BROWSING TO SHOP!

Over the past decade, information technology (IT) has become an important influence on our everyday lives and has even established itself within the realm of commerce.  Judge for yourself:  initially, personal computers were connected to local networks, then -- to international ones. Later on, they worked their way into a global network, the internet. Today, at the dawn of the 21st century, IT's influence on business -- any business, even a small one -- is so great that this technology can be rightfully viewed as integral to economic development. Computers are no longer the sophisticated equipment of the chosen few and have long been regarded as ordinary household items.  Furthermore, the notion of "electronic commerce" has long been firmly established in many foreign countries and is accepted as an important component of electronic business.

It is all the fault of financial pyramids

The opportunities for e-commerce are quite extensive. They cover marketing functions, sales, and the online purchase of services and goods. In fact, any company which offers its goods to its customers stands to experience a qualitatively new phase of development if it involves itself in e-business. Such a company begins to use new business technology which offers a number of advantages, including greater competitiveness due to better customer service and lower costs (fewer sales personnel, the reduction of rental expenses for commercial space, etc.). After all, the World Wide Web is vast, providing, therefore, plenty of new channels for selling one's goods. But, in practice only a handful of businesses resort to the electronic business model of selling. And there are several reasons for this.

For instance, one Azerbaijani businessman, who owns a large retail chain and who decided to sell his goods online more than a year ago, stressed in his commentary for R+ that e-commerce, which brings in multi-million-dollar sales for foreign businesses, brought him only losses. "Essentially, the online shop as a method of doing business simply does not work in Azerbaijan. Our online store, for example, offers discounts. Any internet user can buy discounted goods by paying about US$1 for delivery. If he or she buys goods worth more than $40, delivery is free of charge. We also offer free gift wrapping to our customers. But no matter how good our marketing campaign might be, it does not pay. I am certain that our citizens are, firstly, not used to shopping in this way, and secondly, there is a psychological factor here. For some reason, people have no trust the World Wide Web.  They prefer to spend more time in buying goods in shops and talking to real, not virtual, sales personnel. It is clear that the numerous financial pyramid schemes of the 1990's and banking scams which ruined the lives of many citizens, had an effect on people's views and played a negative role," the businessman said. But he also expressed the hope in his interview with R+ that online commerce, which attracts increasing interest from not only foreign customers, but also from large numbers of businessmen and experts, will sooner or later gain a foothold in the Azerbaijani business environment too. "After all, it can be said with certainty that e-business has a great future," he said.

Osman Gunduz, president of the Azerbaijan internet forum and director of the Multimedia Centre for Information Technologies and Systems, subscribes to the same opinion. But he also stressed that, for foreign companies electronic business is a dynamically developing sector worth considering, whereas the majority of Azerbaijani businesses are only beginning to take their first steps into the electronic market. "And this is despite the fact that the basic legal documents, the law, 'On electronic commerce' and the law, 'On electronic signature' have already come into effect.  But we know that a legal framework alone is clearly insufficient for the development of e-commerce," said Mr. Qunduz. "The banking and credit institutions should be involved in this process. In other words, e-commerce can be sustained only if the links in the chain made up of businesses, banking institutions and internet resources are working smoothly. In our case, there are businessmen who want their businesses to grow, but lack the links with the banking institutions and internet resources: after all, to carry on e-commerce, banks should not just open legal entities' accounts, but should also provide them with codes for the e-commerce web sites. It is clear that we lack an effective payment system (the above-mentioned online shop uses the principle of cash on delivery - author), in other words, there is no online system to make it possible to make money from e-commerce," Mr. Gunduz said.

He also told R+ that some airlines in Azerbaijan are already selling air tickets online. The so-called "mobile bank" has also been created. "And, as far as I know, two Azerbaijani banks are working on the creation of e-commerce systems. However, this is clearly not enough to enable us to say: yes, e-commerce in Azerbaijan is sufficiently well-developed," the expert said. In addition, in his opinion, besides the existing legal documents, there is a need for more bylaws to help develop the appropriate infrastructure and technological tools for the fully-fledged introduction of e-commerce. However, banks had to work hard to make the future system secure, that is to say, to guarantee the security of virtual transactions.

