International Journal of Information Management 22 (2002) 195–209

Going global—remaining local: the impact of e-commerceon small retail firms in Wales

Rhiannon Lewisa,b, Antje Cockrillb,*aGerald Davies Limited, Kenfig Industrial Estate, Margam, Port Talbot SA13 2PE, UK

bEuropean Business Management School, University of Wales Swansea, Singleton Park, Swansea SA2 8PP, UK

Abstract

This research paper outlines the findings of a multiple research study among 25 small and microretail companies throughout Wales regarding e-commerce usage. The key aim of the researchhas been to establish the level of e-commerce usage among these companies, in accordance with theConnectivity Indicator and E-commerce Adoption Model, developed by the UK Department ofTrade and Industry. Moreover, an assessment of the strategies used to implement e-commerce by thesecompanies has been made, which includes an examination of the question whether these businesses,through their use of e-commerce, are focusing on global, local or other markets. This research hasfocused only on retailers who are new channel experimenters, i.e. companies augmenting theirmain business with experimental electronic commerce. Transactional e-commerce is emphasised, sincesignificant growth in this arena is anticipated in the next 5 years. The authors conclude that the Welsh retailsector is partially failing to capitalise on the opportunities that e-commerce presents, which in turn maylead to future job losses, and prosperity being eroded by e-commerce competition from overseas. Theauthors also note that there appears to be a conflict between business structures aimed at supplying localmarkets and attempts of reaching global markets with inadequate means. r 2002 Elsevier Science Ltd. Allrights reserved.

Keywords: E-commerce; Retail; Small and medium sized companies; Wales

1. Introduction

This paper represents the findings of a multiple study of e-commerce participation andapplication by traditional, bricks and mortar small retailers in Wales. E-commerce is increasinglybecoming a ‘‘normal’’ way of trading, especially in the retail sector. However, researchers have

*Corresponding author. Tel.: +44-1792-295-601; fax: +44-1792-295-626.

E-mail address: a.cockrill@swansea.ac.uk (A. Cockrill).

0268-4012/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved.

PII: S 0 2 6 8 - 4 0 1 2 ( 0 2 ) 0 0 0 0 5 - 1

largely ignored how e-commerce will impact on local (small) businesses, (which on the wholeconsist of small and micro businesses) and their communities, instead the study of electroniccommerce usage among retailers has concentrated on large retailers.

This study has focused on small companies (defined as those employing 10–99 staff) andmicro companies (defined as those employing o10 staff people) in Wales. These companiesplay an important role in the Welsh economy, since over 99% of all businesses in Walesemploy o250 people (66% of businesses are sole traders, 33.3% of businesses employ1–49 people, 0.6% employ 50–249 people and 0.1% of businesses employ 250+people(DfEE, 1999). There are few studies on the actual usage of e-commerce in Wales. Thereforethe research creates an interesting snapshot of e-commerce usage by such Welshcompanies.

The retail sector was chosen because it significantly contributes to the Welsh economy. Over theperiod 1994–97, the wholesale and retail sector has consistently represented approximately 10%of Welsh GDP. This sector is also responsible for a significant proportion of employee jobs inWales, for example in the period from 1990 to 2000 the sector has been responsible forapproximately 15.5% of total employee jobs (NafW, 2000).

Although small and micro retailers make a crucial contribution to the Welsh economy (NOP,2000), their situation has become increasingly difficult since the choices of where and how to shopcontinue to expand (Morganosky, 1997). They continually compete against larger organisationsand have faced growing competition in the last few years from out of town stores set up by largeretailers. Importantly there are also new electronic competitors, who pose a threat to theseretailers by using e-commerce to offer goods and services to a local market via the Web(Vanderwerwe, 1999; Steinfield, 1999).

However, small and micro retailers can use e-commerce to their competitive advantage, todevelop new sales channels and to gain business benefits that go beyond improving processes.Leveraging of the web can, for example, bring customers, vendors and suppliers together inways never before possible, so that these companies can sell products, improve customer service,and obtain maximum results from limited resources. The use of e-commerce is therefore aninteresting research issue, as it may well have an important impact on the future development ofsuch firms.

