Internet Studies Predict Rapid Growth by 2004

AMSTERDAM/SAN FRANCISCO/CAMBRIDGE, MA – As e-commerce and Internet use grow at exponential rates around the globe, a flood of studies and research reports is tracking progress, often with mixed results. Here are last month’s samples:

Forrester Research predicted that global online sales would reach nearly $7 trillion in 2004. An Angus Reid study found that last year 120 million of an estimated 300 million Internet users bought online.

A Dutch study said 107.8 million Europeans over the age of 15 have access to the Web. A German study found that every fourth German is now on the Internet and that 28 percent of online users made Web purchases.

What differentiates these studies from many others is the size of samples used. These are not your quick 700 people selected at random asked to comment on a presidential speech minutes after delivery, or perfunctory surveys of six countries.

The Angus Reid study queried 28,374 Internet users and consumers either face to face or on the telephone in 34 countries ranging from urban Argentina to urban Thailand.

Pro Active International, a Dutch Internet research company, surveyed 14,000 in 14 European nations. And the Allensbach Institute, one of Germany’s most prestigious, queried more than 4,000.

Forrester, finally, conducted research in 52 countries to come up with predictions of “staggered” e-commerce expansion as different nations hit “hypergrowth” levels at different times and dimensions.

Researchers examined the conditions underlying this projected growth, including the regulatory environment, technology infrastructure, connection to international supply chains and regional trading blocs.

They expect e-commerce to account for 8.6 percent of global sales of goods and services by 2004 but said that a dozen nations would account for 85 percent of the projected total of $6.9 trillion.

Such growth, Forrester said, will be a function of shifting business-to-business transactions to the Web along the model of the auto industry where manufacturers are coming together to purchase parts and accessories online.

Forrester predicts that the US will retain its dominant position on global e-commerce markets, accounting for nearly half – $3.2 trillion – of the total in 2004, largely because of that shift.

Electronics, utilities and petrochemicals will “increasingly use the net to reach across borders.” The Ford, GM and DaimlerChrysler e-marketplace will pull in Canadian and Mexican manufacturers.

Nevertheless, the researchers say, some of this dominance will fade as Asia-Pacific and Europe begin to catch up, although not necessarily as a uniform region. Individual countries are likely to be e-commerce engines.

Germany and the UK will lead Western Europe’s e-commerce surge, which is expected to reach $1.5 trillion in 2004. Forrester cites Siemens’ shift of distribution partners to the net as well as British Telecom’s deals with Commerce One and Vertical Net.

The company expects e-commerce to double every year in the 2000-2004 period with German online sales to leap from $20.6 billion this year to $386.5 billion and the UK from $17.2 billion to $288.8 billion.

In Asia Japan will account for more than half of the projected $1.65 trillion (see p. 19) with Australia and Korea following far behind with about $200 billion each.

Latin America, Forrester noted, lags far behind the other major regions of the world with online sales predicted to hit $82 billion, the bulk, $64 billion, coming from Brazil.

The problem in the hemisphere is both political and technical. E-commerce growth, Forrester noted, depends on public policy support and a “critical mass of technology linkage – everything from cell phones to Internet hosts.”

Angus Reid’s survey of current of Web users and purchasers also found the US solidly in the lead with 108 million Americans 18 years or older having access to the Internet.

The study, released last month but carried out last November and December, also found that 32 million Japanese were on line, 18 million Germans and 14 million Britons. Nor does size of population count that much in penetration rates.

Canada has fewer than 30 million people, but 12 million of them are online. South Korea has 9.6 million and Australia 6.5 million. France and Italy, both nations with 50 million plus populations, had 8.8 million and 6.7 million respectively.

“We found that the countries with the highest rate of Internet penetration in terms of population percentage were the US, Canada, Sweden, Australia, Switzerland, Finland and the Netherlands,” said Gus Schattenberg, a vice president in the company’s Global Products Group.

More than 30 percent of all Americans online have bought something on the Web, Schattenberg said, followed by Sweden, Switzerland and Canada, all clustered around 20 percent.

Japan, Germany and the UK are in the 12 percent to 14 percent range but of course the gross numbers are far larger than the smaller countries with higher penetration percentages.

“We asked people how likely they were to buy online again and almost 75 percent said they would be somewhat or very likely to buy on line again,” Schattenberg said.

But his researchers noted sharp country by country variations. “It’s easier to find people ready to buy again in the US and Europe than it is in the developing countries where the power supply is not as reliable.”

Still, he said, “our take on this is that online commerce has a great deal of room to grow. Once people try it they become fans.”

Nor did respondents seem worried about security or fraud with only a small minority expressing such concerns. Credit card purchases, however, are made mostly in Canada and the US where 75 percent of buyers pay with cards. Fewer than half do outside North America.

But Schattenberg also noted a slippage in the American lead. Online banking is more widespread in Europe, South Africa and Brazil. To some extent, he said, this was due to the fragmentation of the US banking market.

The Dutch study found that people over 15 who are online make up 34 percent of Europe’s population with 24 percent of that population classified as active users. But averages hide wide divergence, the survey found.

In the two week survey period 53.3 percent of Swedes over 15 were online but fewer than 8 percent in Spain and Portugal. In general, Holland, Scandinavia, the UK and the German speaking countries lead the Internet pack.

German figures, Liesbeth Hop, Pro Active’s CEO said, are skewered because low use in East Germany pulls down the average of high use in West Germany. Italy, France and Belgium also lag behind the European average.

Price is a key factor for Internet usage. Countries with free Internet access like the UK, the Netherlands and Scandinavia have far higher web penetration than those who pay still high telecom costs for access, she said.

Technology is an obstacle in southern Europe where it is not accepted as readily as it is in northern Europe which makes Internet marketing in the less developed regions more difficult, Hop said.

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