Without Borders.

Marketing in a World

While e-commerce enables all marketers to easily target consumers worldwide, local businesses in every region may yet retain a home court advantage.

Blowing westward across the Pacific, a zephyr of millennial commerce is gently kissing the Taiwanese shore. On this Chinese isle a quintessential American corporation, General Motors, now sells 10 percent of its cars over the Internet. With a Web site that already attracts about 150,000 hits per month, GM expects that cybertrade wheelings and dealings will soon account for nearly a third of its Taiwan sales.

Meanwhile, wafting across the Atlantic is the thick and pungent aroma of Munster, Morbier, and Brie. A French purveyor of fine cheese--www.fromages.com --now directs more than half its sales to customers in the U.S. And, finally, in a brave new order of international commerce, Amazon.com CEO Jeff Bezos has vowed to take over the entire world.

Maniacal ambition notwithstanding, the Internet certainly looks like the carrier wave of a marketing revolution. It allows retailers to reach disparate consumers in ways that operators of conventional brick-and-mortar businesses could only dream. It can be fast, direct, and even personal. And yet a pertinent question remains: Will e-commerce truly enable marketers to treat national boundaries as mere lines on archaic paper maps?

The number of potential consumers makes the idea of borderless commerce a tantalizing ideal. Intel CEO Crag Barrett says that in the world today there are between 150 million and 200 million "connected" computers. And he figures that within five years the total should reach one billion machines. If one excludes a handful of woefully underdeveloped nations, this means the Internet's consumer coverage will be virtually universal.

Today the U.S. accounts for about two-thirds of the world's business-to-consumer e-commerce, which the GartnerGroup's Dataquest division says was worth more than $31 billion in 1999, up from $11 billion the year before. But the rest of the world is catching up. Dataquest forecasts that by 2003, the U.S. will be responsible for less than 40 percent of Internet commerce.

"The advent of free Internet accounts is dramatically increasing the number of users in Europe," says Blame Mathieu, a Dataquest senior analyst based in San Jose, CA. "Smart cards, digital wallets, and other secure payment methods are reducing security concerns. We believe that Europe currently accounts for 17 percent of worldwide consumer e-comrnerce revenue. By 2003, that share will increase to 30 percent." For the same year, Dataquest estimates that global e-commerce revenues will exceed $380 billion. (While the growth is impressive, the figure should be kept in perspective; in 1998, just three companies, Wal-Mart, Sumitomo, and Daimler-Chrysler, combined to generate nearly identical revenues.)

In any event, while e-commerce is opening different millennial horizons, the quest to reach distant consumers is as old as humanity. Paleolithic peoples exchanged goods in a chain that stretched from seashores to hundreds of miles inland. Seafaring Phoenicians wired Mediterranean trade routes. The legendary Silk Route was not for the faint of heart. And in recent times, the likes of Coca-Cola, Colgate-Palmolive, and McDonald's have shown that borders don't deter good marketers from developing a global presence.

Web-based businesses, however, are a slightly different kettle of fish. Most commerce on the Web today is what's been described as "pick and pay e-tailing." In many cases, says Mathieu, Net sales are not incremental, but simply substitute purchases that would have been made elsewhere. "Because Ainazon.com makes it easier to buy books, maybe consumers are buying 3 percent more books than before," he observes. "But the rest of the sales are being taken away from somewhere else."

What's more, U.S.-based e-tailers aren't penetrating international markets to nearly the degree once thought possible. For one thing, explains Mathieu, "brick-and-mortar businesses in Europe and Asia have had the advantage of watching e-commerce develop over the past couple years, and are determined not to make the mistakes of their counterparts in the U.S., who were caught off-guard by the e-commerce revolution."

Further, these non-U.S. e-businesses are off to good starts by using local currencies, distribution channels, and languages other than English. Indeed, recent figures show that 92 percent of the world's potential customers and 68 percent of the world's total purchasing power resides in countries where English is not the native language. According to the IDC division of the International Data Group, 45 percent of all Net users live in non-English speaking nations. As former German Chancellor Willy Brandt once said: "If I'm selling to you, I speak your language. If I am buying, dann mussen Sie Deutsch sprechen." In other words, one must sell in the language of the customer.

Language isn't the only barrier to cross-boundary e-commerce. "Privacy concerns are one of many legal differences between the U.S. and Europe," says Don Peppers, president of marketing consulting firm 1:1. "The Europeans have massive restrictions on how companies can acquire and use customer information. For example, you can't transport certain information out of the European community. If you're an airline with a central reservation office in Dallas and take a credit card number from a French passenger, you've violated the law. And while the law has a legitimate purpose, it creates a non-tariff trade barrier."

Europe, in fact, is a maze of Byzantine regulations. Automotive e-tailers, for instance, are stymied by European Union rules that prevent dealers from competing on price. But lest we feel smug, Detroit is also hampered by state laws that protect franchised dealers from direct marketing by manufacturers. Likewise, laws that are direct vestiges of Prohibition prevent U.S. winemakers from shipping e-tail orders to consumers in numerous states.

Cultural traits can also thwart cross-border marketing. "The Japanese are very reluctant to give out credit card numbers over the phone or over the Internet," says Mathieu. "Japanese consumers will actually order something on-line, and then go down to the equivalent of a 7-11 and complete the transaction there. While the clerk probably transmits the same information to the vendor on-line, the physical contact creates trust.

Consequently, even in the grandly global world of the Internet, local businesses will often have a home court advantage. And that may be natural because a great deal of commerce is, at its essence, a local endeavor. It's why some of the more promising e-businesses in the U.S. are those delivering groceries, videos, and junk food. "Physical logistics," says Peppers, "is still one of the most important issues in business."

For all this, Peppers still believes that e-commerce will eventually bust borders and barriers. Europeans are already using the Internet to navigate around some of the EU regulations that inflate the price of books, cars, and other items. "If I had to bet on e-commerce or government regulations," adds Peppers, "I'd bet on commerce nine out of 10 times."