E-commerce development hampered by cultural barriers

E-commerce development hampered by cultural barriers

By Teddy Setiawan Wijaya

JAKARTA (JP): Online shopping is booming in developed
countries. In the United States, sales tripled last Christmas and
more new consumers came online than most cyber retailers
expected. Comparing the situation in the U.S. with Indonesia is
like comparing a tiger with a kitten. In fact, we are still far
behind even when compared to Singapore and Malaysia, our
country's closest neighbors.

Many people will say that security is a major problem in
electronic trade, or e-commerce, but this doesn't explain why the
U.S., Singapore or Malaysia is relatively ahead of us in the
development of this industry.

Our next excuse then might be the lack of phone line
penetration or infrastructure. This is not wrong. Indonesia's
phone line density (lines in services per 100 inhabitants) was
2.67 percent, according to data from PT Telkom in September 1998.

But there are many other indicators of e-commerce growth. For
example, the access to a personal computer, which is mostly
available only to white collar workers and university students in
big cities.

People with computers and phone connections are also not
necessarily online consumers. Usually, only people with high
incomes are attracted to buying things over the Internet. In
1998, U.S. households with annual incomes of more than US$50,000
accounted for 74 percent of online sales (Business Week, Jan. 18,
1999).

Another problem limiting e-commerce in Indonesia is that
people are just not accustomed to buying things through the net.
Most people need to see and touch things before they buy them.

The e-commerce scenario -- where a customer visits a website,
views pictures and information on products, and pays by credit
card -- is unpopular here. Education plays an important role. The
higher one's level of education, usually the easier it is for him
or her to accept new technology or new ways of doing things.
Culture and education thus represent a demographic barrier for
the development of e-commerce.

E-commerce can actually be divided into two major categories:
business-to-consumer sales and business-to-business sales. The
web-based company Amazon.com is an example of the first category,
and is the most successful Internet bookstore, selling books,
videos, and music recordings directly to end-user consumers. In
the business-to-business category, firms deal with other firms,
coordinating their business programs. EDI (Electronic Data
Interchange) is one of the electronic services that people argue
will be replaced by business-to-business e-commerce.

In an international conference on e-commerce, hosted by Telkom
in October 1998, one participant put forward an interesting
argument. She said that companies in Indonesia are currently more
concerned with survival than thoughts of e-commerce.

Shinta Witoyo, cofounder of PT Bubu Kreasi Perdana, an
innovative Internet content provider, said that "educating" her
customers (meaning firms) is one of the biggest problems in
marketing her company services.

"Most companies here simply do not find any compelling reasons
to embrace e-commerce. They ask 'What's so great about e-
commerce? Can e-commerce save our company?'," she said.

Until there is proof that companies here can run better
businesses using the Net, there is little chance that they will
make the plunge into e-commerce. This is a classic catch-22
situation. If no companies here get involved in e-Commerce, how
will we get the proof?

As a matter of fact, there are many benefits of e-commerce.
From a customer's point of view, e-commerce offers more choices
and more control. This control comes from the easy availability
of information. There are various network-based intermediaries on
the Net that can help consumers find what they want. Examples of
these intermediaries are: commercial directories (e.g. The All-
Internet Shopping Directory), search services (e.g. Lycos),
online shopping centers (e.g. The Asian American Mall), and
information suppliers (e.g. Andersen Consulting's BargainFinder).
Better information will allow customers to get better quality and
better prices.

Using online shopping is also more convenient for customers,
as travel time and geography are not constraints. Customers can
browse and buy products anytime, anywhere.

From the company's point of view, e-commerce will facilitate a
better relationship with customers by providing a means for two-
way communication. They can see immediately the customers'
preferences, and can tailor products to suit their needs. A
better relationship will lead to better customer loyalty. E-
commerce can also function as a more efficient sales and
distribution channel, as firms can provide more product
information to a greater number of potential customers at a lower
cost.

The savings come in two ways. First, with e-commerce, more of
the responsibility for sales is transferred to customers, who
must fill out order forms themselves. Customers find product
information, select the product they want fill in this
information in the order. This makes the online merchant less
dependent and can reduce sales people to a minimum. Second,
through electronic commerce, firms are able to save on customer
support expenses.

In 1997, Cisco Systems, the largest supplier of routers for
Internet traffic, moved 70 percent of its customer support
online, including everything from manuals to software. This has
eliminated an estimated quarter million phone calls a month,
saving over US$500 million.

Bigger savings for firms exist in business-to-business e-
commerce. With the proper process and technology, firms can
increase forecast accuracy, decrease planning cycles and lead
times while at the same time better manage relationships with
their suppliers and retailers. Real-time sales information can be
gathered at the end of supply chain, enabling firms to compare
their information and modify their forecasts to be more accurate.
More accurate and timely forecasts enables manufacturers to make
products only when they are needed, and allows retailers to cut
down on back-up stocks because they know that the products will
arrive in time. Stock shortages are also reduced considerably.

Another benefit of business-to-business e-commerce is that the
vendor can manage an inventory in which the supplier controls the
flow of goods, relieving the downstream manufacturer from having
to check for raw material requirements and make panicked phone
calls to place orders.

The Internet can act as a low-cost communication backbone for
suppliers to know their customers' inventory levels and analyze
usage patterns, and customers can also be aware of their order
status.

Shell Chemical Co., based in Houston, Texas, markets itself as
a "utility" company that supplies chemical products to customers
without interruption, and issues invoices once a month. Its
customers can use a web browser to reach Shell's SIMON (Supplier
Inventory Management Order Network), and enter their daily
inventory levels. SIMON receive the data, forwards it to the SAP
R/2 system, which calculates the dates when customers need their
next shipment. After approval from an account manager,
information is returned to SIMON, which is programmed to notify
the customer, by e-mail, as to when the products will be
delivered.

To a large extent, Internet has come to symbolize this
powerful yet uncertain world. Internet is not just a news service
or a new communications network, but it is a technology that
shapes a new kind of global economy -- the closest thing yet to a
unified "borderless" world market.

Electronic trade, which can remove distances and frontiers,
also provides an escape route from marginalization.

The International Telecommunications Union has a special
development initiative called "The ITU Electronic Commerce for
Developing Countries (EC-DC) Project". This project, launched at
the ITU World Telecommunication Development Conference 1998 in
Valletta, Malta, aims at empowering developing countries as
global players to market their products and services in the
global marketplace and receive a fair return on their investment.

Looking at the benefit and the increasing role of e-commerce
in the new global economy, we definitely have to continue with
its development.

Developing e-commerce needs the cooperation of various
parties, including the government as the policy maker and
possibly an early trader. Universities and non profit
organizations can educate, conduct research, and provide
important investment in human resources. And finally it is the
private firms who will be the main participants, and reap the
most rewards, in the global electronic marketplace.

The writer is analyst, Process Competency Group, Andersen
Consulting, Jakarta.