Chris Barton: Found the cart, now where is that horse?

"New Zealand will be world class in embracing e-commerce for competitive advantage." True or false? The disbanding of the e-commerce action team last week - the group chosen in late 2000 to put the Government's laudable vision into effect - was a good time to ask the question.

But the heading on the action team's final report, Towards World Class E-commerce, said it all. After 2 1/2 years' work "much has been achieved" but we're not there yet. Ominously, there's no mention of competitive advantage.

So why disband? Because their job was done? Or because this was always a futile task? There's no doubt the team's dedicated efforts have promoted and elevated the stature of e-commerce. The Government has made some progress too: thirty government agencies now use a secure email system; we have a Centre for Critical Infrastructure Protection; and the Electronic Transactions Bill - putting electronic transactions on the same legal footing as the paper-based kind - was finally passed in October.

But a lack of research means we don't really know just how far away the e-commerce goal is. Throughout the action team's 2 1/2-year tenure, a number of measures have been put up to show our good progress. Things such as the number of businesses with websites and the number of businesses using email. Or the number of "secure servers" - computers on the net able to process credit card transactions - per one million inhabitants. Much was also made of the country's high adoption of eftpos and ATM banking technology - a sure sign that e-commerce was alive and kicking. But none of the above really tell us anything about embracing e-commerce for competitive advantage.

An unpleasant truth came out in July 2001. An ACNielsen survey of internet traders found that not only are internet sales "a small proportion of many e-traders' annual total sales", but they also don't amount to many dollars.

Half of the e-traders surveyed sold less than $10,000 a year. On the plus side, even though volumes were low, most e-traders expected a profit.

But the salutary lesson remained. A lot of people are using the net to sell stuff , but not that many are using it to buy. So while it's true that electronic commerce overcomes barriers to trading internationally - and Kiwi companies can enter a truly global market without the need for a physical presence overseas - it's not as easy as it sounds. Especially when fast electronic pathways are in short supply.

But what "e-commerce for competitive advantage" should we be measuring? The rationale in favour of e-commerce goes something like this: the more commercial transactions there are of the electronic kind (as opposed to the paper type), the better off you are. Why? Because it's more efficient - especially if you use the relatively low-cost global internet to deliver.

Companies get paid in the instant of a sale and supply chains are instantly replenished because inventories - and their raw materials - are electronically linked in a perfectly balanced world of e-supply and e-demand.

In this e-nirvana you can hear the next tree falling in the forest to replenish the print run as the last copies of Harry Potter and the Order of the Phoenix leave the bookstore.

Brilliant - but it's still a dream. Like so much of the dotcom era, the promise of e-commerce was hype. The problem in getting such complex interconnected pathways to work together is not as easy as it sounds. Especially when fast electronic pathways to make such interconnections are still to be built.

It's not much easier in services. Take for example electronic mortgages - where borrowers never touch a piece of paper and everything gets signed online. Most of the information required is already in electronic form - property titles, loan and conveyance forms - but the prospect of banks, lawyers and clients exchanging and completing such a transaction electronically is nowhere in sight.

All of which makes measuring e-commerce progress darned difficult. What's needed is a comparative count of e-transactions versus the paper kind. In some sectors such as retail sales that should be possible - although often there's a hybrid sale where the customer researches on the web but visits a shop to purchase.

Similarly with e-banking. Many use the web for day-to-day convenience, but still visit the bank for more complicated deposits and withdrawals.

But finding new ways to measure e-commerce progress is the least of the Government's e-problems. On the journey towards world class e-commerce, it helps if you have world class telecommunications - especially broadband.

In the understatement of the year, the action team said in its final report: "Work also needs to continue on improving New Zealand's telecommunications infrastructure to allow people to make the most of the opportunities offered by new technology."

In other words, "We're really tired of pushing the cart before the horse."

* Email Chris Barton

ecommerce.govt.nz - Statistics and Research