The agenda of the UK Government has been for several years to increase e-commerce usageamong small businesses, so that the UK can achieve the aim of becoming a world leader in e-commerce (E-Commerce Task Force, 2001). This vision has filtered down to regional governance,and the regional government’s targets for Wales are ambitious: near 90% of companies areexpected to use e-commerce in 2003/4 (NafW, 2001), and by 2010 all businesses in Wales aresupposed to have access to a choice of modern advanced telecommunication technologies at anaffordable cost (NafW, 2001).

Little statistical information on the use of e-commerce exists, and where it is available, it is ofteninaccurate, over-inflated (Garcia, 2000) or contradictory. However, for comparative purposes, theInternational Benchmarking Study (DTI, 2000), NOP Research (NOP, 2000) and Kite Project(Chappell & Feindt, 1999) stand out. The Kite Project clearly demonstrates the way in which mostSMEs are engaging in e-commerce, and outlines the critical success factors for participating ine-commerce. The NOP Research gives the most recent measurement of ICT usage throughoutWales and explores reasons behind such usage. These statistical resources therefore indicate that

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there are some general trends among the small and micro business retail companies, which couldgive some reason for concern.

* The entire retail sector (including small and micro companies) is lagging behind in the adoptionof e-commerce compared to other sectors (Spectrum, 1999a).

* Small and micro companies are lagging behind in the use of e-commerce compared to mediumand large businesses (NOP, 2000).

More importantly, regional disparities in the adoption of e-commerce are clearly evident; smalland micro Welsh companies illustrate a general apathy towards the use of electronic commerce,compared to companies of the same size in other regions of the UK (Garcia, 2000).

For the purpose of this research, the authors have adopted and modified the description ofe-commerce used by the UK Department of Trade and Industry (DTI, 1999) to define e-commerce as

Using an electronic network to simplify, improve and speed up particular stages of the businessprocess, i.e. the buying, selling and delivery of goods and services.

Zwass claims that the Internet has become the prime driver of e-commerce, and goes on topresent a hierarchical framework. This consists of three meta-levels: infrastructure, services, andproducts and structures, which permits the analysis and development of very complex systemssuch as e-commerce participation (Zwass, 1999). Transactional e-commerce, rather than processe-commerce, is the main focus of this research, and this lies at the top of Zwass’ hierarchy, (withinthe level of products and structures.) Products and structures of e-commerce cover threecategories: consumer-orientated commerce, business-to-business and intra-organisational busi-ness. The research focuses primarily on consumer-orientated e-commerce, and briefly touchesupon business-to-business e-commerce.

Many commentators maintain that e-commerce can provide numerous potential and actualbenefits to small and micro firms (Dedhia, 2001; Chappell & Feindt, 1999; Poon & Swatman,1999; Ng, Pan, & Wilson, 1998). Small firms, for example, can create a global presence throughthe use of websites, for comparatively very little investment when compared to other media(Greaves, Kipling, & Wilson, 1999). Furthermore, the boundaries of business on the web are notdefined by geography or national boundaries, but rather by the coverage of computer networks,which offer widened access to markets for Welsh small and micro companies, which are on theperiphery of Europe. Therefore ‘‘border crossing’’ may appear, i.e. the disappearance of distance-related barriers (Walczuch, Braven, & Lundgren, 2000).

Kalakota (2000) cites cost benefits as an explanation for the increased participation in e-commerce. This includes the reduction of transaction costs, since buyers and sellers can access andcontact each other directly. Lower purchasing costs could be gained through broader scope forcost effective purchasing, reduced amount of inventory held and improved logistics management.Some of the biggest gains may lie in smaller firms’ purchases of indirect inputs, such as telephonecharges, etc., which together account for 30–60% of firms’ total non-labour costs. Other costbenefits may include lower personnel costs and reduced support costs (Chappell & Feindt, 1999).

Quality benefits of e-commerce use could include the improved flow of information, newproducts and customer services, improved availability, improved market transparency (Chappell& Feindt, 1999), and reduced errors in information processing (Ng et al., 1998; OECD, 1999).Regarding customer services, the interaction between the customer and the retailer has never been

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as important as it is today, and the interactive nature of the web can support such interactions(Hoffman, Novak, & Chatterjee, 1995).

