The Economic Security of Online Companies:- My objective with this article is to reflect on the strategies of online companies, and the economic security factors that must be treated and studied before the execution of any operative action.
Economic Security of Online Companies
The article analyzes the evolution of online companies, to reach its current state and the observation of possible trends. In addition, all economic security factors involved in the success of online commerce projects are detailed, such as: logistics, legal security, lack of knowledge of the market, tax differences, security technology, customs costs, exchange rates, systems Payment or scarce knowledge.
The current state of online businesses
Europe has always had a strategic role in international trade for centuries for its maritime natural position as a gateway to the Mediterranean, as well as being the bridge from Europe to the African continent.
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However, today there is a certain decline in the geo-strategic position of Europe and Asia in international trade for two reasons, firstly by economic and strategic rise of Asia, and secondly by re-positioning US . To India via the Pacific shipping lanes.
But all this does not matter . At least it does not matter to the same extent as before because the world is not only physical but also virtual. The internet network, and the capacity of connection and communication that it is capable of producing, makes the commercial rules of our world move in two real and virtual domains. These tend to merge into one: there are no longer physical companies or companies exclusively online, there are companies that use all existing resources within their reach of both channels to achieve their goals.
To give two examples of this fact, the online commerce giant Amazon , with an annual turnover greater than the GDP of dozens of countries, has announced the opening of physical stores. And on the contrary, the same thing happens: large traditional companies of the physical textile channel like Inditex have already opened their online stores. Inditex opened its online store in 2010, and in 2013 a quarter of its sales already come from this channel.
Therefore, should no longer distinguish between online businesses, those that sell their products or services using electronic means exclusively, physical companies, but they distinguish between companies that will endure because they use both channels of those who do not get by their lack of adaptation to change.
From a strategic business approach, the globalized world has arrived for several years. The smartest companies no longer distinguish between the physical world and the virtual, and even make the distinction between countries or borders, this is thing of the past. The most intelligent companies only distinguish cultures. The true market segment today marks the culture of potential customers, and based on this will develop their strategies. Capitalism in the global market is not a political ideology, neither good nor bad, it simply is.
This globalized world is especially fast. In fact, you could say that the only constant is the change, and this they know to use very well companies with online channels in their favor, because in the virtual world can be adjusted products, prices, delivery routes form Very fast, almost in real time, thanks to programming algorithms.
According to the CNMC , since 2013 the electronic commerce in Europe has not stopped growing , and this growth of 27% in the last quarter of 2015 for which data are available. However, according to the consulting firm PWC in its report Total Retail 2016 , the e – commerce market in Europe still has not reached its point of maturity if we compare to other neighboring countries like UK, Germany, France or Italy. According to PwC , Spanish consumers have come a long way but still perform a limited and infrequent use of electronic commerce, and our companies have not made significant investment shares in technology or processes .
However, there are still many opportunities for Spanish online companies, and not only in the national market, but also in the cross-border market. Chinese consumers are the ones who are propping up the online commerce of the next three years and setting the trend. To date, 19.6% of Chinese people buy online every day (4% in Europe, and 7.1% on average worldwide).
According to the latest data from the Spanish Ministry of Economy, in 2015 Spanish exports grew by 4.2% reaching a record high. And the trend for the coming years is clear upwards. According to a study of eBay , the largest Internet auction website (although having a hard time positioning), the Spanish sellers of this platform sold to over 216 different countries , being our main resident buyers from USA, Germany, France or the United Kingdom, in that order. In addition, the report indicates a forecast in which will increase border sales by a third in the world by 2020.
Still, according to the report “Networked Society 2015 ” prepared by the ONTSI , Europe still has a problem of external deficit since the turnover of purchases from Spanish websites compared to sales by Spanish companies abroad Shows a lag of more than 1,000 million euros in the second quarter of 2015, the last one for which data are available (at the time of writing). The product in Europe which accounts for over 70% of purchases in other countries, and not surprisingly, are those related to tourism (travel, transportation, hotels and car rentals).
Internationalization is a key factor in the Strategy
As we said before, the only constant is change , and in this mega connected global context there are only two types of companies: the quick and the dead.
The current situation in Europe is excessive corporate atomisation in which more than 98% of businesses are micro-enterprises . While it is true that the mere fact of being small is an advantage when it comes to adapting to changes quickly, it is also true that it carries a great disadvantage, and it is the scarce capacity for internationalization. From my experience as a strategy consultant for businesses and startups, there is a direct correlation between the size and export capacity: larger, higher capacity EXPORT.
