E-Commerce for Development_ Challenges and Opportunities

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16/6/2014 E-Commerce for Development: Challenges and Oppor tunities

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E-Commerce for Development: Challenges and

OpportunitiesAllison MURRAY

Canada

This paper was written as a personal research effort by the author while

on placement as an Intern with the International Development Research

Centre (IDRC) Asia Regional Office in Singapore. The findings are based

on independent observations, and in no way represent the officialstandpoint of IDRC.

Abstract

The use of electronic commerce by business in developed countries has grown considerably in the past few

years. While the private sector appears to be benefiting from this low-cost means of reaching consumers

worldwide, the question remains: can e-commerce be used effectively by other sectors to generate revenue?

With the sharp decline of financial aid to developing countries over the past five years, many Non

Governmental Organizations (NGOs) are looking for alternative means to fund their development activities.This paper examines how e-commerce applications employed in the commercial sector can be used by

NGOs to generate revenue to supplement their funding base. The findings from this paper demonstrate both

the challenges NGOs face in using e-commerce in developing countries and the opportunities emerging from

this new Internet platform for development. If the projections for the upcoming years concerning the growth

of e-commerce are true, then it is important for NGOs to realize the opportunities available for generating

revenue online.

In developing countries, thousands of NGOs have gone online over the past five years, realizing the

importance of the Internet for the exchange and distribution of information. With the rise in e-commerce over

the Internet and the subsequent decline in development aid over the past five years, NGOs may be able to

tap into this new business modality to offset their operating costs. Many NGOs already produce and sell

products, such as publications, publicity materials, and locally made handicrafts through "traditional" means of

marketing and distribution. As NGOs are nonprofit organizations, the revenue generated is plugged back into

projects and activities, offsetting costs. Marketing and selling their products online could mean wider

distribution of development material and diversification of revenue sources. However, various issues must be

considered for e-commerce to be an effective tool for NGOs to generate revenue. Issues such as costs

involved in setting up shop online (both capital and noncapital); how the NGO approach to e-commerce may

differ from that of business; ease of use by consumers, sellers and distributors; time taken away from other

activities; type of products that can be sold easily online.

These issues are examined in the context of the International Development Research Centre's Pan Asia

Networking e-commerce initiatives. For the past three years, Asian NGOs have been selling their goods

online, with support from PanAsia. In June 1998, Pan Asia Networking launched its first Web-based
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platform for selling goods online. The Pan Asia E-Commerce Shopping Mall initiative has been set up to

provide support for Asian NGOs wishing to tap into e-commerce facilities. A Web-based program has been

developed to allow NGOs to sell both physical goods (publications, handicrafts) and virtual goods (online

data, multimedia video and audio clips).

Will the opportunity cost of generating revenue online outweigh the amount of revenue generated? Do NGOs

have the time to dedicate to selling products online, considering what is often the case of low staffing and high

demand for services? What type of support mechanisms can be set up to assist NGOs in the use of e-commerce? If e-commerce can be a means for NGOs to increase the sustainability of their operations in

times of budget cuts and funding cuts, then the findings presented in this paper provide both timely and

valuable information.

Contents

Introduction

Methodology

Nonprofit development organizations: An overviewResource expansion

Development organizations and the Internet

The PanAsia Networking initiative

E-commerce as a means of resource expansion

PanAsia Networking's early online selling activities

Operationalizing online selling for development

Identifying the issues

Addressing the issues

The e-commerce strategyFinding support

Pan e-commerce: Supporting new directions for online development products

Levels of support

Experiences to date

Summary and conclusion

Notes

References

IntroductionThe explosion in the use of electronic commerce (e-commerce) by the business sector has been tremendous

since its inception only a few years ago. From governments to multinational companies to one-person start-

ups, e-commerce is increasingly viewed as a key business modality of the future. Ease of transaction,

widening markets, and decreased overheads are factors that make e-commerce solutions more and more

attractive, as evident with the growth of online sales.

The Organization for Economic Cooperation and Development (OECD), in a paper on the economic and

social impacts of e-commerce, points out that due to a combination of both regulatory reforms and

technological innovation in the past three years, the barriers to entry have fallen dramatically for many e-commerce businesses. Their estimates have put the level of e-commerce traffic at US$ 1 trillion by 2003 to

2005 [1]. If these projections hold true, then the online business community stands to benefit considerably

from this new form of conducting business. Combined, these encouraging factors lead to the question of
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whether e-commerce can move beyond the commercial sector to be used effectively by other sectors to

generate revenue.

Thousands of development organizations have gone online in the past five years, having realized the

importance of the Internet for the exchange and distribution of information. With the rise in e-commerce

activities over the Internet, and the subsequent decline in development aid over the past five years,

development organizations may be able to tap into this new business modality to offset their operating costs.

