ECONOMY

Internet firms must still play by Old Economy rules

Users of information technology, whether private individuals or companies, are going through a period of consolidation, trying to take maximum advantage of their investments and trying to cope with the letdown that followed the extremely high expectations raised by technological advances and, more importantly, by technological firms. At the same time, Internet firms are still shutting down at a fast pace and the much-heralded electronic commerce is barely making an impact. According to a survey by consultants Strategic International, the electronic commerce in Greece (business-to-client only; business-to-business transactions are not included) makes up only 0.024 percent of retail sales. Not that things are much brighter elsewhere: In the United States, where it all began and where a much larger percentage of the population is «wired,» B2C commerce accounts for 0.4 percent of retail sales. The message of Strategic International’s analysts is simple: The dream is over. Welcome back to the Old Economy. The fast and quick profits that marked the so-called «New Economy» firms are no longer possible. After all, the same economic laws apply, whether the economy is old or new. Technology and Internet companies must pay more heed to the laws of economics, restructure themselves and make long-term plans. They must ensure their profitability and the added value of their products and services. After all, the Internet, and information technology in general, can be very helpful in improving productivity, providing enhanced services to clients, cutting costs and make maximum use of intra-company information. Fast growth Despite the fact that the tide began turning against New Economy firms during the year 2000, the Greek Internet market (commerce and service provision) grew 80 percent in the same year, compared to 1999. This is due to the sharp increase in the number of people gaining online access, admittedly from a very low base. Still, this trend is expected to continue for at least the next five to six years. Strategic International’s forecasts over the next three years anticipate an impressive growth of the Internet sector; the main factors contributing to that growth are the generous inflow of European Union funds through the third Community Support Framework, public investment, growing awareness among firms and the reduction in online access costs. By 2004, the year of the Athens Olympics, the number of Internet users will top 1.5 million. Given current trends, it would be wrong to expect B2C e-commerce to grow uniformly. Clients use the Internet to buy cheaper products that still do not lose their quality. The consultants’ survey showed that Greeks use the Internet mainly to buy travel tickets, CDs, computer equipment and flowers. Following, some distance behind, are books and mobile telephony products. What are the immediate expansion plans you are working on at present? What markets in Europe and southeastern Mediterranean are you targeting for immediate expansion and which are part of your medium-term goals?