How does Amazon segment its marketplace sellers

IT symposium of the GDV insuring risks in e-commerce

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1 IT symposium of the GDV Insuring Risks in E-Commerce Insuring Risks in E-Commerce for B2C and B2B: Trusted Shops and TRUSTED TRADE Ra. Thomas Götting Lawyer Th. Götting Page 1

2 Strong growth expected in the e-commerce sector Independent research institutes expect an explosive increase in goods and services traded over the Internet. This applies to both the B2C and the B2B area. E-Commerce market in 2002/2004 in billions * B2C B2B Germany Europe 11 / / 123.7 71 / / World /6.790 * Source: Forrester Research 1999 Lawyer Th. Götting Page 2

3 Different growth in the individual regions It is to be expected that the volume of online trade will differ considerably between the individual regions. B2B B2C raw materials n North America Asia / Pacific Western Europe Latin America Africa / Middle. East Eastern Europe Total Production Online n Retail 2004 * 3.252,,,, 8 14,, 4% 51.3% 24.2% 22.3% 1.2% 0.8% 0.2% 100% * all data in Billion Logistics North America Asia / Pacific Western Europe Latin America Africa / Middle East Eastern Europe Total Consumers Online Retail 2004 *% 204,, 6 5.8 3.7 1.1 454.4 * all figures in billions 44.9% 25.8% 27% 1.3% 0.8% 0 , 3% 100% lawyer Th. Götting Page 3

4 Main Success Factors in Online Trading In order for the optimistic forecasts to be fulfilled, the main success factors for online trading must be available. These are primarily experience, benefits, trust and adequate framework conditions. Adequate framework conditions (law, technology, etc.) Experience Main success factors in online trading * Benefit Trust * Source: Forrester Research Attorney Th. Götting page 4

5 Financial risks and solutions in the B2C area Depending on which business partner makes advance payments, there are different financial risks and solutions TRANSACTION TYPE 1 TRANSACTION TYPE 2 Online buyer pays first Internet shop delivers insurance first 1 delivery insurance Trade credit insurance The online buyer is against Non-delivery insured 2 Consumer credit insurance The internet shop is insured against non-payment by the buyer Warranty 3 Online shop bond The internet shop buys a delivery guarantee 4 Buyer bond The online buyer buys a payment guarantee Information 5 Online shop seal The online shop Buyer trusts an independent seal of quality 6 Information about buyers The shop buys databases with consumer information Lawyer Th. Götting page 5

6 Financial risks and solutions in the B2B area In individual process steps of a transaction there are different risks and corresponding solutions Process steps Search & selection Delivery Payment Risks Non-transparent market Partners of poor quality Incorrect understanding of product / price offer Price volatility Delivery time Correct product Correct quantity Correct quality Damage Insolvency Currency risk Political risk Faulty payment system Possible security services Certificate identification Credit rating Behavioral rating Product tests Delivery guarantee Delivery insurance Transport insurance Credit insurance Factoring insurance Political risk Letter of credit Securitization Debt collection Currency hedging Trust account Credit card Lawyer Th. Götting Page 6

7 providers to cover B2B risks Both financial service providers in the old economy and dot.com s have already positioned themselves in the new market segment. Process steps Provider Search & selection Delivery Payment Certificate Verisign.com Eccelerate.com Certco.com Baltimore.com Arthur Andersen ( esure-aicpa) Technical Insurance Insuretrust.com Rating / Scoring Cofacerating.com Dnbcorp.com Creditreform.com Standardpoor.com Townsendtarnell.c om Certco.com Equifax.com Product Test Sgs.com Worldwidetesting Itsglobal.com Silliker.com Shipping Insurance AXA AON Credit Insurance AON Coface Hermes Certco.com Csieast.com Hiscox.com Credit Card Credit Card Company Cna-credit.com Guarantee Ecredible.com Letter of Credit Identrus.com Gccrisk.com Firstunion.com Factoring E-debt.com Townsendtarnell.com Freightcash.com Trust Account Identrus.com Escrow.com I-escrow.com E-trusco.com Lawyer Th. Götting Page 7