One effort that supports this type of activity is Pan Asia Networking (PanAsia), an initiative of the

International Development Research Centre (IDRC). PanAsia has provided support over the past three years

to various development organizations in the Asia Pacific region to assist them in realizing the benefits of selling

their publications and goods online. The lessons learned from this example can provide a means for assessing

the challenges and opportunities faced when the development sector uses e-commerce for resource

expansion. This paper therefore examines the question of whether e-commerce can provide an effective

means of generating revenue for the nonprofit development sector.

MethodologyThis paper begins by providing an overview of nonprofit development organizations. It makes a link between

declining levels of donor-assisted funding and the need to find new methods of sustainable funding

development activities and projects. It looks specifically at tapping into the intellectual outputs that these

organizations could sell online. The rise in the use of the Internet by development organizations is further

highlighted.

The issues surrounding this latest Internet phenomenon are examined by drawing from the experiences of

development organizations that have been selling goods online for the past three years with the PanAsia

initiative. The issues that arise from PanAsia can provide experience for formulating strategic approaches tothe use of e-commerce by development organizations. Specifically, this paper discusses the challenges that

arise for development organizations, and how these issues can be addressed. It concludes by presenting new

methods of support offered by PanAsia, taking into account the specific nature of development organizations

and the need to provide assistance for the effective use of e-commerce for resource expansion and future

opportunities in this area.

The scope of this paper does not allow for an in-depth analysis of all of the issues involved with the use of e-

commerce by development organizations. For this reason, efforts have been made to distinguish between the

issues particular to this question and those issues associated with the use of the Internet by users fromdeveloping countries (such as language barriers, access to technology, training, and social barriers).

Furthermore, certain factors are shared among all online retailers, regardless of whether they come from the

public or private sector (such as location of e-commerce operations, country-level infrastructure, distribution,

and policy and legal framework for e-commerce). This paper focuses primarily on issues of concern to

development organizations and their use of e-commerce as distinct from private businesses or companies.

Nonprofit development organizations: An overview

Post-World War II saw the emergence of nongovernmental organizations (NGOs) as providing services tomarginalized groups, filling the void often left by state and market forces. The United Nations Development

Program (UNDP) notes that, "In the early 1980s, one rough estimate suggested that NGO activity 'touched'

100 million people in developing countries: 60 million in Asia, 25 million in Latin America and some 12 million

in Africa. Today the total is probably nearer 250 million -- and will rise considerably in the years ahead" [2].
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Northern NGOs and donor agencies based in developed countries became one means of disseminating

Official Development Assistance (ODA) funding from OECD countries to developing countries [i]. Southern,

or developing country, NGOs receive ODA based on their needs, affiliations, and programming goals. In the

late 1970s the level of funding to Southern NGOs increased thanks to a growing awareness of the need to

encourage local capacity-building and an acknowledgement of the limitations Northern NGOs face in

implementing programs at the local level. NGOs receive approximately 15 percent of overall ODA. Total

funding is basically divided between 50 percent ODA transfers and 50 percent volunteer contributions

(whether capital or noncapital).

From the 1970s to the present, NGOs have grown in number and evolved, assuming a complex array of

organizational forms and functions. David Korten, in his definition of the "third sector" (as distinct from the

state and the market), presents four general categorizations of NGOs:

1. voluntary organizations that pursue a social mission driven by a commitment to shared values;

2. public-service contractors that function as market-oriented nonprofit businesses serving public

purposes;

3. people's organizations that represent their member's interests, have member-accountable leadership,

and are substantially self-reliant; and

4. governmental NGOs [ii] that are creations of government and serve as instruments of public policy. [3]

The variety of organizational categories that have emerged within the NGO community has led to some

confusion as to the specific type of organization one is referring to. For purposes of simplicity, this paper

speaks generally of "development organizations" as encompassing the varying forms of NGOs.

The rise in the number of development organizations in the 1990s has paradoxically coincided with a

decrease in ODA levels during the same period. According to the International Monetary Fund, ODA from

OECD member countries fell to 0.25 percent of gross national product in 1996, the lowest level in the pastthree decades. They go on to note that this decline comes at a time when the poorest countries increasingly

need ODA to fight poverty. [4]

As ODA levels continue to fall, development organizations are forced to cut their spending on project

activities, adversely affecting the most marginalized sections of society. Competition for funding has been

increasing, forcing development organizations to re-assess the way they attract and generate revenue for their

operations. Therefore, new approaches must be found in order to bridge the funding gap that has

emerged in the 1990s.

Resource Expansion

One of the ways in which development organizations have expanded the resources available for their

activities, while disseminating pertinent development information is through the sale of publications. For years,

development organizations have produced goods for sale (including products such as locally made textiles

and handicrafts) as a means of fund-raising. Although nonprofit by definition, development organizations are

able to generate revenue to offset operational costs. In most instances, the expanded resources from these

activities meet a fraction of their overall needs. However, the revenue can more than cover the costs of

producing the goods, leading to the further dissemination of development information and products.

