Europe's single currency, the euro (http://europa.eu.int/euro/), has finally become a reality after more than a decade of planning and preparations. In one stroke, the single currency has created the largest single economy in the world with a larger share of global trade and a greater number of consumers than the U.S.
A European single currency has been a long-held ambition for members of the European Union (EU). The idea was first considered in the 1970s, but knocked off course by the oil price rises. It re-emerged in the early 1980s, and was finally agreed to in the 1992 Maastricht Treaty. There were many accounting criteria to be met by each country, such as the control of the rate of inflation and the debt/GDP ratio. ("GDP" is used in all countries outside the U.S. to represent the level of the economy there -- what Americans call the "GNP"). Most countries met these criteria in 1998 and were permitted to join the European Monetary Union.
This goal has now been achieved by 11 countries. EU currencies like the German mark, French franc, and Italian lira are now merging to become the euro. It includes all European Union countries except the U.K., Sweden, Denmark and Greece. The U.K. being outside the euro region will be quick inconvenient for many U.S. companies who trade heavily with U.K. companies or have subsidiaries there. (Note: Norway and Switzerland are not members of the European Union, and neither are Eastern European countries).
The exact timetable is as follows:
- Jan. 1, 1999 the euro became an official currency;
- 1999-2002: existing national currencies and the euro operate side by side at fixed rates. The euro is not imposed as currency, but inter-bank transfers can be made in euros.
- By Jan. 2002, new euro notes and coins will circulate;
- By July 2002, at the latest, local currencies are completely phased out and no longer allowed. Only euro transactions (cash or transfer) are possible.
Advantages
There are many economic benefits. The euro will:- Lower prices by making them transparent across Europe;
- Create a genuine single market by ending barriers to trade caused by transaction costs and fluctuating currencies;
- Enhance competition by forcing companies to concentrate on price, quality, and production instead of hiding behind weak currencies;
- Benefit SMEs and consumers by making it easier for the former to enter "foreign" markets, and allowing the latter, increasingly via the Internet, to shop in the lowest priced markets;
- Bring inflation and interest rate stability via the new European Central Bank; and
- Lower the costs of doing business through lower prices, lower interest rates, no transaction costs or loss through exchanging currencies, and the absence of exchange rate fluctuations.
Perhaps most importantly, marketing and pricing strategies need rethinking. Because the euro will allows easy price-comparison across Europe (especially via the Internet), it will reveal the differences between higher and lower priced markets.
For those selling via the Internet, the euro will make it easier to do business, and give encouragement to companies selling to European customers. The Americans and Canadians will now be able to address the European market and give pricing in Europe's local currency (not in dollars), a pricing that Europeans understand. This makes the decision process easier. Since Europeans will now be able to shop and compare prices at a click of a mouse, they will be more favorably inclined towards e-commerce.
In any single European country, there is usually not much competition for a given product, since purchasing habits have always been local (in one's own country). Now that Europeans will be able to shop internationally at the click of a mouse, they will become aware of other choices and prices for the same product that were not previously known. Competition will heat up for the buyer's euro, and this should put a downward pressure on prices.
Intra-European commerce
Even more than American's e-commerce that sells to Europe, there is much to be said for intra-European e-commerce. Many analysts claim that the recent birth of the euro will have more impact on the cohesion and unification of the single market than even the imposed 1992 deadline. (During the 1980s, European countries arbitrarily gave themselves until 1992 to change their laws so that they could do business anywhere within the EU). Seen from a European business' perspective, e-commerce is more likely to be readily accepted when it involves selling to their neighboring countries than when it means selling to the U.S. or Asia.The advance of smart cards in Europe should make it possible to use in purchasing things online, by using a card reader costing about $80 from Gemplus (http://www.gemplus.com), which is connected to an online PC.
Already in Belgium, the Proton cash card is a great success; one can
add cash to it and spend such e-cash most anywhere in Belgium. Hopefully,
the card will be able to be used later this year for online purchases.
And hopefully, the use of smart cards will become more generalized in Europe,
after such a success in Belgium. The implications of using cash less and
less, either in the physical or online world, are simply staggering. Even
the European Union has come out and said that they support a move to a
more cashless society. Your Website will be competing with same-subject
European Websites for the attention of attention of Europeans. Obviously,
you will need to use euros as a currency on the site, as well as dollars
(or your own currency). A tip: if you want to offer your prices on your
website in both dollars and euros, use the HTML code € or €
to obtain the "euro" sign (
), though be aware that it is not yet available on all computer and browser fonts. (It does not work yet with Netscape 4.5, for instance, although fine with Internet Explorer 5.0).
And of course, you will need to promote your website in European languages. To get the attention of online Europeans, you have to go bring them to your Website in their own language. Once they arrive and their interest has been whetted, many will be able to follow it in English. But the initial change of attention from the previous online subject to your Website has to happen in their language, since there's a 99% chance they are accessing the Internet in that language.
Now what does this mean for U.S. niche-players, (even those that don't do business or plan to do so in Europe? It means "watch out for new European competitors." Find out about them and what you need to do to beat them or they will beat you here! Most European companies are very internationally minded and already deal with the issues of internationalization that most U.S. companies don't. They have a definite advantage. Now that they will be more free to grow to scale in their home markets the competitive threat will increase.
Resources on the Euro
- EMU Net. Perhaps the best single site for information about the euro. Current news, official documents, links to euro-currency events, and online forums. http://www.euro-emu.co.uk
- Official EU site for the Euro http://europa.eu.int/euro/
- Financial Times collection of articles about the euro. http://www.ft.com/emu/
- TrueType Core Fonts for the Web that include the Euro Symbol. These can be downloaded from the Microsoft site for Arial, Times Roman, Verdana, Courier New, etc. (http://www.microsoft.com/typography/fontpack/)
- The Euro Currency Symbol FAQ from Microsoft gives links to downloads that update various operating systems for the Euro. (http://www.microsoft.com/typography/faq/faq12.htm)
- If you use Windows 95, you will need a patch to your operating system to be able to display the euro symbol (), which you can find at www.microsoft.com/windows/euro.asp.
Good luck in your European online sales in 1999!
Written by
Bill Dunlap
Managing Director,
Euro-Marketing Associates
ema@euromktg.com