E-commerce also permits savings in time: levels of response time and accuracy forspecifications, requests for proposals, tenders, orders, progress chasing, payment into supplychains, deliveries, all of these can be delivered faster than with the traditional tools of telephoneand fax (Chappell & Feindt, 1999; Lancioni, Smith, & Oliva, 2000).

However, although increased sales and profitability via e-commerce have been discussedextensively, the actual benefits are still extremely contentious. Even for those who admit gainingshort-term benefits such as increased sales, such advantages are marginal and often circumstantial(Poon & Swatman, 1999). There is currently no reliable way of estimating sales delivered toconsumers electronically versus those delivered using traditional methods, and likewise nomeasurement of e-commerce retail sales (Haltiwanger & Jarmin, 1999). Sales and onlinetransactions may generate only a fraction of overall sales, perhaps due to the fact that certaingoods are not easily purchased over the Internet, or that they require some form of face-to-faceinteraction in addition to the web presence.

Although barriers to engage in electronic commerce have progressively fallen over recent years,some persistent obstacles to the use of e-commerce remain (OECD, 1999). Confirmed not justmerely as a specifically Welsh issue, but a global one, the key barriers to electronic uptake amongsmall and micro companies include lack of financial resources, staff support, and skills (Parfett,2000; Terry, 1999).

The high cost of entry into and maintenance of e-commerce has been cited by small and microcompany representatives as a significant barrier to e-commerce adoption (Chappell & Feindt,1999; Walczuch et al., 2000). Naturally the start-up costs for venturing into e-commerce vary forcompanies, depending on how computerised their business processes already are. Companieswilling to invest in emerging technologies also face a daunting array of solutions, and can choosefrom many different architectures and implementation possibilities. Another issue in this contextis that the time constraints in small businesses are often so tight that managers feel they cannotjustify the risk of allocating staff time to implement a new e-commerce strategy without a clearview of potential benefits (Dawson, 2000).

Without a doubt e-commerce imposes new skills requirements on the retail sector. Thesuccessful uptake of e-commerce requires IT expertise, coupled with strong business applicationsskills and therefore a flexible, multi-skilled work force (OECD, 1999). However, the retail sectoralready faces difficulties in attracting young people with relevant skills (Tackey, Hillage, Jagger, &Bates, 2000), and this is likely to be compounded by the growing need for IT skills. Previously35% of Welsh firms stated that their employees did not have sufficient understanding ofinformation and communication technologies (ICTs) available in their company to enable them tomaximise the competitive advantage that new technologies could bring (DEIS, 1998). This is inconjunction with the fact that Welsh businesses are notable for their lack of confidence in the skillslevels of their employees (DTI, 2000).

The continuous learning required to manage the rapid change of technical applicationsneeded for e-commerce purposes may lead a large number of small and micro companiesto outsource technical support services. However, there are once again cost implicationsin this choice. Nevertheless, the operational monthly cost to outsource the e-commercetechnology infrastructure for such enterprises is relatively low compared to acquiring and

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maintaining in-house systems and staff with enough technical expertise (Jutla, Bodorik, Hajnal, &Davis, 1999).

It has been stated that uncertainty about the legal, regulatory and tax environment also acts asa barrier to the uptake of e-commerce among small and micro companies, in particular for thosecompanies undertaking international commercial activities (Bologna, 2000). There is also an acuteproblem of security and fraud, with the perceived security risk of participating in e-commerceinhibiting the use of the Internet for financial transactions (Troy & Willcocks, 1999).

Taken together, it is evident that there are still strong barriers to e-commerce use, even though,as outlined above, there are also clear advantages. The latter can be best exploited if a businesstakes into consideration the planning, management and assessment of the use of e-commercewithin the business (Evans & King, 1999). This is explored below.

It is often advocated that organisations should build an electronic presence without regarding theactual benefits, since costs are apparently low. However, there is a contradictory belief (Jutla et al.,1999) that this may cause disillusion to some companies, because organisations find it difficult tobuild sustainable electronic business plans if they do not support them with a long-term businessstrategy. And indeed it is often the case that small and micro companies engage in e-commercewithout preparing a strategic business case (Chappell & Feindt, 1999). Included in a strategy,appropriate business models and frameworks for investing in electronic commerce need to bedecided upon, as the introduction of e-commerce into any business often requires business processesto be reengineered in order to gain the full benefits of e-commerce usage (Jutla et al., 1999).

