E-Commerce For Development - Challenges and Opportunities

16/6/2014 E-Commerce for Development: Challenges and Opportunities
http://www.isoc.org/inet99/proceedings/1g/1g_2.htm 1/15
E-Commerce for Development: Challenges and
Opportunities
Allison MURRAY <alliemurr27@yahoo.com>
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 official
standpoint 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
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 overview
Resource 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 strategy
Finding support
Pan e-commerce: Supporting new directions for online development products
Levels of support
Experiences to date
Summary and conclusion
Notes
References
Introduction
The 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
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.
Methodology
This 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 to
the 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 from
developing 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 to
marginalized 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].
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 past
three 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 Oxfam and its sale of
Bridgehead coffee. This product is organically grown and bought at "fair price" from local, South American
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
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 retailer
group. 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 development
organizations 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 create
e-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
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 the pattern 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 development
organizations 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, they may 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, disaster
relief, 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.
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 emerged in 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 of
items 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 issues
The 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
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 of
whether 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. The
development 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 the
administrative 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
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 the
operational 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 markets include 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 that
would 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 markets include 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 be
employed 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.
Other innovative means of marketing can 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 groups
with 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 create Web-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
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 products
concerning 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-One scheme, 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
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. Pan
E-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 selling
goods 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 allow
development 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.
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 organizations
wishing 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
[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.sg and 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.

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