Having determined the fact that Spanish companies have to grow, there are ways and ways to implement growth strategies. According to Kotler, there are different ways to grow , such as through the brand, innovation, corporate social responsibility, but mainly through internationalization.
Companies can implement internationalization strategies in a fast through online channels, but not all products, not all countries should be the targets of their online internationalization strategy , but is fundamental analysis product, market, Legality, logistics, service management, guarantee and, above all, available resources.
According to a report by the Observatory eCommerce , only 56% of surveyed Spanish companies wants to increase its presence outside its borders and of those, only 19% do so in more than three countries or more. The remaining 44% claim a set of economic security problems that we will see below.
Factors of Economic Security
There are a number of strategic factors that every entrepreneur or entrepreneur must take into account when implementing their online sales project in other countries. These factors include:
Logistics is the key element in any online business. So much so, that the own Jeff Bezos, Amazon CEO, always repeating: ” My business is logistics, then logistics, and finally logistics “.
The logistics strategy of any online business must be integrated not only fully with the global strategy of the company, but also has to adapt according to the target country.
The logistics of an online business encompasses the following topics: price of shipping costs, delivery times, shipping pre-orders, resolution of incidents, returns, after-sales service and others.
Online companies often have different suppliers or logistics partners depending on the type of product, its volume and its destination.
The vast majority of Spanish logistics companies, reaching almost any destination, have agreements with other international operators, or open branches in destination countries, but it remains a barrier to be overcome by small businesses that start in ecommerce.
Each country has full autonomy over the regulation of online trade, even within the European Union. This fact complicates the action of online commerce because it forces companies to know in detail the regulations of each of the countries in which they intend to sell their products, as well as the determination of the law applicable to an e-commerce operation since they can , And it is customary, that they are different.
In addition to the importance of determining the law to be applied, another factor to take into account within the legal elements is the jurisdiction of the Act.
Another aspect involves complications in online trading is the determination of the legal domicile of the participating subjects , then the transaction can be done by people anywhere in the world with any Internet – connected computer system. Other aspects to consider within the legal factors to be considered are the message integrity and confidentiality or the probative value of electronic documents, aspects for which tools such as electronic signatures become an excellent ally.
The best opportunities for expansion are represented by countries with strong, efficient and transparent regulatory frameworks and institutions. In this regard, it is necessary to contextualize that certain dictatorships treat favors to certain ecommerce platforms, but these facts are in themselves an indicator that shows the low quality of the legal stability that is practiced in them.
In Europe, the rule regulating the online trade is the Law Society Services of information or LSSI.
Lack of market knowledge
There is no market the same as another. What does exist are small, locally-sized markets made up of very similar potential customers, but which are analyzed globally and make them profitable. It is what we call the giant niche markets.
A niche market usually does not represent an opportunity in a particular country, but if those little niches are discussed in many countries simultaneously and in addition, there may be real untapped business opportunities .
Another key factor of economic security for online trading companies should be a minimum of study of the market they are targeting, analyzing variables such as market size in each country or region, consumer behavior and potential growth. Once analyzed, a selection of the most appropriate will be made according to the resources available.
The differences that exist between different countries at the fiscal level and their regulation is a factor to be taken into account. In Europe, that is, for non – EU operations, the issue is simple because the export is exempt from IV A and this point is not usually vary over time. However, in intra – Community transactions, and B2C models, each company decides whether VAT applies the country of origin or the destination country to a stop . Once this cap is reached, it is obliged to pay the VAT of the buyer country. In addition, if the product is digital, the tax will always have to be paid in the buyer country.
VAT is a national tax, so companies should be very attentive to changes in this tax in countries with greater volatility within the European Union.
This management of VAT is a decisive factor for small online businesses because it requires high administrative resources that can clearly result in lower margin.
In recent years we have seen how the technological cost of Internet connection has dropped exponentially, and how free software technology platforms have become more than enough tools to start an online commerce project.
However, in online sales, the user’s confidence in the platform is key. For this, attention must be paid to the use of security technology in all operations involved in the transaction (procurement, logistics, payment, etc.). Technology that may involve a significant cost to the project.
Cost of customs
All e – commerce activity beyond the borders of the issuing country, both input and output goods, is regulated by customs and the subsequent collection of customs taxes.