E-commerce strategies also have to be supported by funding, and funding of e-commerce usagetends to give a rough measure of commitment (Chappell & Feindt, 1999). The use of externalfunding sources implies the development of a business case and thus a high level of commitment,whereas publicly funded initiatives (projects) have often difficulty in commercializing themselves,thus raising the question of the level of commitment beyond the lifetime of the funded project.

There are also valid reasons for businesses positioned in a local community to develop acompetitive strategy that emphasises their physical store. For example, rather than creating awebsite only to attract distant clients, an alternative strategy for local merchants has beenadvocated, whereby a physical presence is combined with creative use of the web to target localmarkets. This, in turn, could lead to a better service to the local community (Steinfield, 1999;Steinfield, Mahler, & Bauer, 1999), and thus increased competitiveness and profitability.

2. Research methodology

The key objectives of the research have been to examine a number of issues related toe-commerce in a sample of Welsh small and micro retail companies. The following aspects ofe-commerce usage have been investigated:

* Levels of e-commerce usage.* Key reasons for the uptake and non-uptake of e-commerce.* Benefits and disadvantages of participating in e-commerce.* Inhibitors to the adoption of e-commerce.* E-commerce strategies.* Funding of e-commerce.

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Given the dynamic nature of the subject area, a multiple research strategy was taken (Dutta &Segev, 1999). The first stage of the research consisted of an e-commerce usage survey being sent to98 small and micro retailers. These companies were evenly distributed throughout Wales, so thatany regional bias in the results could be minimised, and that issues common to all regions ofWales would be assessed. The respondents were either owners or managers of the companies. Theclassification of the companies was based on the Standard Industrial Classification codes 1992.

The level of e-commerce usage among the sample companies was gauged against theConnectivity Indicator (Spectrum, 1999a), and the six-step E-commerce Adoption Ladderdeveloped by the UK Department of Trade and Industry (DTI, 2000).

In order to engage in any form of e-commerce, a business must have a basic level ofconnectivity, i.e. a basic connection to the Internet either by having a website, making frequent useof external e-mail or using electronic data interchange, irrespective of the technology deployed.

Once a business is connected, this six-step model measures the progression of any business fromrelatively simple to more complex e-commerce activities. The six steps of the Ladder, leading tofull e-business participation include:

1. Messaging: The use of e-mail to send text messages.2. Online marketing: Creation of a website or e-mail to publish information about products and

services, so that customers can access this information on line.3. Online ordering: Online interaction between a business and its customers, or a business and its

suppliers, for the placement of an order.4. Online payment: A transaction which can be split into two separate online activities, issuing or

receiving an invoice and completing the transaction online by an electronic payment.5. Order progress/online sales support: The use of e-commerce to support the business

relationship between a customer and a supplier, for example through online post-sales supportsuch as courier information.

6. E-business: The theoretical end point when a business has fully integrated ICT into itsoperations, potentially redesigning its business processes around ICT or completely reinventingits business model.

The second stage of the research involved an observational study of the respondent companywebsites, in order to assess the market orientation of those respondents having websites.

The third part of the research included a small number of semi-structured interviews beingconducted to compliment the survey findings and observational study. The aim of the interviewswas to elicit qualitative and/or anecdotal data from the owner or manager of the companiesregarding e-commerce strategies and market orientation.

3. Results

Twenty-five out of the 98 retailers responded to the questionnaire, giving an overall responserate of 26%. Clearly there were limitations in using this sample, since the respondents were self-selecting and therefore it was more likely that respondents were those with strong positive ornegative feelings about the issue of e-commerce. It is recognised therefore that given the small

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sample, the authors cannot claim representativeness, although the data appears to indicate somestrong trends.

As illustrated in Table 1, 68% (17 out of 25) of all respondent companies have external e-mailfacilities. This trend is higher than the most recent figures for Welsh businesses, which state thatoverall e-mail penetration amongst Welsh SMEs is 38%, in comparison to 57% of UK SMEsusing e-mail (NOP, 2000). The findings are positive, illustrating a high level of e-mail usage. Withregard to the specific purpose of using e-mail, it is evident that e-mail is mostly used in aconsumer-orientated way, i.e. in a sales function (50% of companies), for marketing purposes(38% of companies) and for post sales support (19% of companies). For business-to-businessapplications, 43% of companies use e-mail for direct purchases. This is a disappointing finding,demonstrating that the use of e-mail in this context is limited in its use.