In some instances, development organizations have been very successful in producing and marketing goods

for sale. One example is the British development, advocacy, and relief agency Oxfamand its sale of

Bridgehead coffee. This product is organically grown and bought at "fair price" from local, South American
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producers, and is packaged, marketed, and sold in North America as an environmentally and

"developmentally" sound coffee product.

By the mid-1990s there were also an estimated 500 Oxfam "charity shops" operating in Britain, selling used

clothing, books, handicrafts, and selected commodities. Ian Smillie, in his review of development

organizations, notes that sales from these "charity shops" are negligible in comparison to commercial retail

stores. However, these low-level sales are often justified because of the added publicity and exposure of the

development issues it supports. Furthermore, costs are lower because of volunteer staffing. The Oxfam fair-trade stores in Britain turned a profit of UKP 17 million on income of UKP 52 million in 1993 alone. [5]

Development organizations and the Internet

The number of development organizations using the Internet has grown tremendously in the past five years. It

is difficult to pinpoint exactly how many have established their own websites, as there is no single directory

that lists all of the development organizations currently online. However, most development organizations that

have registered domain names with InterNIC would fall under the .org domain name. One indication of the

growth of NGO activity on the Internet can be measured by the growth of .org hosts in the past few years.According to the Network Wizards Internet Domain Survey there were 154,578 .org hosts in January 1995.

The same survey conducted in July 1998 shows a total of 655,971 .org hosts. [6] That is a 417 percent

growth rate in only 3 1/2 years.

Another indication of the growth in the use of the Internet by development organizations is the amount of

donor-assisted projects that target the NGO sector. As the Internet began to emerge in the early 1990s as a

possible means of improving communication networks in developing countries, various donor agencies began

to target development organizations as a possible beneficiary group. Donor agencies such as the Canadian

International Development Agency, IDRC, UNDP, the World Bank, and NORAD (the Norwegian

development agency) saw the potential for development organizations to benefit from wider access to

information and improved methods of communicating across distances. Initiatives were under way in Africa,

Asia, and Latin America to allow development organizations to have access to the Internet. Early projects

included connecting health networks in parts of Africa, and establishing NGO networks, such as the IDRC-

funded SANGONet (South African NGO Network). Larger efforts saw a consortium of agencies

collectively working toward the goal of promoting connectivity and content building for development. An

example of one such effort is Bellanet, which promotes interagency collaboration for the promotion of

information and communications technologies (ICTs) for development. Today hundreds of projects are

working to get development organizations online and to tackle some of the barriers they face with access to

ICTs. [iii]

The PanAsia Networking Initiative

PanAsia Networking is a pioneering initiative of Canada's IDRC. PanAsia was established in 1995 to

promote electronic networking in Asia; the use of ICTs; the development and sharing of information

resources; and the research and development of Internet systems, technologies, and policies. It looks at new

and innovative ways of using ICTs for the promotion of sustainable development among Asian organizations.

The four cornerstones of PanAsia are:

1. e-mail and Internet access through telecommunications connectivity;

2. content building and dissemination through websites;

3. access, communication, linking, sharing, and exchange through networking; and
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4. development of Internet policies, technologies, and systems through applied research.

PanAsia has facilitated the establishment of national level technical carriers (Internet service providers [ISPs])

in various developing countries of Asia. They have concurrently worked with development organizations in

the provision of technology, training, and access to the Internet for the promotion of communication and local

content-building on Asian-based development issues. They currently host over 100 Pan Partner development

organizations whose research and development website content forms part of the PanAsia Network. The

websites are hosted on the PanAsia server, located at their Singapore hub.

E-commerce as a means of resource expansion

As mentioned above, growth in e-commerce use and applications, combined with the lowering of barriers to

entry and the increasing use of the Internet by development organizations, could provide one means of

experimentation with new forms of resource expansion by development organizations to offset pressures from

declining ODA. The OECD notes the sectors that will benefit most from e-commerce revenue generation will

be those that transmit information. [7] As development organizations use their intellectual outputs for the

production of publications and documents for the dissemination of information, they are a logical retailergroup. E-commerce could allow development organizations to tap into the world marketplace and effectively

generate revenue to offset operating costs. What are the issues involved? How do development organizations

differ in their approach to e-commerce? What barriers do development organizations face in using online

commercial facilities? What support mechanisms are available for development organizations that wish to sell

goods and services online? These questions will be explored in the discussion that follows.