8 Offers from credit insurers to solve the trust problem The large credit insurers are currently still relying heavily on their traditional products to eliminate the trust problem in online trading. Company Product Description Hermes Credit Insurance (Allianz Group) Coface Hermes Rating / Online sales of credit insurance with individual coverage for small claims via the Internet finance portal Certification of companies on the basis of existing and transmitted information; non-integrated cover based on the creditworthiness information NCM (Swiss Re - Group) e-credible protection of the credit risk of marketplace transactions based on a buyer's guarantee, attorney Th. Götting page 8

9 Trusted Shops and Trusted Trade as an offer from the Gerling credit insurance group The Gerling credit insurance group wants to eliminate the trust deficit through the e-commerce units Trusted Shops (B2C) and Trusted Trade (B2B). They are part of an overall strategy for comprehensive risk management and financial services for online business transactions. B2C B2B Gerling TradeSafe.com Strategy: Risk management & financial services for online business transactions TRUSTED SHOPS TRUSTED TRADE Security when shopping online Security for Internet marketplaces Attorney Th. Götting Page 9

10 Classification Trusted Shops and TRUSTED TRADE DM 17 billion premium income Gerling 3rd largest credit insurer worldwide GCIG (Gerling Credit Insurance Group) Traditional business Trusted Shops Gerling Tradesafe.com TRUSTED TRADE trade cover DM 1 billion premium income TRUSTED TRADE benefits from the core competencies of the Gerling Group 100% subsidiary of the Gerling Group Lawyer Th. Götting Page 10

11 Services from Trusted Shops Trusted Shops is the first European quality seal for online shops with a money-back guarantee. Trusted Shops product trust Trusted Shops seal Seal Confirms that the online shop complies with certain consumer protection standards (e.g. data protection, etc.) Security Trusted Shops guarantee Security The Trusted Shops guarantee applies in the following cases: - Non - delivery - Return of the goods - Credit card abuse (acceptance the deductible) Lawyer Th. Götting page 11

12 Functional principle of Trusted Shops The Gerling credit insurance guarantees compliance with the online shop's assurances through a guarantee. The award of the seal after successful testing is carried out by Trusted Shops. Guaranteed for the Gerling Kreditversicherung online shop for behavior contrary to the contract. Recourse against customer registration of the transaction online shop Trusted Shops GmbH awards seal after examination by advisory board lawyer Th. Götting page 12

13 Positive market acceptance of Trusted Shops The market acceptance of Trusted Shops which has so far been extremely positive shows that there is indeed a great need for security in B2C transactions on the Internet. Started in January Online shops certified 114 shops currently being examined More than 500 applications received More than registered transactions The most important online shops (e.g. Dell, bol.de, etc.) are Trusted Shops customers, attorney Th. Götting Page 13

14 New developments at Trusted Shops Due to the encouraging market uptake, the Trusted Shops product is being gradually expanded. Cooperation with TÜV Rheinland / Brandenburg for the certification of business processes at TS customers. Process certification of payment transactions Cooperation with Citibank for the further development of electronic payment transactions EU support Support of the European Union for TS Alternative Dispute Resolution Approach Expansion European roll-out of Trusted Shops has started (Belgium, France, England). Lawyer Th. Götting page 14

15 The digital marketplace - the trading forum of the future - A digital marketplace or B2B marketplace is a software package that enables the establishment of a trading room on the Internet. The digital marketplace is organized by companies that define the functions and the group of participants in this trading room. The marketplace also brings together supply and demand between previously unknown companies. The software enables the participants in the marketplace to exchange information on products and prices, to find products or to acquire new customers. The trading process on the marketplace is based on the catalogs of sellers, tenders and auctions from both sellers and buyers and - in exceptional cases - in the form of real exchange models. Lawyer Th. Götting page 15

16 Expected turnover on digital marketplaces in billion USD USD USD USD USD USD 500 USD 0 USD Trading via digital marketplaces Trading in EDI proceedings, Attorney Th. Götting Page 16

17 B2B marketplaces enable advantages for all sides Vertical marketplaces specialize in certain sectors and branches. Horizontally, they target certain functions and services for a wide variety of branches. Digital marketplace for sellers Offers for buyers For sellers A marketplace enables new customers to be reached Selling excess production Cost reduction of the supply chain transaction between seller and buyer For buyers A marketplace enables products to be found easily, prices to be easily compared Cost reduction of the supply chain lawyer Th. Götting page 17

