This report focuses solely on ‘consumer e-commerce’. It excludes business-to-business e-commerce which has traditionally been carried out through Electronic Data Interchange (EDI). Our focus for consumer e-commerce is wider than Web-based approaches. It takes in the plethora of the other platforms and technologies which are evolving, including ‘smart card’-based solutions or instructions issued over digital networks that do not use Web interfaces.

For the purpose of this report, we have adopted the following definition for e-commerce:

E-commerce: the purchase of goods, services or other financial transactions in which the interactive process is mediated by information or digital technology at both, locationally separate, ends of the interchange.

Developments in information and communications technologies (ICTs) are moving at an ever increasing rate. These developments are having an effect on economies throughout the globe and on individual consumer behaviour.

The challenge facing most industries today is how to gather the relevant information they need to take informed decisions about future strategies to retain a competitive edge.

Already many companies are using the Internet to reach new customers at home and beyond in more efficient and more personalised ways. While some high street retailers feel under threat from offers being made over the Web, others understand that making use of digital developments is crucial to their survival.

By presenting current research on consumer profiles and forecasts of their likely take-up of e-commerce, businesses within the retail industry will be able to find a starting point on which to base their future involvement in this vast electronic revolution.

Consumer e-commerce does not require high levels of sophistication on the part of the consumer, but there is a learning curve as consumers are expected to navigate their own way around data provided by the retailer. This is usually successful as long as the data is sufficiently user-friendly.

Main conclusions
The UK market for e-commerce will grow substantially to at least £2.5 billion by 2003, with forecasts as high as £7 billion or more (See Figure 1).

Retailers of all sizes and in all sectors should be aware of the potential opportunities that e-commerce offers and be ready to take advantage of them.

There are many potential benefits to retailers from e-commerce, including:

— electronic store fronts are easier and cheaper to maintain than physical ones;
— open 24 hours a day, 365 days a year to customers in every time zone in the world;
— automatic data checking (credit card data etc.);
— reduced support costs;
— reduced costs per transaction;
— provision of data to inform ‘just in time’ management and improved forecast accuracy;
— ability to rapidly alter information on product specification, cost, etc.;
— decreased time-to-market for new products;
— reduced costs for electronically deliverable products and services;
— facilitated access to niche and overseas markets and to target customers;
— customer involvement in product and service innovation;
— increased customer loyalty;
— a level playing field for small and medium sized enterprises (SMEs) vis-à-vis larger companies in access to markets
— increased profitability.

The use of PC access to the Internet currently dominates the e-commerce market but forecasts suggest that sales of PCs in the UK may peak in the next few years and alternative platforms, such as digital television (DTV), will provide new opportunities for e-commerce. Some forecasts suggest that 75% of households in the UK will have DTV by 2008.

It is not yet clear which types of interfaces will be adopted by consumers. The PC-based approach has dominated to date but other strong contenders are emerging. While technologies like interactive digital television (iDTV) and games consoles will bring e-commerce into the home, screen phones and personal digital assistants (PDAs) will extend consumers’ access further.

Profiles of current e-customers are based on analysis of Internet users which can only be an approximation. Currently the typical e-commerce consumer in the UK is a 34 year old male, in social class ABC1, who lives in the South East and has at least one degree. Over time women are expected to become a much stronger purchasing force online.

Access to online services currently declines with increased age. A move to greater use of DTV could make access to e-commerce by older groups easier, but limited disposable income could constrain the extent to which this becomes significant.

The products that have dominated the e-commerce market to date have been flights and travel, CDs, books and computer hardware and software. The development of a wider consumer base will increase the demand for other products and services online.

Potential and known benefits to the consumer from e-commerce are numerous and include:

— quality of product information available;
— topicality of information – regular updates;
— ability to perform non-linear searches;
— ease of comparison shopping;
— provision of ‘hard to find’ products;
— reduced costs due to electronically open marketplace;
— immediate delivery of certain products (e.g. software, electronic documents etc.);
— convenience of online support through Frequently Asked Questions (FAQs).

There are potential barriers to the growth of e-commerce which successful retailers need to address if they are to increase their share of the e-commerce market. These include:

— ease of access;
— speed and reliability of delivery service;
— quality and range of products and services provided;
— information on quality assurance and after-sales services etc.;
— issues relating to risk and security of personal information (privacy);
— the need to create a pleasurable experience.

The growth pattern of e-commerce in the UK is expected to be significantly different from that in the USA because of:

— geography;
— demographics;
— economic structures (including retail sectors);
— telecommunications and broadcasting systems and infrastructures;
— familiarity with other distance shopping modes (mail order, telecom commerce etc.).

Scenarios
Four scenarios are presented offering four distinct evolutionary paths of e-commerce under the influence of differing technological, business and social trends and choices. They are not predictions, merely alternative futures, but all assume a growth in the value and level of e-commerce in the UK. We have called these scenarios Explosive, Dynamic, Active and Sluggish to reflect the rate of development of personal e-commerce and its social and economic impact.

We welcome your comments on this report. You can contact us through the Foresight Knowledge Pool: www.foresight.gov.uk or write to us at:

The Secretariat
Retail and Consumer Services Foresight Panel
Room 575
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET

The closing date for comments is 1 June 2000.