PanAsia Networking's early online selling activities

As early as 1996, the management of PanAsia realized that the possibility existed for developmentorganizations to expand their funding resources from online sales. Several organizations that would be

interested in selling their publications online were identified and selected to become "Pan Partners." [iv] This

activity was initiated as an experimental use of e-commerce facilities in the development sector. As noted by

Randy Spence, IDRC Regional Director of the Asia Regional Office, "we saw that the business applications

of the Internet were the fastest growing (at the time, in 1996)." [8] First, it was felt that if revenue could be

generated from online sales, then it could provide a sustainable source of financing for website maintenance

and operations, supporting both the PanAsia Network and Pan Partners. It was hoped that if the initiative

was successful, enough resources could be generated to provide support to other operational and project

costs incurred by the organization. Second, the goal was to train development organization in how to createe-commerce platforms themselves, so that in the future they would be able to develop the initiatives on their

own.

In January 1997, PanAsia hosted the first Pan Content Partners Training Workshop at its Singapore hub.

One of the aims of the workshop was to discuss with Pan Partners the potential opportunities for online sales

and how to go about e-commerce. The Pan Partners identified various products that they could produce and

sell online. These products include journal subscriptions, books, CD-ROMs, databases, and videotapes. The

issues raised at this workshop helped to form the basis for PanAsia's online resource expansion activities.

Operationalizing online selling for development

The PanAsia hub in Singapore hosts the basic infrastructure for its online selling activities. In the early stages,

a simple cgi (common gateway interface)-script form was provided on the development organization's
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website, allowing potential customers to place an order for the goods they wished to purchase. The customer

had the option of paying by check or money order, sent to the organization, or receiving an invoice. As no

credit card numbers were processed in the transaction, security features were not used at this time. This

method was seen as supporting ease of function, processing of orders, and updating of the products available

on the site. Once the form was completed, the software system automatically generated e-mail copies of the

order form which were then sent to both the PanAsia office in Singapore and the Pan Partner. Responsibility

for fulfilling the order rested solely with the Pan Partner selling the goods.

PanAsia received a small percentage of the Web-sales value from the Pan Partner as a contribution toward

the operational costs of hosting the site, and provided training and support for the online selling activities. The

level of contribution varied according to the financial resources of the development organization in question.

In 1998-99, PanAsia developed a more sophisticated e-commerce platform. The new system will be

discussed in a later section.

Identifying the issues

Online selling activities by Pan Partners has been very experimental to date, with not a sufficient amount of

data generated to provide conclusive results. However, important issues have emerged that can be identified

for the purpose of promoting future discussion and analysis. These issues vary according to the organization in

question, the type of products it sells online, online selling patterns, online customer base, approach to online

selling, and resource expansion.

One overarching characteristic that has emerged is thepattern of sales. The level of total sales to date varied

between the Pan Partners, with some experiencing higher overall sales than others. Most Pan Partners

experienced erratic sales patterns; the level of sales might be high one month and drop off to zero the next

month. These erratic sales patterns may be attributed to two factors. First, for many developmentorganizations the main goal of this activity is not generating revenue, but rather disseminating information on

specific development topics. Producing and distributing publications is a secondary activity that is done

alongside larger projects for which they receive their funding. This is contrary to the private-sector online

selling community, whose primary focus is profit-making. Because of this, private companies spend a lot on

marketing their products in order to gain a competitive edge in the marketplace. As e-commerce is seen as a

secondary activity for development organizations, theymay not be able to put as much capital into

marketing their products as private companies do.

Generally, Pan Partners have promoted their online products through advertisements in brochures, journals,and publications, announcements at conferences and events, and on their website. Without employing more

strategic marketing techniques, potential customers may not know the product exists, or may not know that

they can purchase the item online. The monthly rise and fall of sales figures can possibly be attributed to 1)

customers' ad-hoc online purchasing patterns, when one month more individuals may visit the site, compared

with other months, or 2) the release of a new publication with an advertisement listing the online sales option,

or a conference or event where this service is announced.

A second factor that may account for the erratic sales patterns is the type of products offered by

development-focused organizations. The types of publications and other products offered by these

organizations are very topic-specific, focusing on particular development sectors such as health, disasterrelief, agricultural sustainability, gender equity, the environment, and so on. The markets for these

publications, although significant, can be small in size compared with mass-market products such as popular

books or music. The target markets are primarily with the development sector or academics and researchers.


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It is possible to assume that only a small portion of the overall online customer community would be interested

in purchasing these items. This, combined with the fact that there is little or no marketing of the products,

means that the level of sales will depend on the consumer first knowing that the product exists for sale online

and second, being interested in purchasing the items.

Other trends that have emergedin the sales patterns of the development organizations that are worth noting

are the purchasing patterns of online customers. [v] These patterns include the number of items purchased per

customer and the number of repeat customers. Generally, Pan Partners experienced low total number ofitems purchased per customer and few repeat customers. These indicators can allow development

organizations to determine the level of interest in the publications being offered. This includes not only the

topic covered, but also the frequency of new publications added to the site and the variety of publications

offered. Some Pan Partners update their sites regularly with new publications and they also offer a wide

variety of products. When new publications are available on a regular basis, customers can return to purchase

more items at a later date. Also, with a larger variety of publications available for sale, some customers may

be attracted to purchasing more than one item.

