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e-Commerce in Ireland report from Brendan Hughes

Irish consumers are spending more time and more of their income online than ever before. 70 percent of adults in Ireland are now purchasing products and services online and while in large part online spending is focused on travel, technology and entertainment, 56 percent of adults are also purchasing financial services products online.

Multi-channel purchasing behaviour in the UK and Ireland. (IIA/AMAS State of the Net, Winter 2010)

Multi-channel purchasing behaviour in the UK and Ireland. (IIA/AMAS State of the Net, Winter 2010) .pdf

We are in the midst of a digital revolution: 1.7 million Irish people visited Facebook in August 2010; almost twice the number that visited in the same month last year, and globally it is estimated that within the next three years 1.4 billion people will be using smart phones to access the Internet. This digital revolution presents both challenges and massive opportunities for Irish enterprises.

Market dynamics

As a small trading economy, there are significant opportunities for the development of a robust export-focused e-commerce sector in Ireland. However, our ability to seize this opportunity is dependent on our ability to respond to the rapidly changing market dynamics.

Today’s empowered online consumer has more information available to them than ever before as they research product purchases. Google’s search engine remains the gateway to the Internet for most people and provides instant access to information on brands and products from a myriad of sources, most of which are not controlled by manufacturers or retailers.

As a result of the seemingly unlimited choice now available through the Internet marketplace, consumers are less loyal to the brands to which they have traditionally given their custom.

Business models

Business models are changing too. The online bookstore, Amazon was among the first to open up the ‘long tail’ of retail; stocking and selling both large volumes of best sellers and smaller quantities of many more niche products. The Internet has also fostered the ‘freemium’ sales model, where a significant level of service is provided at no charge and then a premium is charged to a small number of customers who require extra functionality. Skype, for example, offers a free Internet telephony service where just one in ten calls, those made to landlines, incur a charge. Skype has over 560 million users and when sold by eBay in November 2009 was valued at $2.75bn.

Online ‘marketplaces’ such as eBay and Amazon, enable consumers and small merchants to sell to each other within a trusted environment, trading both new and second-hand goods. Many of these small merchants have grown into global low-cost retailers. These Internet car boot sales present a real challenge to retailers who very often cannot compete on price given their large overheads.

Bricks and mortar retailers are seeing changes in customer shopping patterns and those who support ‘multi-channel’ shopping are rewarded as increasing numbers of consumers switch between online and offline channels for both research and purchase. The multi-channel approach has significant advantages over pure plays in meeting consumer expectations about how and where they want to shop.

New opportunities

While it is true that traditional business models are suffering as a result of a new breed of competition and ever-more demanding customers, the continually evolving Internet technologies do offer new opportunities for businesses. For example, due to the viral power of social networks, it is now easier and cheaper than it has ever been to create a global brand. Also, the explosion in cloud computing services makes it more feasible to develop low-cost platforms that can be scaled easily thus reducing initial capital investment.

The ubiquity of the Internet brought about by mobility and portability, means that customers can now be contacted through many different applications, on many different devices throughout their waking day. A global supply marketplace is only a few clicks away and consequently retailers too have access to a much wider range of product and service providers. The Internet can support businesses in reducing costs, being fleeter of foot in bringing new products to market and in cost-effectively marketing those products to the world.

While in Ireland we still lag behind our nearest neighbours in the UK in terms of online purchases, if anything this simply highlights the opportunity that exists for us here to grow our own Internet-based market. Furthermore, given our proximity to the UK market there are obvious opportunities for Irish e-tailers to tap into that population’s propensity to shop online.

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