 | Issue: | Latin America II 2000 |
| Article no.: | 13 | |
| Topic: | “When E Meets Me” | |
| Author: | Jim Kelly | |
| Title: | Chairman and CEO | |
| Organisation: | United Parcel Service | |
| PDF size: | 20KB |
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Article abstract
The expression, “there are two sides to every story,” certainly applies to the near-future possibilities for e-Commerce and Latin America. On the one side, you have a remarkable technology story. The World Wide Web and its accompanying applications for commerce are exploding, leapfrogging generations of technology, and enabling commerce like never before.
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On the other hand, you’ve got the political or human side. Here, insecurities, misunderstandings, and the desire to protect, are still part of the equation. Put another way, the front door has a gatekeeper that is wary about what this e-Commerce visitor means for me. I call this story, “when E meets me.” Let’s begin by looking at where technology has taken us. Indeed, the Internet and e-Commerce are expanding by leaps and bounds. In fact, the Net is doubling in traffic volume every 100 days. Every 24 hours, 3.6 million new pages are added to the Web. And every minute, 36 new households are wired to the Web. As far as e-Commerce goes, consumers spent US$15 billion shopping on the Web last year, and that was twice the amount they spent the year before. But this consumer activity was just the tip of the e-Commerce iceberg when you compare it with business-to-business activity. B2B e-Commerce grew to US$ 100 billion in l999, and is expected to explode to US$ 1.3 trillion by 2003, according to Forester Research. For its part, Latin America now has 7.5 million Internet users; which is up from two million in l997. And according to forecasts by the Internet research firm, IDC, Latin America will have 20 million Internet users by 2003. By that same year, the volume of e-Commerce activity is expected to be US$ 8 billion. B2B e-Commerce should make up 75 percent of that total. In light of these forecasts, I don’t think it’s an understatement to say we’re living through a business revolution as profound as the Industrial Revolution was to a previous generation. That is driving all this?We recognised years ago that two mega-trends were going to forever change the way our customers did business. Those trends are globalisation, and a dynamic we call, consumer-pull. Of course, globalisation isn’t really new. In fact, it’s been going on since the ancient Phoenicians first plied the waters of the Mediterranean and beyond, looking for trading partners. But future historians may well describe this era we’re living through as the Golden Age of democracy. The Berlin Wall fell in 1989. The Soviet Union officially dissolved in 1991. And the Internet has introduced a free flow of information around the globe. In this environment, profound changes in business development have taken place. In the last decade, we’ve seen the following: o The emergence of thousands of multinational companies. o The strengthening of regional trading blocs around the world. o The expansion of new trading routes, such as Asia to Latin America and, o Unprecedented opportunities for entrepreneurs. Today, consumers can pull whatever information and services they want from the Web, and, at a price they want to pay for it. Suppliers and customers are using networks like the Internet, Intranets, or Extranets to compare prices, shop features, and reach across geographies to a wider pool of possible vendors, partners and employees. Customers are connecting directly with each member of the supply chain to pull what they need, when they need it, and often at a price they’re willing to pay for it. Suddenly the end-customer is king Consumer-pull enables small businesses to compete on an equal footing with giant multinationals. Conversely, it’s what’s enabling the world’s largest corporations to act as nimbly and customer-centric as a lone consultant with a few clients. The power of consumer-pull and globalisation has jump-started the astronomical growth of electronic commerce. But one thing it hasn’t done is to change the nature of commerce. That’s still all about the buying and selling of goods through trading partners. In fact, we like to say you can drop the “e” in e-Commerce because it’s all about connecting buyers and sellers. That’s the way business is, and will continue to be done. Nothing fundamentally has changed. What the genius of technology applied to commerce produces is the capability to marry three once distinct flows of commerce – goods, information, and funds – into a single flow. We’ve learned, for example, the information about a package – the flow of information – is nearly as important as the package itself. Consumers and businesses love to track the progress of their shipments online. In fact, UPS receives an average of 2.5 million on-line tracking requests every business day. And just as technology has combined packages and information, it’s also bringing funds into the mix. You may not think of UPS as a financial services company. But picture a network of 85,000 drivers, all armed with hand-held computers. When that hand-held computer scans a package and captures a digital authorisation signature, we immediately confirm a shipment is at the right place. That signature could also trigger a payment to a supplier. So the process of delivery, matching purchase order with invoice, and approving and triggering a payment, can all be compressed into a single, electronic moment. Our recently announced electronic bill presentment and payment service promises to eventually leverage the power of digital authorisation signatures to serve billers and payers in business-to-business transactions. It will also help businesses around the world with financing solutions like financing account receivables. This will provide businesses with means to improve cash flow and opportunities to expand to new markets.Interestingly, when it comes to financial services, Latin American firms are at the forefront in taking advantage of the global e-Commerce boom. Over the past year, Banco do Brasil has embarked on a US$1.8 billion project to revamp its retail banking system via e-Commerce technology. The Brazilian Banking Federation estimates by end of 2000 as much as 30 percent of all banking will be done by the Internet. In other Latin America Web commerce activity, Argentina’s Acindar, the giant iron and steel company, has invested millions of dollars for a new systems integration network. That system enables field sales representatives to access inventory, sales and order status data from a central database. And in Montevideo, Uruguay, more than 1,000 pharmacies are connected to the Centro de Farmacia system. The system provides the pharmacies with up-to-date and uniform information about medication prices. Progress has been made. But here’s where the political side enters the e-Commerce story. Latin America has not yet built the environment that enables the seamless New World commerce model. Existing governmental regulations and trade policies were created to serve a different era of business. Too-high tariffs, labour laws that inhibit efficiency and customs procedures that make just-in-time operations nearly impossible to achieve, put limitations on progress. Technology has delivered a global commerce network that enables buying and selling at light speed. Yet it all comes to a screeching halt as soon as goods cross national borders, and are subjected to outdated customs processes, which in some cases are paper-based. Isn’t this an irony? You have this remarkable Internet technology spreading like wildfire around the globe, and some countries still use paper-based customs systems. Why? The answer isn’t always simple, or one of resources. At the bottom of it, there’s usually human nature. There is an urge to protect, and a resistance to change. It’s a “how will it benefit me?” impulse. That may not always be logical, but its impact is substantial nonetheless. A Forrester Research study tells the tale. The Forrester study found that e-Commerce companies, either with or without previous international experience, cited shipping as the number one reason international Web orders are turned away. Among e-Companies with international experience, tariffs and taxes also ranked as a major reason Web orders are turned away. So it’s pretty clear that for e-Commerce to reach its full potential as an accelerator for business growth in Latin America, barriers to shipping must be addressed. Or, put another way, a seamless Web for trading goods and services is meaningless, and in the end unattainable, without a seamless network for transporting them. What can we do? Good places to start would be opening key sectors such as telecommunications, transportation, and financial services, along with automating the customs process. For example, the average telephone bill for a Latin American household is US$ 53; that’s twice as high as the U.S. average. With such high Internet access costs, is there any wonder why only 20 percent of the region’s computers are connected to the Internet? On the bright side, we’ve seen a recent trend toward trade liberalisation through open skies agreements between the U.S. and nine countries in the region. Recent successes include bilateral agreements with Argentina, Chile, and the Dominican Republic. Boeing predicts that intra-American air trade, which now exceeds two million tons annually, will increase 40 percent over the next five years. Conclusion Certainly, Mexico is a trade success story. According to a recent Wall Street Journal report, since the pas-sage of the North American Free Trade Agreement in l993, Mexico has blossomed into a major exporter. Prior to NAFTA, Mexico ranked number 26 in the world in export volume. Today, Mexico ranks number eight.