In addition, 52% (13 out of 25) of all respondents have their own website. A further 16% ofrespondent companies plan to set up websites in the near future. This positive finding is in lineswith other research (NOP, 2000). Noticeably, 16% of the respondent companies lackcomputerisation within their companies. These findings are similar to overall figures for theUK, which indicate that one-fifth of retailers do not have any computerised systems at all installed

Table 1

E-commerce usage according to the Connectivity model

Company Type of product Company size Use of e-mail Website

1 Wood flooring 5 � �2 Celtic jewellery 8 O O3 Flooring 60 O O4 Dairy products 6 � �5 Optical wear 12 O O6 Jewellery 7 O O7 Fresh food produce 6 � �8 Sports equipment 7 O O9 Decorating materials 30 O O

10 Sports equipment 45 O O11 Welsh crafts 4 O O12 Cards and gift wrap 14 � �13 Sports apparel 8 O Pending

14 Meat products 11 O �15 Wood products 25 O O16 Carpets and furniture 8 Pending Pending

17 Meat products 10 � �18 Farm produce 6 O O19 Horticultural products 15 O O20 School clothing 5 O O21 Optical wear 10 O O22 Jewellery 7 � �23 Hardware 3 � �24 Motor parts 3 O Pending

25 Groceries 20 Pending Pending

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in their business (Spectrum, 1999b). For smaller firms (0–99 employees) in all sectors the picturelooks even bleaker, with 33% lacking computerisation (NOP, 2000).

Table 2 illustrates that the progression along the e-commerce adoption ladder by therespondent companies is very limited. Only 64% of companies reached step 1 (online messaging),52% of companies reached step 2 (online marketing), 12% of companies reached step 3 (onlineordering) and step 4 (online payments), and 4% of companies reached both step 5 (post-salessupport) and step 6 (e-business).

The most recent figures (DTI, 2000) indicate similar trends, with 46% of small and micro UKbusinesses reaching step 2 (online marketing), 24.5% of small and micro businesses reaching step3 (online ordering), 9.5% of small and micro companies reaching step 4 (online payments), and6.5% of small and micro reaching step 5, (post-sales support). These DTI figures indicate that therespondent companies are somewhat lagging behind in reaching the steps outlined in the adoptionladder, indicating once again that Welsh companies are not using e-commerce to the full. Moresignificantly, this gap will not be easily reduced, as there is a significant time lag betweenimplementation of e-commerce and full participation.

Table 2

Overall use of e-commerce according to the E-commerce Adoption Ladder model

Company Type of product Adoption ladder

Messaging Online

marketing

Online

ordering

Online

payment

Order

progress

E-business

1 Wood flooring NA

2 Celtic jewellery O O O O O O3 Flooring O O � � � �4 Dairy products NA

5 Optical wear O O Unknown—no website access

6 Jewellery O O � � � �7 Fresh food produce NA

8 Sports equipment O O � � � �9 Decorating materials O O � � � �

10 Sports clothing O O Website under construction

11 Welsh crafts O O O O � �12 Cards and gift wrap NA

13 Sports clothing O � � � � �14 Meat products O � � � � �15 Wood products O O � � � �16 Carpets and furniture NA

17 Meat products NA

18 Farm produce O O � � � �19 Horticultural products O O � � � �20 School clothing O O O O � �21 Optical wear O O Website under construction

22 Jewellery NA

23 Hardware NA

24 Motor parts O � � � � �25 Groceries NA

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Looking at the organisational factors that influence the adoption of e-commerce, it is apparentthat progress along the e-commerce adoption ladder is not dependent on company size within therespondent companies, although other studies have shown that even within the small businesscategory more larger firms adopt e-commerce compared to smaller ones (Premkumar & Roberts,1999).

