by using databases, we can make it easier for customers to find what they are looking for."

Quelle has been trying to avoid the mistakes of the competition. Its website does not offer products that do not sell well on the internet, socks for example. In fact, of the 80000 articles on sale in the catalogue, only about 8000 are available on the web.

Quelle admits that the Internet isn’t necessarily creating more demand. But it has opened up an new avenue for sales. In order to survive, Quelle was forced to establish its presence on the Net. Without it, there would be less reason to celebrate for the company and its employees.

E-Commerce, M-Commerce, B2B and B2C

Even traditional, well-established companies are beginning to see the possibilities the net opens up to them—especially when it comes to one of the most successful business models the medium has seen. It’s called Business-to-Business, or B2B for short. It means companies trading with each other - to purchase raw materials, for example, or to establish contacts with suppliers.

Almost all branches of business are now using the internet as a virtual market-place. Experts predict that this area is going to see massive growth in the next three years. Some forecasts suggest B2B turnover will soon reach 400 billion euro (some 350 billion dollars) -- an increase of 4000 percent from where it’s at today.

But things look very different in the Internet retail trade—what the pundits call Business-to-Consumer models, or B2C. There’s been some success with certain products like books, CDs and computer software, for example. But elsewhere the picture is bleak. There is no sales assistance when you’re ordering online, and that can be a key factor for customers wanting to buy household goods or personal items. In addition, many consumers are concerned about data security when shopping on the Web. Last year alone, these factors led to the disappearance of one in four Internet retail companies.

Nevertheless, experts believe the market is now consolidating. And advertising strategists are already looking ahead to what they believe will be "the next big thing". The future, they say, belongs not to E-Commerce, but to M-Commerce—retail trade via the mobile Internet. The potential market in Europe is undoubtedly enormous: in Germany, for instance, one in two people already uses a mobile phone. And when the next generation of mobile phones is up-and-running - the so-called WAP-phones, experts believe the advantages of M-Commerce will become clear to retailers and consumers alike: it’ll be faster, it’ll be simpler, and it’ll be even cheaper.