A recent survey of CEOs from around the world indicates that revenues from e-commerce are still just getting started. While 75% of the CEOs said that 5% or less of their revenue is currently derived from e-commerce, the majority expect e-business revenue to double over then next five years.
Approximately 40% of the CEOs anticipate that more than 10% of their company revenues will come from e-commerce over the next five years. Half of these expect e-commerce revenue share to exceed 20%.
When taking into consideration all the recent talk about e-commerce growth, these numbers might seem smaller than expected. However, the CEOs of most companies involved in the survey represent large, well-established businesses that have a history of producing revenues through channels other than the Internet.
The survey was conducted in conjunction with the second annual PricewaterhouseCoopers (PWC) World Economic Forum in Switzerland, with results reported January 28. Survey and forum participants included 802 CEOs from among the world’s largest companies. The survey sample included CEOs from Asia, Europe, Latin America, and North America.
Advantages of Shifting to E-Commerce
CEOs cited “servicing customers more efficiently” as the primary reason for expanding into e-business.
In addition, PricewaterhouseCoopers said that companies can reasonably expect to double their operating profits as they shift to e-business, which typically has much lower overhead costs. Increased operating profits are especially likely for companies where e-business revenues exceed 20% of total revenues.
These returns can combine with other advantages of e-business, such as better customer service, improved market reach and distinct competitive advantage to give these firms a towering lead in their industries.
E-Commerce Brings Increased Competition
The survey indicates that market leadership and competition are also on executives’ minds, in regard to e-commerce.
Half of all CEOs surveyed said that it was extremely or somewhat likely that non-traditional competitors would pose a significant competitive threat by using e-business as a primary channel to their customers. From a regional perspective, the threat was seen as most real in Asia (59%) and least imminent in Latin America (29%).
“CEOs realize that the revenue potential and competitive threats of e-business are very real,” said Jeffrey Nickerson, director, PricewaterhouseCoopers. “The challenge for CEOs lies in guiding their companies through the uncharted waters of e-business, striking a balance between zealousness and indecision.”
Global Standards Needed
93% of CEOs believe that the growth of cross-border Internet commerce depends on global standards for privacy protection, security and authentication, and dispute resolution. Yet, six out of ten CEOs feel that the Internet should be allowed to grow without government regulation. This opinion was more common among Latin American CEOs (74%) than European CEOs (54%).
Many CEOs Lack Internet Savvy
25% of CEOs surveyed are regular Internet users, while approximately one out of every three (30%) executives admits that they have not signed onto the Internet at all in the past four weeks.
Nearly one-third (31%) of the executives evaluate their own level of sophistication regarding use of the Internet as excellent or good, but another one-quarter (25%) believe their level of sophistication is poor.
PricewaterhouseCoopers positions itself as the world’s largest professional services organization, with more than 146,000 people in 148 countries. The company’s Management Consulting Services division helps clients maximize business performance by integrating strategic change and technology solutions.