In addition to the increased cost caused to the user, some important markets such as China or Russia do specifically complex action entry of goods into their markets as a protection mechanism, which requires companies to have qualified staff with language skills for treat incidents of this type.
The exchange rate between the origin and destination currencies of the transaction is also a factor of special attention in terms of the economic security of online trading projects.
Almost by their very nature, economies are cyclical with periods of recession and devaluation of their currency, and periods of growth and strengthening. For any business project, detect changes cycle is important, but in the case of e – commerce is even higher interest rate change factor, but mostly it is more complex because the fact of not being physically rather than the destination, It becomes more difficult to detect certain clues that makes entrepreneurs and entrepreneurs think about the possible change of cycle.
The problem associated with the exchange rate is a problem of competitiveness with local businesses on arrival, and can be a difficult problem.
The payment system is, along with logistics, the most important element that must attend an online company for the confidence to pass on to its customers. For this reason and others, the choice of the payment system becomes a strategic choice and may or should change depending on the product or service provided, the country in which the client operates and the legal regulation in the relevant market.
Traditional payment systems could be categorized into the: bank transfer, cash, credit or debit cards and Paypal. Among these, the systems of payment by transfer are in clear descent of use by its great inconvenience in the delay of the process of purchase, making difficult, in addition, the management of the inventory. Something similar happens with the solution against reimbursement, as it increases the costs for the risk of returns.
The payment system by credit card is the most used and this is largely for their safety. Virtual banking terminals comply with security standards by ensuring that online companies do not have access to the data of their buyers’ cards. The use of this technology increases transaction costs by approximately 1% over the sale price. To this must be added that each are more financial institutions that offer products for online commerce, such as virtual cards whose destination is exclusively online shopping and provide an extra security element by containing only the balance that the user decides.
PayPal has become for some years one of the payment systems preferred by users, especially for two of its characteristics: simplicity and security. This system is implemented in 203 countries and has more than 165 million active accounts worldwide, allowing payment in more than 100 different currencies.
In the international arena, the main cards to operate are Master Card, Visa, American Express, Diners Club and Discover. However, in the last two years there are other actors who also enjoy good trust among users, and by making their mark, offer new payment alternatives. We are talking about Google, Amazon, Apple or Facebook.
North America is the most developed area for online payments, and the credit card with PayPal are the most commonly used tools. In South America there are greater differences between countries. Thus, while in Brazil 30% of the transactions are distributed between transfer and counter-repayment, in Mexico, because it is less banked, the latter is the winner. In other countries, payment by transfer is the most common.
Europe is the second largest area in terms of Internet shopping, for various reasons such as the strength of its regulatory framework and the main means of payment. It has to be said that Asia has been in a position very similar to the European and American, and that its payment system most used is Alipay, a payment platform with more than 500 million accounts. In Australia the use of credit cards to make payments by Internet followed by payment gateways like PayPal, BPAY or Paymate predominates.
Among the new payment systems, in addition to the aforementioned companies like Google, Amazon or Apple, we must talk about virtual currencies . According to a PWC study entitled “The means of payment, a landscape in motion” , virtual currencies could be consolidated as a payment mechanism for its good adaptation to the Internet ecosystem. One of the best examples of virtual coins is definitely Bitcoin , a virtual currency born in 2008 under a decentralized structure allows all kinds of international transactions without the intervention of any monetary central authority that regulates and virtually no cost in terms of commissions .
And include a new payment channel growing phase: mobile . This new channel is causing, in many cases, the disruption of the online commerce sector, and not only this, but it is allowing continents and countries with low level of banking to opt for this payment system.
In addition, the use of mobile as a payment system in electronic transactions has caused the emergence of so-called Wallets, which are no more than applications installed on terminals with a virtual purse function in which information is stored on credit cards Users, bank accounts or even cryptographic currencies.
As we can see, at international level there is no universal solution, safe and easy to use, but companies will have to make their decisions according to the destination of their sales.
In ecommerce, as in all areas of the company, knowledge is one of the most determining factors in the success or failure of the same. In online commerce projects, there are many initiatives that appear every day, and many are equally fail, being one of the great problems of the latter their little knowledge in business strategy in online channels.
Companies, in their goal of success, should not leave a number of very high random variables, and yet, this seems to be happening. The training and experience of experts in these fields rises as fundamental and essential factor in achieving the objectives .