However, another phenomenon can be observed in this research: niche retailers have progressedfurther along the adoption ladder. These retailers include, e.g. a jeweller specifically selling Celticjewellery, a Welsh craft shop and a specialist clothing shop. This is perhaps not surprising sincethe wider audience of the Internet might appear particularly attractive to niche retailers.

With regard to e-commerce usage, in general, 35% (6 out of 17) companies stated that the mainreason for participating in e-commerce was primarily to gain quality benefits such as efficiencyand precise purchasing. In addition, time benefits were a reason for participation for 2 out of 17companies and 1 company wanted to gain cost benefits from participating in e-commerce.However, it is debatable if such benefits can be obtained in the short term. Disappointingly fewrespondents participate in e-commerce to specifically gain cost and time benefits. This is a missedopportunity on the part of the companies.

Specifically focusing on customer-orientated e-commerce, the reason for participating in e-commerce is more distinct. Sixty-two per cent (8 out of 13) of the respondent companies withwebsites claim to use their websites for promotional purposes, which is in line with other researchfindings (NOP, 2000). Secondly, 46% (6 out of 13) respondents with websites aim to increase salesby using their websites to reach more customers. This implies a reactive (Fink, 1998), rather than aproactive approach, where additional revenue may be more important than providing consumerswith as many options as possible (Tackey et al., 2000). In addition, during interviews, some ofthese companies also displayed corporate inertia regarding this issue, treating the Internet simplyas another sales channel, rather than a business model.

Finally, 29% (5 out of 17) companies gave other reasons for participating in e-commerce. Forexample, one company expressed that participation in e-commerce was necessary to keep up withcompetitors and technological change. This, again, implies a reactive rather than proactivestrategy, although it reflects the recognition that these changes are taking place and need to beacknowledged by the company in order to remain competitive.

Forty-four per cent of companies not participating in e-commerce stated lack of advice andsupport as a reason for non-participation; as well as a lack of funds and lack of skilled andqualified staff. Several respondents maintained that e-commerce is not applicable to the business,and these statements coincided with those companies lacking computerisation. One furtherrespondent indicated that their principal customers and suppliers had not yet adopted e-commerce as a means of conducting business, and therefore they were slow in adopting itthemselves. This phenomenon has also been observed by other researchers (Bologna, 2000;Chappell & Feindt, 1999).

Importantly one interviewee claimed that the use of a website was not suitable for their maincustomer base (the elderly) and would therefore not lead to increased sales, yet a website would beproduced in the future to offer services ancillary to the main business function. This implies astrategic and proactive approach by the company.

Direct benefits, quantifiable by analysis of financial data, were not assessed among the samplecompanies, since such benefits of IT investment are often intangible and disproportionately

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difficult to measure. Furthermore, companies are often not willing to divulge such financialinformation. An overwhelming 88% of companies participating in e-commerce had realised somesort of indirect benefit, either reduced costs, quality benefits or time benefits. Overall 71% ofe-commerce participants (15 out of 17) had realised quality benefits, in particular access to newmarkets; 59% of e-commerce participants (12 out of 17) had realised cost benefits, particularlyreductions in purchasing costs; and 41% of e-commerce participants had realised time benefits,especially the reduction of cycle times. Despite the fact that many of these respondent companieshave not yet proceeded far along the e-commerce adoption ladder as illustrated in Table 2,considerable benefits are being accrued by these companies. This is a very encouraging findingsince it has been suggested that the implementation of IT in small businesses occurs mostsuccessfully where there is a demonstrated relative advantage in terms of time saved, benefitsaccrued or discomfort decreased (Cragg & King, 1993).

Interestingly, at least two-thirds of the respondent companies not currently participating ine-commerce perceived some benefit of participating in e-commerce, which supports previousfindings that small and micro companies are fully aware of the stated advantages of e-commerce(Jacobs & Dowsland, 2000).

A third of the respondents participating in e-commerce, 31%, did not answer whether theyperceived any disadvantages in using e-commerce. However, 44% of respondent companies haveexperienced drawbacks. These include inefficient/slow response of systems, high cost of softwarefor specific applications, low take up of e-commerce by suppliers and customers, and a lack of ITtraining for specific software. Although it was not apparent from the survey that security andfraud is an issue, the interviews indicated that fraud was perceived as a serious danger, and indeedin one company customer data had been stolen. Additionally, companies wishing to implementsecurity measures face severe cost implications.