18 B2B marketplaces must offer a high level of service and security in order to be attractive for buyers and sellers Digital marketplace seller Offers buyer The seller compares the fees of marketplaces expected Credit protection checks the traffic (transaction frequency) Buyers and sellers check the possibility of mapping traditional customer relationships on marketplaces Check the financial and logistic services Security of the transactions The buyer compares prices, expects a wide range of products Seeks security for quality and reliability Attorney Th. Götting page 18

19 Risks on marketplaces seller seller seller failure risk: marketplace fees service risk: additional services one-stop shopping trust marketplace failure risk delivery risk buyers buyers buyer lawyer Th. Götting page 19

20 In order to meet the security needs on digital marketplaces, TRUSTED TRADE positions itself as a horizontal service provider that is integrated with many marketplaces Digital marketplace Energy Steel Chemicals Other logistics Horizontal services Office equipment TRUSTED TRADE Financial Security TRUSTED TRADE - integrated with vertical marketplaces Other lawyer Th. Götting page 20

21 Trusted Trade will expand the existing offer for digital marketplaces and their participants into a complete solution of financial security instruments Secure platform Range of services from Trusted Trade Internet marketplace Secured transaction - escrow account Seller credit insurance Transport insurance Financing Buyer rating transaction Buyer limit assignment Performance bond lawyer Th. Götting Page 21

22 Development towards a multi service provider In view of the great technical complexity involved in integrating services on digital marketplaces, the demand on the part of marketplaces (MP) to obtain as many services as possible from a single source will increase. MP MP MP Intermediary / Multi Service Provider Individual service, e.g. KV Individual service, e.g. TRV Individual service KV = credit, TRV = transport insurance KV KV Broker TRV escrow Development, Growth, Consolidation KV FI = Financing TRV L / C FI escrow Lawyer Th. Götting Page 22

23 Advantages for buyers and sellers through Trusted Trade Trusted Trade creates trust through transparency. In detail, the following advantages arise for buyers and sellers: Advantages for the seller Security against non-payment through information and security Data and system security Speed ​​(real time and online) Reduction of administrative effort compared to traditional solutions Can be used worldwide Advantages for the buyer Security against non-payment -Delivery of data and system security Reputation gain through creditworthiness confirmed by third parties Speed ​​increase in transactions through pre-determined credit limit Knowledge of your own credit limit and better planning of marketplace transactions Lawyer Th. Götting page 23

24 Advantages for the marketplaces Internet marketplaces benefit directly and indirectly from Trusted Trade Additional source of income Supplementation of the service offer => Trusted Trade helps the marketplaces to achieve critical mass Complete integration into the processes of the marketplace Sharpening of the profile through security and quality Lawyer Th. Götting Page 24

25 Case Study: Online real-time credit insurance at efoodmanager efoodmanager is the first pan-European marketplace, one stop trade and service marketplace for the entire food industry. The efoodmanager offer is divided into three areas: 1. Open Market Buyers and sellers come together on the Open Market to conclude business with each other. The Open Markets are structured according to the commodity. 2. Company Marketplaces On the company marketplaces, companies from the food industry use their own product catalogs in specially marked efoodmanager marketplaces in order to do private business with pre-selected participants. Existing company marketplaces are those of Tengelmann and The Fishman. 3. Service area In the service area, buyers and sellers can use logistics, insurance and financial services. Industry-specific information is also available here. Lawyer Th. Götting page 25

26 Online real-time credit insurance at efoodmanager: registration and limit allocation For marketplace participants, registration is completed with just a few clicks of the mouse, as efoodmanager's login data is taken over directly : Consent of buyer interest in KV from seller á limit allocation (via buyer) á policy issue (for seller) Return of the data to Efoodmanager and to the user lawyer Th. Götting page 26

27 Online real-time credit insurance at efoodmanager: trade protection Through information and protection, Trusted Trade supports the selection of the trade partner and creates trust in online trading Seller Efoodmanager Buyer A seller creates a non-binding offer The offer is placed with efoodmanager Buyers are informed Buyer A answers Low price The seller receives the inquiries Efoodmanager forwards the data to the seller Buyer B does not answer Buyer C Does not answer Buyer A is chosen for credit reasons despite the lower price Efoodmanager is informed, the contract is concluded Buyer D answers high price Lawyer Th. Götting Page 27

28 Our current partners: Lawyer Th. Götting page 28

29 Thank you for your attention, Lawyer Th. Götting, page 29