Addressing the issuesThe discussion above highlights three overall issues of concern to development organizations using e-

commerce:

1. amount of resources put toward developing marketing strategies and techniques;

2. types of products being offered; and

3. purchasing patterns of online customers.

Each of these issues can affect the rate of sales and the amount of revenue generated.

It appears that the overarching question that development organizations should ask when deciding whether to

embark on e-commerce initiatives is "What does our organization wish to gain from selling goods and services

online?" As noted by Randy Spence, e-commerce may not be right for every development organization. [9] It

is important to first look at the mandate of the organization -- are there any conflicts that may arise with

allocating resources, both capital and noncapital, to e-commerce? Does the organization wish to generate

revenue? If so, to what extent?

The answers to these questions can determine the amount of time and funding that will go toward developing

the e-commerce facilities, and time put in developing strategies for sales and marketing plans. If the

development organization has few resources (both capital and noncapital), but still wishes to sell its products

online, it can expect to generate a lower amount of revenue. However, the dissemination of information, not

revenue generation, may be the main goal, as previously mentioned. In this case, any revenue generated could

be a useful spin-off benefit, used toward the costs of producing further publications. As noted by Vivien

Chiam, Partnerships and Business Development Manager at IDRC's Asia Regional Office, the gains from e-

commerce can be more intangible for some development organizations than making a sale; it increases

publicity and exposure for the organization and promotes development issues. [10] If development

organizations make a strategic decision to use e-commerce as a means of both disseminating development-

focused products and services and for generating revenue, increased effort will have to be put into developing

the service.

Taking into consideration the issues that have emerged from the examples above, development organizations

may find it useful to construct an e-commerce strategy. This can allow them to gauge what they expect to
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achieve with e-commerce, and how to approach the initiative in a strategic manner to maximize the benefits

and reduce costs.

The e-commerce strategy

It may be useful for development organizations to consider the many issues involved before embarking on an

e-commerce initiative, in relation to the organization's mandate, development goals, and organizational

structure. The primary issues involved would include:

Resource Expansion --Is the main goal of selling goods and services online the generation of revenue to

offset operational costs? If so, how much revenue does the organization expect/wish to generate? These

strategic questions will allow the organization to assess how much funding will go toward e-commerce

activities. If the organization is approaching e-commerce as a means of covering not only the costs of

producing the goods and services and disseminating development-focused products, but wishes to expand its

revenue base to support other project costs, then it may want to develop an e-commerce platform and

strategy that can attract customers. The organization may have to approach e-commerce as a resource

expansion activity that uses business strategies and a full marketing approach. This leads to the question ofwhether this fits in with the development mandate of the organization and its charitable organization status.

Will e-commerce activities distort the tax-free status of the development organization? Is the organization

liable in the case of legal conflicts? Most development organizations have already faced these questions if they

sell publications and other products by "traditional" means.

Capital Costs-- How much funding is the organization willing to put into e-commerce activities? E-

commerce platforms can be high priced, depending on the level of sophistication. A development organization

undertaking e-commerce activities should consider whether it wants to incur higher costs, with the possibility

of cost recovery from an expected higher level of sales. What are the possibilities of receiving financial

assistance from donor agencies or partner organizations for this activity? Development organizations pursuing

e-commerce activities may have to decide between a variety of options for their online selling activities,

depending on their financial capacities. These options can be divided into 1) technical hardware and 2) site

design and maintenance. The organization will have to decide whether it wants to invest in setting up its own

in-house server, depending on the organization's size and computing requirements, or find a third party that is

willing to host the site on its server. Is the third party another development-focused organization, or is it a

private company/ISP? Regarding design and maintenance of the e-commerce site, is the organization able to

hire in-house technical personnel to handle design, development, and maintenance, or is it more cost effective

to hire an outside party to handle these tasks? Developing an e-commerce site that generates high levels of

revenue will have to respond to the changes in e-commerce platforms in the commercial sector. Thedevelopment organization may want to consider using security encryption software for credit card payment,

increasing costs to an extent yet benefiting from increasing customer confidence in the transaction process.

Will the site be eye-catching, with the hope of attracting customers, possibly increasing site development

costs for higher level graphics and design? Pan Partners currently do not have to bear all of the above-

mentioned capital costs, but may one day have to consider them when they initiate an e-commerce site on

their own.