The respondent companies were asked whether formal e-commerce strategies were used for theimplementation of e-commerce. Only one respondent had adopted such a strategy. Most of theother companies appeared to use e-commerce on an ad hoc basis, for example, one respondentstated that the use of website was to ‘‘simply a general presence on the Internet’’. Anothercompany stated the future use of their website would be linked to the company’s marketingstrategy.

Table 3 illustrates the market orientation of the respondent companies, and the use of theirwebsites to strategically bolster business from their local community. The majority of companiesintend to serve their local markets through the use of their websites. Although this localisation inmarket orientation can be illustrated in other research (NOP, 2000), it is an important findingsince it contradicts other research which states that local providers are attracted by the allure ofnew access to global markets and are more likely to de-emphasise their geographic location andphysical establishment when they do go on the Web (Steinfield, 1999).

In the interviews, companies clearly stated that local markets were targeted through the use ofthe website, as the products sold were not suitable for global markets. Undoubtedly, this reflects arealistic view of the use of websites, as products sold by certain respondent companies, e.g. generaloptical wear, are not niche products and are unlikely to be sold to global markets (Kassaye, 1997).However, this approach may also lead to the failure to utilize opportunities a more globalapproach offers, for example in cases where products are niche products and could be sold to awider market.

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The researchers also adopted a framework developed by Steinfield (1999) to evaluate thewebsites of respondent companies. This was used as an attempt to assess whether the companiesclaiming to support local markets were actually applying such strategies on their website to takeadvantage of their local presence (i.e. local contact details, map or directions, photo of thephysical store, marketing strategies to entice customers to the physical store, etc.). Although themajority of websites listed local addresses and provided telephone numbers, far fewer offeredmaps, directions, and no website made use of marketing strategies to entice customers to thephysical store. It is therefore evident that the respondent companies focusing on local markets donot take full advantage of their local presence through the use of their websites.

The vast majority of respondent companies do not outsource e-commerce implementationactivities. Only three companies participating in e-commerce used external bodies to implemente-commerce, although there is a wealth of organisations available, which support such activities(Garcia, 2000). These findings are in line with those of NOP Research. In the NOP study (NOP,2000) only 34% of small companies (5–9 employees) sought IT/Telecom advice. It is therefore

Table 3

E-commerce strategies for various markets

Company Type of product Market orientation

Local Global Specific geographical

market

Specific customer

group

1 Wood flooring NA

2 Celtic jewellery O O � �3 Flooring � O � �4 Dairy products NA

5 Optical wear O � O �6 Jewellery O � O O7 Fresh food produce NA

8 Sports equipment/clothing O � � O9 Decorating materials No reply

10 Sports equipment/clothing O � � �11 Welsh crafts O O O �12 Cards and gift wrap NA

13 Sports apparel O � � O14 Meat products NA

15 Wood products � � O O16 Carpets and furniture NA

17 Meat products NA

18 Farm produce No reply

19 Horticultural products O O � O20 Specialist School clothing O O � �21 Optical wear O � � �22 Jewellery NA

23 Hardware NA

24 Motor parts No reply

25 Groceries NA

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surmised that advice on e-commerce is not specifically targeted to the retail sector, and that mostof the advice currently offered is postal based, whereby only a small minority of companies preferthis (NOP, 2000). Although government support for the implementation of e-commerce amongsmall firms is being given in Wales, much of this has been in the form of fairly small-scale,unrelated pilot projects which, in many cases, have not been developed into sustainable or wider-ranging initiatives (WIS, 2000). This issue is currently being addressed by the development andimplementation of the Wales Information Society Initiative that aims at encouraging SMEs in allsectors to use e-commerce.

A quarter of respondent companies (25%) participating in e-commerce have received at leastpartly public funding, which included free training from Higher Education institutions, setting upof websites, etc. The remaining companies funded such activities internally. These results aresimilar to other findings (Chappell & Feindt, 1999), which showed that 17% of such companiesrely on public funds, and 61% of small and medium companies relied on internal funding toimplement e-commerce. However, in the interviews conducted for this study, it emerged thatsources of information regarding such funding is difficult to find and also difficult to understand.In addition, the activities of various funding bodies and projects are perceived as uncoordinatedand bureaucratic. The lack of funding may explain why respondent companies in the main do notoutsource e-commerce implementation as mentioned previously.