Countries of greatest interest for online companies
The consultancy AT Kearney prepares every year a report identifying the major countries of the world for its attractive online market. The report entitled ” The 2015 Global Retail E-Commerce Index ” analyzes four factors: the current volume of online market, the country ‘s infrastructure necessary for logistics operations, the culture of consumers and potential growth based on their economic cycle. Based on the measurement of these variables, and a weighting system, they conclude a single indicator that represents the market’s attractiveness in each country.
Thus, the report shows how the first country, and therefore more attractive as a destination for online trade projects, is the United States , with a score of 79.3 points out of a maximum of 100. The United States, along to China , which occupies the second position, have a market size valued at 100 points, and it is certain that markets are greater volume, with the difference that the American market appears to have peaked growth, while That the Chinese market has still a long way.
The UK sneaks into third place in the ranking to the detriment of other market, the Japanese, which occupies the fourth position thanks to its attractive infrastructure level.
Among the surprises of the edition of the 2015 is the emergence of Europe in 18th place markets more attractive in online trading , made very positive if one considers that in the previous edition of the report Europe was not even present. This position is mainly due to the infrastructure factors, in what we are highly valued, and to the behavior of its consumers who are increasingly confident by this modality of purchase. In the most negative aspect we have the market size, a very low volume market of potential buyers compared to other countries. The report refers to the problem of unemployment, but also to its growth, the largest in Europe since the start of the crisis.
The darkest ecommerce
All we can see as users of the Internet, is not t odo there is , but there is a part of the encrypted network and not indexed by search engines:
The term Darknet was coined by several workers of Microsoft in 2002 and everything began with the appearance of the first networks of exchange of files between people called P2P or Peer to Peer.
Currently, the hidden network is much more than the P2P networks, the darknet is the place where your users download all kinds of illegal and massive digital content via torrents, child pornography, hackers hired and the selling stolen items, drugs or classified government information.
The tool to “almost” anonymous access to this network is a browser called TOR . This browser is the result of a draft military investigation by the US Army, and is currently in the hands of Tor Projec t, a non-profit organization. In essence, what TOR does is allow an exchange of messages and files between users without revealing their identity.
The hidden ecommerce
Darknet is a dark and hidden place where there are all kinds of commercial transactions, that is, a hidden ecommerce. As refers Matthias S. Zavia in his article, there is a starting point through which the darknet can navigate in a world of hidden sites ecommerce sites. This entry point is a sort of hidden wiki called the hidden wiki.
From The Hidden Wiki you can access a multitude of hidden ecommerce services, such as:
- Financial services such as stolen PayPal accounts or cloned credit cards.
- Sexual exploitation services.
- Arms and ammunition markets, drugs and false documentation.
- Hosting services for child pornography and erotic pages.
- Sale of classified documentation of countries or files censored by universities.
- Rental hacking services, and even hitmen.
As you can see, the hidden wiki offers a directory of pages from which to carry out all types of transactions outside the law. This illitic ecommerce presents all kinds of threats that country governments should address as a priority, perhaps because, as pointed Alejandro Suarez in his book ” The Fifth Element “, the third world war will be fought in the environment digita l.
The low technological cost and the cultural change that we are attending globally make online commerce a real business opportunity for entrepreneurs and entrepreneurs from all countries of the world.
From the oblivion that the traditional companies submitted to the small niches of markets by their low profitability, they have become priority thanks to the globality of the markets and to the online commerce.
New and existing businesses have a great business opportunity because of connectivity and electronic devices as disruptive as smartphones, true tools for marketing departments in compulsive shopping.
However, companies need innovative strategies and, above all, strategies designed in the medium term, outside the immediacy of the short-term hit, no longer existent due to the maturity of the market.
In addition, companies with new strategies in online markets must meet the great challenge of logistics, without a doubt, the natural barrier for many companies, or the great competitive advantage for others. In one way or another, logistics is positioned as the key factor in any online commerce project.
On the other hand, governments still have much to do. It is a priority to regulate, in an orderly manner, and without excess, the existing regulatory disparity in commercial unions, as in the case of Europe, especially in areas such as taxation or legal certainty.
Online commerce no longer serves countries with borders, but large groups made up of millions of people who share the same culture. This is the great challenge of online commerce, and it seems that a journey has begun without a return to achieve it.