Staffing/Training-- Along with the capital costs comes the assessment of whether the organization has

trained staff that can maintain an e-commerce site, including both the technical staff mentioned above, and theadministrative staff that can process and fulfil the orders. Is the current staff able and willing to take on

these activities? Will capacities be taken away from other projects and activities? Will the organization have

to employ new staff to concentrate on e-commerce? Would it be cheaper/more effective to hire an outside

company to do this? Can the organization afford these costs? Will the staff have to receive training? All of the


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above questions are important, not only for the success of the e-commerce initiative, but also to ensure that

capacities are not taken away from other development activities.

Once the above-mentioned issues are addressed, it is possible to move on to the operational strategy. The

operational strategy addresses the issues highlighted in the examples above. These issues are important to

address because of their impact on the overall expected sales patterns of development organizations.

Marketing-- As evident from the discussion above, a good marketing strategy forms the basis of theoperational strategy, in order to attract customers to the e-commerce site and ensure a steady pattern of

sales. Development organizations often need not employ capital-intensive marketing programs in order to

have a successful marketing campaign. The marketing strategy can be divided into two main categories: 1)

online markets and 2) offline markets.

Online marketsinclude those customers that have already used, or are able to use, e-commerce for

purchasing products. The Internet can be used as a tool in itself in order to capture online markets.

Techniques include identifying other sites that would be willing to link to the organization's e-commerce site,

or cross selling on these sites. These sites include organization partners and sites that offer links to

development information and online resources. Another technique includes identifying target markets thatwould be interested in purchasing the specific development-focused products that the organization is selling

online. Once the target markets are identified, potential customers can be identified and a personalized e-mail

sent, providing a description of the products being offered and why they might be of interest to the potential

customer. As well, individuals and organizations that have already been in contact with the organization can

be contacted by e-mail with a similar message. In this way, the development organization is targeting markets

that it knows will be interested in the products it offers.

Offline marketsinclude those individuals and organizations that have access to the Internet, but have never

used e-commerce or are unlikely to do so. In these cases, "traditional" means of marketing can beemployed to attract the potential customer to the e-commerce site. This includes advertisements in

publications, newsletters, announcements at conferences and events, mailings to members, and supporters.

Otherinnovative means of marketingcan be employed, such as advertising promotional offers (e.g., "buy

one, get one free," or announcements of discounted items) on the home page of the development

organization's website.

Types of products offered for sale online-- As previously noted, the products that are produced by

development organizations primarily serve the purpose of disseminating information on a specific development

topic or issue. These are products that are not often produced for mass markets, but for particular groupswith an interest in the development sector. Should development organizations wish to broaden their market

sector, they can develop products that have a wider appeal, while still maintaining a focus on the

dissemination of information on development issues. These products could include general information and

educational publications on a particular development theme (e.g., a survey of regional environmental issues).

Such products could draw in new markets, such as schools and libraries.

Development organizations could also look at innovative ways of using the Internet to createWeb-based

products for sale. For example, electronic versions of books and journals can provide a low-cost means of

both producing these products and distributing them. Text can be digitized and offered for sale online. The

product can then be sent to the customer electronically, cutting down on the cost of printing the text and

sending the item by post. Other products could include digitized audio and video materials and electronic

greeting cards. One such initiative is E-cards, an online greeting card company that supports the World

Wildlife Fund (WWF). The virtual cards contain photographs of endangered animals and habitats. The site is
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sponsored by advertisers and for every greeting card sent, E-cards donates a significant portion of the

revenue to the WWF. It also assists by sending Web traffic to the WWF website and, as an extension,

drawing attention to the cause of endangered species and the environment. Another possibility that

development organizations could pursue is allowing charitable donations and contributions to be made online.

This would allow individuals that would like to support the efforts of a particular organization to submit their

contribution in the form of an online transaction. This may increase overall contributions, as it provides a

convenient way for individuals with access to the Internet to donate.

Purchasing Patterns of Online Customers-- The frequency of updating new products can impact the

number of items purchased by customers and the number of returning customers. In order to encourage

customers to purchase more than one item at a time, it is important to offer a (wide) variety of products.

Returning to the marketing strategies, development organizations can offer sales promotions mentioned

above. This can increase the per-customer volume of sales, increasing overall revenue. Development

organizations can consider organizing a schedule for updating their e-commerce site, adding new

products and promotional offers on a regular basis. This way, previous customers will see that new products

are available for sale and may be attracted to purchasing a second or third time. It may be useful to form a

general profile of who the organization's likely customers might be, and what their purchasing patterns could

be. Are they individuals, companies, research institutes, universities, donors, libraries, or governments?

Further research on e-commerce customers could provide a useful tool for assessing online purchasing

patterns.

Developing an e-commerce strategy can allow development organizations to approach this initiative with an

understanding of what they want to achieve and how to achieve it. This can encourage strategic thinking of

how to attract potential customers to the site and how to keep them returning. In order for e-commerce

initiatives to be successful, whether generating revenue to offset production costs or increasing overall revenue

to offset operational costs, development organizations can often use business strategies to more effectively

achieve their overall goals.