4. Discussion and conclusion

It is apparent that for the majority of respondent companies, the use of e-commerce is in anembryonic stage. The results indicate that the majority of retailers are not participating in thesophisticated, highly interactive e-commerce solutions that larger firms are focusing upon. Thismay be compounded by the fact that innovation is limited by resource (human, financial and time)constraints in small and micro enterprises. It is also apparent that these companies are taking arather uncoordinated, ad hoc approach to the introduction of e-commerce technology (Parfett,2000). Despite this, a minority of companies have linked e-commerce usage to formal/ informalbusiness plans or marketing strategies, and are beginning to take a more strategic approach toe-commerce usage.

However, the authors maintain that a differentiation will be seen between those small and microcompanies who are quick in the adoption of new technologies, and more traditional smallcompanies who tend to stick to traditional technologies (Dutta & Segev, 1999). This divide isevident among the respondent companies, for certain respondent companies illustrating an overlycautious approach towards e-commerce usage, where a realistic view of the cost-benefits ofe-commerce usage is taken. Nevertheless, this approach may be too extreme; small and microcompanies should not completely dismiss e-commerce by maintaining that e-commerce is notapplicable to their business, since the simplification and streamlining of business processesthrough the use of e-commerce is a clear advantage.

The potential benefits of e-commerce participation with the target group have been shown inthis survey. Furthermore, the critical success factors for e-retailing include the presence of aunique and/or innovative product or service that is saleable over the Internet, and that fits withthe media of the Internet and exploits the electronic environment in a value-added way (Chappell

R. Lewis, A. Cockrill / International Journal of Information Management 22 (2002) 195–209206

& Feindt, 1999; Dawson, 2000). Managers must be able to identify e-commerce applications thathave a strategic/competitive potential for the firm, before committing valuable resources topossibly unsuccessful e-commerce implementation projects.

If products are not appropriate for e-retailing, alternative competitive strategies may be moreappropriate. The authors therefore support the view that, if physical stores cannot be moved tocyberspace, then by default cyber retailing must be moved to the physical retailing realm. Thisimplies cyber-enhanced retailing (Otto & Chung, 2000), where retailers may do better by focusingon strategies which deliver a new customer service concept within the physical world, thusincreasing the value of the shopping experience for the customer. In this way, companies will bedirectly competing with large retailers who already provide a wider variety of quality customerservices.

Of particular concern is the fact that the usage of geographical market expansion strategies byWelsh companies is limited (NOP, 2000). The results of the survey confirm the ‘‘regional’’ imageof most of the respondent companies, highly unaware of the small size of the local market and notsearching for potential business opportunities further a field. However, the authors anticipate thatwithin a decade, reduced costs of e-commerce implementation will increase the use of e-commercein small retail companies significantly. Currently, a small minority of companies are extremelypro-active in their approach, and it is hoped that they set the scene for other Welsh companies inan age of increasing globalisation.

Acknowledgements

The authors are grateful to the retail managers who took the time to respond to thequestionnaire and to those who participated in the telephone interviews. We also gratefullyacknowledge the contributions of Dr. Cliona O’Neill and Ian Owens, both from the EuropeanBusiness Management School at the University of Wales Swansea. This research would not havebeen possible without the funding received from ESF/ADAPT via the WALES 2000 project(based at EBMS, University of Wales, Swansea), Dossier No. 992177UK8.

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Publications.

Rhiannon Lewis (LLB Law/German, University of Wales) is currently working as a graduate trainee in an

environmental engineering firm in South Wales. Previously, she worked as a Project Officer in the European Business

Management School at the University of Wales Swansea, and for a firm of management consultants. Her research and

work interests focus on IT training, e-commerce and Internet usage.

Antje Cockrill (MA American Studies, Frankfurt University, MLib and Ph.D. University of Wales) is currently a

Lecturer at the European Business Management School at the University of Wales Swansea. She has her Ph.D. in

Information and Library Studies and has worked both as an Information Officer and Researcher prior to her current

post. Her main research and work areas concern small and medium sized enterprises, with special focus on training and

skills issues and marketing.

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