Why Ireland needs to embrace e-commerce and e-payments

7 Apr 2011

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There is a world of difference between the globalised Ireland doing business electronically and the localised Ireland of small firms hobbled by late payments and overseas competition.

The way business is conducted in Ireland needs to become more electronic: payment by cheque is outmoded and costly, and not enough Irish firms are trading online.

At present, 78pc of all transactions in the Irish economy are by cheque, which belies our claims of being a smart economy. Firms are being hobbled by late payment from creditors and this late payments cycle becomes a vicious circle that consumes jobs and businesses.

Ireland is the most cash-intensive society in Europe: a report by National Irish Bank revealed last year that Irish people withdrew more than €25bn in cash in 2009. The same report revealed Ireland could save €1bn annually if the Government alone made the move to electronic payments.

The European Commission has set a target that by 2020 all invoices sent in Europe will be electronic – this, it says, would save Europe €240bn within six years by attacking late payments and reducing inefficiencies.

Celtrino report

A report by Celtrino estimates Irish businesses can save up to 2pc of their turnover by cutting out paper invoices and optimising related supply chain processes. The translates to €246m in potential savings, based on Irish GDP of €1.23bn in 2010.

Paul Rohan, head of product management, Global Treasury Services at AIB Capital Markets, explained that with initiatives such as the Single European Payments Area, the ability to pay and accept payments across borders within the EU will prove invaluable to Irish firms intent on growing exports.

“This would also help reduce the difference between the globalised Ireland and the localised Ireland. We have multinationals selling to Europe and the world from here and local firms, be they retailers or manufacturers, need to realise that it is within their power to trade globally.

“We have firms based in Ireland exporting to globalised standards but also local firms focused on the local market. There needs to be greater education. You cannot eradicate chequebooks overnight. It needs to be a multi-stakeholder project. At the same time, we could take advantage of the clustering effect of having Google, PayPal, Citibank and others based here and share that knowledge with Irish firms,” Rohan suggested.

There is much work to be done and a clear example of the imperative for Irish businesses to become more web savvy, embrace electronic payments and trade globally can be seen in how many Irish consumers are being targeted by overseas web businesses – right under the noses of local firms who haven’t embraced e-commerce.

Consumers online

According to the latest State of the Net quarterly bulletin, price-conscious consumers are turning increasingly to the internet to research and buy products and services. Irish businesses are losing e-commerce business to the UK and other markets that are targeting Irish consumers.

Many Irish e-commerce sites lag behind international sites in terms of the user experience, the deals on offer and the average transaction value. The .ie Domain Registry (IEDR) revealed that only 66pc of Irish businesses had websites and of these a mere 21pc had e-commerce capability.

To make matters worse, the IEDR revealed there has only been a 3pc net increase since 2000 in the number of firms conducting e-commerce on their websites.

If this is the case, it’s hardly surprising that Irish consumers underserved locally online are turning to overseas providers. For being e-commerce laggards, Irish firms have been paying the price.

New data from Visa Europe puts a value of €356m on Irish e-commerce, which works out at €172 per shopper. Irish consumers are going online to save money, with a majority believing that online shopping can result in savings of 18pc compared with prices on the high street.

Google’s head of marketing for Europe Dan Cobley pointed out that Irish consumers are buying goods online in record numbers. The only problem is they are buying goods from US and UK retailers, in particular, because so few Irish retailers have an online presence.

A recent Google and Experian Irish retail event attended by 100 retailers heard that declining consumer confidence, a multitude of purchasing options and the tough economic conditions mean Irish retailers have to work harder now, more than ever, to understand their customers and deliver targeted and relevant messaging, which in turn will generate sales and build consumer loyalty.

“Consumer confidence fell dramatically in the last four months of 2010,” explained Robert Quirke, business manager, Cheetahmail Ireland.

“In addition, shoppers are now well practiced at hunting through vast quantities of information, channels and purchasing choices for bargains and special offers. If retailers are to have any hope of survival in the current economic climate, they must seek to maximise every available opportunity at their disposal. Digital marketing is a cost-effective way of targeting new customers and promoting repeat purchases from existing customers.”

Digital is daily

Gary Flynn, Google’s head of online sales for retail and tech, pointed out that digital is already at the heart of Irish daily life.

Irish consumers spend almost 20 hours per week online, compared with the European average of 12 hours. They are looking for information and, critically, they are looking for purchases. Almost 70pc believe search engines will help them find a relevant seller of a product they are hoping to buy and more than 40pc intend to make more purchases online this year.”

Flynn warned retailers about the apparent disconnect between how retailers treat their offline shop window and online shop window, stating that almost 70pc of Irish SMEs don’t sell or promote their products or services online and he urged retailers to develop a digital strategy.

Flynn explained: “People expect access to what they are looking for 24/7; on the internet the shops are always open. For example, in 2008, 3.8m people bought online on Christmas Day, and this was a 26pc increase on the previous year! If, as a retailer, you are not selling online, then you are not in a position to maximise on these opportunities.”

But things are changing. According to Aileen O’Toole, managing director of online consultancy AMAS, Irish retailers and other businesses are beginning to fight back.

“And it’s not just about defending their patch,” she says. “They are beginning to recognise that there are serious untapped business opportunities, not only in Ireland but in overseas markets.

“Evidence from the UK and other more mature online markets shows that multichannel retailers – those with both traditional and online outlets – are winning market share against online-only retailers.

“The perception that overseas online stores offer better value is often incorrect. Consumers can get excellent value from Irish online stores or through offers on Facebook or Twitter,” O’Toole said.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com