Finding support

Many development organizations may find that an e-commerce initiative is too capital intensive, both in terms

of start-up costs to create the e-commerce platform and administrative support, and in terms of resources

taken away from other development projects and activities. It is important, therefore, for development

organizations to look for means of support for this type of initiative. Furthermore, it is important for donor

agencies to provide funding and corresponding projects that encourage and support e-commerce by

development organizations. This will encourage both the wider dissemination of information and productsconcerning development issues, and alternative methods of generating revenue to offset operational costs,

therefore decreasing dependency on donor funding.

Pan E-Commerce: Supporting new directions for online

development products

The IDRC, through PanAsia Networking, recognized the growth of e-commerce and its capacity for

supporting development goals and activities. After reviewing its online sales from 1996 to mid-1998, PanAsia

felt that there was enough potential from online sales for resource expansion and the dissemination of

intellectual outputs to embark on a second phase of its e-commerce initiative. With aid from a grant from the

Singapore government's S-Onescheme, PanAsia decided to develop a full e-commerce platform to provide

the necessary framework and support for development organizations. In the three years since PanAsia began
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supporting online sales, e-commerce has grown in size and complexity to incorporate advanced methods of

payment, security, and accounting. According to Randy Spence, PanAsia recognized the "need to expand

and improve operations in order to do e-commerce properly, including security issues, automated payment,

and credit card [processing]." [11]

The S-One grant to IDRC provided the necessary funding to PanAsia to tap into broad-bandwidth network

for the development of multimedia capabilities. This includes streaming technology, object relational database

management system, multimedia technology (audio, video, Shockwave), and an e-commerce platform. PanE-commerce began to be developed in April 1998, with the Grameen Bank as its first "virtual shop" in July of

that year. The Pan E- commerce site offers virtual goods, through the On-Web Shop, including text-based

publications and digitized graphics, audio, and video. The Off-Web Shop contains physical goods, such as

printed publications, textiles, and handicrafts. The On-Web goods are delivered in digitized form with Web-

based access, while the Off-Web goods are shipped to the customer.

Levels of support

Pan E-commerce supports development organizations by providing a readily accessible platform for sellinggoods and services online. The site has been developed as an online shopping mall for development goods,

where online customers can find a variety of different products from a number of sources. Pan E-commerce

provides support for development organizations wishing to sell goods and services online through a variety of

means, cutting costs, and as an extension, training the "shopkeepers" in how to successfully approach e-

commerce. The support extends to development organizations at various levels:

1. Cutting costs-- Entry and set-up costs of e-commerce platforms can be expensive and vary

according to the level of service the site offers. Until prices of encryption software, payment facilities,

and accounting systems fall, many development organizations will be unable to afford to develop a

high-level e-commerce site without assistance. Pan E-commerce, and possible services like it, offer a

means for development organizations to set up "shop" in a ready-made platform, without having to

incur set-up costs. This allows development organizations to concentrate on developing products for

sale. Pan E-commerce pays a transaction fee for the use of the encryption software and accounting

systems. These costs are recovered through low percentage contributions of sales revenue from the

online "shopkeepers."

2. Technical training and support-- Pan E-commerce provides technical assistance and training to

development organizations in order to help them get their products online and functioning. The primary

goal is to familiarize development organizations with the way e-commerce works while transferring this

knowledge. In this way it is hoped that in the future the "shopkeepers" will be able to set up e-commerce platforms on their own with the training received from their experience with Pan E-

commerce.

3. Marketing-- The Pan E-commerce "shopping mall" expects to ultimately support approximately 150

online retailers. By having a variety of development organizations sell their products in one location, it is

possible for the organizations to learn marketing and promotional techniques from each other, with

PanAsia acting as a guide. PanAsia will also provide guidance to organizations that are looking for new

ways of marketing their products online.

4. Types of products offered for sale online-- As previously mentioned, Pan E-commerce offers

multimedia support for the development of new forms of On-Web products. This will allowdevelopment organizations to produce new types of products, such as photos, audio clips, and videos

of development themes. For example, educational videos that were traditionally distributed by cassette

tape can be digitized and transferred to the customer using a Web-based format, such as RealPlayer.
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Experiences to date

As previously mentioned, the first "shop" on the PanAsia E-commerce shopping mall opened in July 1998, in

partnership with Grameen Uddog, Bangladesh. The site offers the world-famous Grameen Check Textiles for

sale, woven by rural Bangladeshi women. Samples of more than 400 check designs are posted, allowing the

customer to "search" the design he or she prefers, based on predetermined colors. Customers receive their

orders by shipment. Other shops now online include the International Centre for Diarrhoeal Disease

Research, Bangladesh and the Engender Book Gallery. PanAsia Networking has also produced the PanAsia

Networking Yearbook, providing a comprehensive survey of the state of electronic networking in 22 Asian

countries. All of these shops provide text-based digitized goods that, once purchased, are downloaded into a

personal bookshelf for the customer to access. As PanAsia E-commerce continues to develop, more shops

will be added.

