Analysis: Will a move to the Single Digital Market boost e-commerce?

The EU hopes that the way out of the economic chaos engulfing the continent is to create a vibrant digital economy

The corridors of European power can seem opaque and far-removed from the day-to-day realities of most modern enterprises.

But locked away in informal council meetings, where neither business leader nor citizen would presume to peer in, European officials began plotting in early February a future that could have profound implications for all businesses.

At the core of these plans is the realisation that the best way out of the economic chaos engulfing the continent is to create a vibrant digital economy. The plan has been named the Single Digital Market (SDM).

The first inklings of what this might entail came during the European Commission's informal Competitiveness Council meeting on 2-3 February, but the details of its proposals were fleshed out this week at a high-level conference in Copenhagen, A Digital Single Market by 2015.

The core plan for reinvigorating European economies boils down to three central proposals: a doubling of European online sales by 2015; a full transition to e-procurement in the EU by 2016; and the establishment of e-invoicing as the dominant invoicing mode by 2020.

"The doubling of online sales by 2015 will not happen by itself. Likewise, the goals for e-procurement and e-invoicing. All require action from us," Antti Peltomäki, deputy director-general of enterprise and industry at the European Commission, told delegates.

The notion of a Single Digital Market has received backing from the UK government, where minister for culture, communications and creative industries Ed Vaizey has been a long-standing supporter.

He urged delegates to work with the commission to "identify key measures" that would help drive forward the programme and make the SDM a reality.

But a lack of hard detail in Vaizey's vision prompts one obvious question: what role does the commission have in influencing the way consumers make purchases, or firms buy and pay for goods and services?

According to Peltomäki, the commission's role is a supporting one, helping to ensure the necessary connectivity is in place and that critical systems are there to give citizens the confidence they need to use online services.

The EC has already made laudable commitments to partly bankroll the deployment of high-speed broadband in parts of Europe as part of its wider digital agenda initiative.

But even if it is successful in ensuring that all citizens can access services with speeds of 30Mbit/s by 2020, that in itself will not see a doubling of European sales online by the earlier date of 2015.

When it comes to the SDM goals, the EC appears to believe the key to achieving them will be through a rapid increase in cross-border e-commerce.

This is also another digital agenda target, where the EC wants to raise the proportion of consumers who shop online across borders to 20 per cent by 2020.

But as one delegate from the floor, a representative of the Danish Chamber of Commerce, pointed out: there is often little incentive for traders to extend their e-commerce offerings to other countries.

"To do so, you may need to provide an instruction manual in a foreign language, or deal with customer complaints in a different tongue," she told a conference panel.

The EC is pinning its hopes on solving such issues through the UN-backed online dispute resolution system, which aims to settle such cross-border e-commerce disputes.

But it's doubtful that this alone would be enough to increase the amount of cross-border e-commerce, Martin Gill, a principal analyst at Forrester Research, told Computing. "When consumers are looking to buy online, they simply don't focus on whether the site has a decent dispute resolution procedure," he said.

The main barriers to cross-border trade are shipping costs, import taxes, differences in consumer purchasing behaviour and language barriers, he argues.

UK firms wanting to enter the German market may be surprised to find they don't use debit cards for online purchases, said Gill.

According to Forrester, nearly two-thirds of online shoppers in Europe stick to sites hosted in their own country. The little cross-border trade that occurs typically centres on the UK and involves consumers from countries including Sweden, Norway and the Netherlands, where a high proportion of the population speak English as a second language.

"If businesses want to trade across Europe, they either have to take the Asos approach of offering a single-language site but attracting customers with free shipping, or they follow the Marks & Spencer route and develop localised sites for different geographies," he said.

Ultimately, the arguments for a single digital market are commendable, with both consumers and businesses likely to benefit from the removal of barriers to cross-border e-commerce. The EC's mechanism for achieving this looks as if it is "poorly executed", said Gill.