Special Report: Europe's b-to-b boom tantalizes U.S. firms

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Europe's online b-to-b marketing efforts might be trailing the U.S. in terms of revenue, but American marketers would be mistaken to think pushing forward in Europe is a walk in the park.

A close examination of the region reveals a hot market where, increasingly, suppliers and customers are running the same race to do business on the Web. To win in Europe, U.S. companies need to be adept at obstacle races requiring leaping over barriers in language, regulations and corporate cultures that vary widely in a number of countries.

U.S. companies must be prepared to work with a new set of rules if they're to survive Europe's fast-growing b-to-b sector, said Rosemary O'Mahony, an Andersen Consulting partner based in Paris who is responsible for the company's e-commerce program in Europe. For Americans, O'Mahony said, the key is to form alliances with local partners and localize content on Web sites. Additionally, they must adapt to the different national business and legal practices.

"Europeans tend to be more sensitive and understanding about the need to do those things," she said, "and over the past two years, we've seen a lot of b-to-b activity here."

It's no wonder. According to eMarketer, global revenues from b-to-b e-commerce will soar to $1.26 trillion in 2003, compared with $185 billion today. Currently, Europe accounts for 14% of the global b-to-b revenue; the U.S. accounts for 67%. By 2003, Europe will account for 29% of global revenue, while the U.S. will represent 60%. By the end of next year alone, Forrester Research Inc. predicts 1,000 new b-to-b operations will launch in Europe.

Chemical reaction

B-to-b sector development began a few years ago with e-procurement, O'Mahony said, a slow start punctuated by London-based BP Amoco plc's successful deployment of more than 50 local Web sites to conduct $20 billion of transactions with its suppliers and customers worldwide. The move has saved BP "hundreds of millions of dollars" a year, she said.

Then, in the last 18 months, e-exchanges started sprouting up all over the continent.

Take ChemConnect Inc.'s European efforts, for instance. The global online exchange for chemicals, plastics and industrial gases has 11,000 members in 110 countries worldwide, with buyers and sellers linked up via the Internet on ChemConnect's World Chemical Exchange sites. Europe is one of the exchange's fastest-growing sectors.

Though ChemConnect maintains its global headquarters in San Francisco, it is well represented in Europe, with offices in London, Rotterdam, Paris and Frankfurt. Compared against U.S. exchanges, "Europe started late, but is growing very fast," said Linda Stegeman, ChemConnect's senior VP-marketing.

Although most of ChemConnect's clients are global operators, Stegeman said, "Europeans are participating more and are beginning to host auctions and reverse auctions" in the new corporate trading rooms on ChemConnect's site.

"In the past, it would have had to be processed manually [in the physical world] and that would have taken months and tons of people," Stegeman said. "The efficiency of the Internet in terms of doing business globally is huge."

Financial gains

Europe's b-to-b finance sector is also beginning to take off on the Internet, now that the honeymoon for online business-to-consumer financial services is over.

Andersen Consulting concluded that in Europe, with all its hoop-jumping and paperwork, it takes about 12 weeks and $1,800 to register a business. It's far easier to do so in the U.S., where it requires just a week and $500. Bearing this scenario in mind, it isn't surprising that Andrew Moorfield, the U.K. managing director of finance and banking portal bFinance, believes the Internet has helped the company fill a gap in Europe's estimated $6 trillion banking sector.

Through the Web, bFinance offers a low-cost, high-quality platform for the CFOs, finance directors and treasurers of Europe's small to midsize companies seeking a wider choice of finance and banking services.

With offices in the U.K., France and Germany operating localized advertising-funded Web sites, bFinance uses journalists and former bankers to provide up-to-the-minute financial news to its users. It hopes to launch a Swedish service early next year, furthering the company's goal to be in every major Western European market by the end of 2001.

Launched in February, bFinance has already done nearly $900 million worth of business with 160 financial institutions, Moorfield said.

Industry experts forecast that the next b-to-b development in Europe will be the onset of online companies providing clearing and settlement services such as letters of credit and financial documentation for b-to-b partners in Europe, a side of the business already well served in the U.S.

But American companies, spoiled by the homogenous nature of working in an English-language market, should be prepared for some culture shock if they want a piece of Europe's b-to-b action.

A recent Andersen Consulting survey, concluded that while 91% of German executives placed e-commerce high on their agenda, only 33% of their French counterparts felt the same. Even in Scandinavia, usually treated as one region, a mere 9% of Norwegian business decision-makers questioned said e-commerce would affect future strategies, compared with more than 60% in Finland and Sweden.

Crispin O'Brien, London-based deputy chairman of KPMG's global electronic team, pointed out the root of the problem. In economic terms, the European Union, which has a bigger population than the U.S., might be considered one region. But the truth for U.S. marketers is that the E.U. is made up of 15 countries speaking different languages and dialects, using different currencies and practicing a variety of religions.

For this reason, O'Brien said that Europeans' familiarity with that environment makes them better positioned to exploit the market's potential. "U.S. companies will have to Europeanize their offerings," to continue to compete, he said.

BFinance's Moorfield agreed. "It's difficult to open offices in the different countries. The mechanism of funding and finding offices is very challenging."

Cultural and legal differences will inevitably raise serious regulatory questions in the future. But, according to industry observers, as European b-to-b is still in its infancy, no hackles have been raised so far.

In December 1999, the E.U.'s European Commission unveiled a plan that encourages all consumers and businesses to go online. It called for cheaper Internet access, risk capital for small to midsize businesses, and the transferring of all government data and information onto the Net.

National governments are also contributing to these Net-related initiatives for businesses. In Sweden, for example, the government is set to invest about $2 billion in a venture to make broadband Internet universally accessible.

Juliana Koranteng is a contributing editor for BtoB's sister publication Ad Age Global.

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