Keeping up with the times

In the meantime, head of the Azerbaijani Banking Association, Eldar Ismayilov, noted in conversation with R+ that the "banking institutions in Azerbaijan are trying to keep up with the times." "Azerbaijani bankers understand very well the importance of new methods of implementing the well-worn economic doctrine, 'goods-money-goods.' Goods should be made available to the money, regardless of whether it is electronic or not. Electronic trade is a pressing issue at present, and I know that Azerbaijani banks, including the National Bank, are working quite hard on introducing e-commerce. However, the mechanisms required for this are still absent. And, for now, we still have to study carefully all segments of the market which are associated with e-commerce. I think that, sooner or later, this way of doing business, which has proven successful in many countries of the world, will establish itself in Azerbaijan, too. Especially as countless foreign companies are offering their products online and this business is generally very democratic. At the same time, high technology becomes an important part of the business process and, despite its complexity, companies which want to remain competitive must incorporate this technology into their business activity," said Mr. Ismayilov.

We may conclude, therefore, that the development of e-commerce in Azerbaijan is hindered by the current inability of the banks to offer online services, the underdevelopment of systems of payment by credit card and cheque, the widespread computer illiteracy of the population and an incomplete legal framework in this sector. Besides, online shops are developed, not by e-commerce professionals, but by amateur web designers. In addition, due to the absence of online systems of payment, all payments take place at the time of delivery which may cause a number of problems for the vendor. And let us add to all this the fact that big businesses do not yet consider online trade to be a promising direction of development.

Despite all these negative factors, the Azerbaijani Ministry of Communications and Information Technology is already working on a package of recommendations to organize e-commerce in the republic. A working group has been created and given powers to research the demand for e-commerce in the country and to plan appropriate work when the results are obtained. Azerbaijani experts believe that this is the most promising area of activity and it will help to make a considerable impact in reducing budget expenditure in the country.

Today, world online trade is developing at a dramatic pace. According to some data, 40-70% of Europeans who use the internet have made at least one online purchase. The number of customers of online stores is growing every year. In Russia, for instance, where the e-commerce market is developing more slowly than in the West, online sales revenues reached $4 billion last year!  Let us note that in 2004 it was about $950 million. In recent years, the online sales market in Russia has grown at a steady rate of 40-50% per year. And, while online trade in Russia is about 0.7% of the total sales of non-food items in the country, in the United States, where online purchases are much more popular, the figure is as high as 2.5%.

Sooner or later?

In principle, there is great potential for the development of e-commerce in Azerbaijan. The number of internet users in our country is growing every year. Demand creates supply, so the day will soon come when the growing internet audience will attract the attention of businesses. The fact that internet access is increasingly available in the Azerbaijani provinces, where the vast majority of the country's population lives, will play an important role in this process. It is precisely these factors, in the opinion of experts, which promote dramatic growth in online sales. So, sooner or later, customer demand for internet sales will be significant, not only in Baku, but also in the provinces. Once a positive trend is established, others will follow: growing numbers of businesses will start selling their products online and then electronic payment methods via different payment systems, cards, etc., will emerge. By the way, with the increasing popularity of online sales, internet vendors themselves will have to focus on the quality of their services to keep customers; this will give a further boost to the development of the IT and communications market in Azerbaijan. And let us stress in conclusion that, at present, Azerbaijani businessmen have yet another major advantage, in addition to the steady increase of internet users. This is that the experience of many developed countries enables Azerbaijan to analyze others' mistakes and choose the optimal way of introducing and establishing internet commerce. This will help develop a marketing policy best suited to the Azerbaijani situation. So, the fact that the Azerbaijani business sector lags so dramatically behind their foreign counterparts in providing e-commerce services may yield at least one positive effect.  After all, studying the Western experience may help us avert the mistakes made by foreign companies when they introduced e-business services and developed the electronic market in general.