PanAsia E-commerce has experienced moderate but encouraging sales of its online products. A strategic

marketing plan has been undertaken to promote the PanAsia E-commerce mall and the creation of a strong

"brand" association with PanAsia E-commerce to attract customers.

Summary and conclusion

The encouraging growth in e-commerce activity in the private sector over the past three years leads to the

question of whether these experiences can be extended to other sectors of society. Development

organizations are potential users and beneficiaries of e-commerce because of declining ODA funding and the

need to find alternative sources of resource expansion to support project activities. Development

organizations typically produce products based on development topics or issues. Furthermore, Internet use

by development organizations has been rapidly increasing, making entry into e-commerce a logical step.

Experiences of development organizations selling goods and services online with the support of PanAsia

Networking has shown encouraging results. This initiative allows development organizations to choose the

level of effort they wish to place on online selling, corresponding to levels of resource expansion. These

experiences draw attention to a number of issues that emerge concerning the particular use of e-commerce by

the development sector. Because development organizations do not function in the same manner as private

businesses do, it appears important for these organizations to adopt strategies to maximize the potential

resource expansion available with e-commerce.

Many development organizations will be impeded from entering into e-commerce because of high entry costs

and technical barriers. It is therefore important for support to be made available to development organizationswishing to sell goods and services online. One such effort is Pan E-commerce, which provides varying levels

of support, such as assisting to cut entry costs and offering technical assistance and marketing support to

encourage the dissemination of development products and the realization of resource expansion to offset

operational costs.

Maria Ng Lee Hoon, the PanAsia program officer in Singapore, notes: "Selling of intellectual information is

not new. R & D [research and development] organizations have been doing that in the form of hard copy

publications and audio, visual, and motion-based media for a long while. What we are offering our

development research partners on PanAsia Networking is a new market segment -- the Internet clientele --and a new means for their resource expansion activities." [12]

Notes
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[i] Ian Smillie defines ODA as "concessional assistance from governments. It may include tied aid and loans

but it must include a grant element of at least 25 percent." Means of disseminating ODA include grants to

national donor agencies and government-to-government assistance grants. The latter includes infrastructure

projects, political aid, and military expenditures. Approximately 15 percent of ODA is disbursed to NGOs.

[ii] These include intergovernmental organizations -- umbrella groups that represent development-focused

government departments on a regional basis. Intergovernmental organizations are dependent on both ODA

and government funding for their operations.

[iii] Many critiques (Hamelink, Castells, Mansell, Wresch) have emerged over the past five years, warning of

the marginalization of developing countries in the impending "information revolution." Issues such as lack of

education and financial resources, geography, and sociocultural barriers have been identified as possibly

impeding the growth of the Internet in developing countries. As an extension, developing-country NGOs face

similar obstacles.

[iv] Only a small portion of Pan Partners engage in online selling activities. To view a full list of Pan Partners,

go to the PanAsia website http://www.PanAsia.org.sgand click on "R&D Websites" in the top left-hand

corner.

[v] This is an issue that impacts both the public- and private-sector online selling communities.

References

[1] "The Economic and Social Impacts of Electronic Commerce." Organization of Economic Cooperation

and Development (OECD). http://www.oecd.org/subject/e_commerce/summary.htm

[2] UNDP Human Development Report. New York: UNDP, 1993.

[3] Korten, David C. (1990) as quoted in Smillie, Ian, "The Alms Bazaar." Ottawa: International

Development Research Centre, 1995.

[4] International Monetary Fund Survey. Vol. 27, No. 8, 27 April 1998, p. 132.

[5] Smillie, Ian, "The Alms Bazaar." Ottawa: International Development Research Centre, 1995. P.156.

[6] Network Wizards Internet Domain Survey http://www.nw.com/zone/WWW/top.html

[7] OECD. Ibid.

[8] Spence, Randy. Personal Interview. Singapore: 26 January 1999.

[9] Ibid.

[10] Chiam, Vivien. Personal Interview. Singapore: 1 February 1999.

[11] Spence. Ibid.

[12] Ng, Maria Lee Hoon. E-mail correspondence. 23 February 1999.
http://www.isoc.org/inet99/proceedings/1g/1g_3.htmhttp://www.isoc.org/inet99/proceedings/1g/1g_1.htmhttp://www.isoc.org/inet99/proceedings/1g/index.htmhttp://www.isoc.org/inet99/proceedings/index.htmhttp://www.nw.com/zone/WWW/top.htmlhttp://www.oecd.org/subject/e_commerce/summary.htmhttp://www.panasia.org.sg/


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E-Commerce for Development_ Challenges and Opportunities

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