Analysts: Firms Missing the Mark in Europe

Both European and US firms are not taking advantage of the Internet’s opportunities in Europe, according to research done by PricewaterhouseCoopers and Jupiter Communications.

Europe’s largest organizations are not investing sufficiently to realize the long-term potential of e-business,
PricewaterhouseCoopers found. Only 11 percent of European companies have fully implemented e-business solutions, and 48 percent are only at the early stages of Web site development.

“This research indicates that most European businesses are taking a defensive stance that pays lip service to the Internet and fails to maximize its full potential,” said Andy Zimmerman of PricewaterhouseCoopers’ Management Consulting Services practice.

“Few of the businesses we spoke to are making significant investments in e-business, many admit they lack the necessary skills, and most are seriously underestimating the impact of the new ‘dot com’ entrants.”

PricewaterhouseCoopers interviewed chief information officers or e-business leaders at 100 leading European companies for the survey.

Only 25 percent of the companies surveyed saw traditional competitors trading through e-business as their greatest threat and just 15 percent view pure Internet companies as their greatest challenge. Nearly half (45 percent) of the companies instead view their traditional, mainstream competitors, using traditional channels as their greatest threat.

As another example of how European firms are trailing the Net race, consider that of the top 50 US business-to-consumer brands on the Web, 45 are Internet-only brands. Only four percent of the European organizations interviewed by PricewaterhouseCoopers are looking to create an Internet brand. An overwhelming majority (86 percent) will rely either entirely on their existing brand or adapt their existing brand to the Internet.

Just four percent of organizations are currently investing more than 10 percent of revenues in e-business development. According to PricewaterhouseCoopers, the reluctance to invest may be driven by the lack of recognition from the capital market.

“European businesses have reached a point of no return. They must embrace a new business model centered around a proactive e-business strategy,” Zimmerman said. “Only by doing so will they realize their e-business ambitions.”

Research by Jupiter Communications found that European enterprises are not alone when it comes to missing the mark with consumers in Europe. Both US and European firms have failed to establish high-value consumer relationships with European consumers.

Jupiter also found that in the European market, the key elements of e-commerce — access, commerce, and content players–are driving low-value, high-volume relationships with consumers. However, Web ventures in Europe must increase the value of those relationships, from acquisition to retention, and eventually ownership in order to practice truly targeted marketing.

The plethora of free ISPs in Europe have increased the number of Europeans online, yet they have not increased usage of the medium, according to Jupiter. In a similar fashion, content players have attempted to increase their overall audiences by focusing on portal offerings of commoditized data and listings, and neglecting to drive consumers to vertical content sites.

Europe’s merchants, especially those offline, have concentrated on driving traffic to their sites instead of developing strategies to retain these customers, according to Jupiter. The low quality of European customer service online also works against merchants. A recent Jupiter survey of the top European e-commerce sites found that more than 60 percent of sites did not respond to a customer’s inquiry within 48 hours.

“The European markets are at a key juncture right now where fundamental changes in the way access is provided, content is marketed, and goods are sold must occur if the market is to advance,” Neufeld said.

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