[November 14th, 1998]

See Also   Euro FAQ   The Euro and Your Web Store   Getting Europe Online   Intranet USA - Who Needs Europe?

"I want the whole of Europe to have one currency"
Napoleon Bonaparte 1769 - 1821

It might have taken the best part of two centuries, but Napoleon's wish is finally about to come true when on January 1st 1999 the Euro is finally born.

However, whilst many offline businesses have invested significant effort in preparing for this landmark event, there would appear to have been little preparation work done by many of their on line counterparts. This is I guess, a reflection of the current US-centric nature of the Internet.

Slowly though, more and more messages about the Euro are beginning to appear in Internet discussion lists and I now regularly receive e-mail questions on the subject. And by far the most common question being asked is by Web merchants who want to know if they should offer prices in Euros in their Web stores.

This is not an easy question to answer. The marketer within me screams "yes". After all the Euro will initially be accessible by 289 million Europeans. Combine this with 267 million Americans and you have a very attractive market of some 556 million people that Web stores offering prices in both US dollars and Euros will be able to reach. And this already huge number is likely to continue to grow as other countries sign up for the Euro, for example the United Kingdom, the remainder of the Scandinavian countries and even potentially Russia.

There are however some problems that need to be overcome before Web merchants can start pricing their goods in Euros.

First there are the limitations built in to much of the electronic commerce software currently in use. Most merchants considering offering Euro prices will want to do so in addition to their current currency of choice. Frankly there are few e-commerce software packages available that will handle multiple currencies, particularly at the lower end of the market. And even those merchants who plan to make a complete switch and offer Euro pricing only will still have problems to resolve as it is likely that their e-commerce software and most of their customers' Web browsers will be unable to display the Euro currency symbol.

There are also restrictions associated with credit card merchant accounts. Many holders of merchant accounts will find that they are only able to process one currency through them, normally the currency of the country in which their business is based. And even holders of merchant accounts issued by European banks who want to switch to the Euro may well face problems as they find their card processing software and hardware unable to cope with the new currency.

Finally there is the issue of exchange rate fluctuations. Whilst one of the goals of the new European Central Bank will no doubt be to try and hold the Euro steady against the US dollar, the exchange rate will never the less fluctuate. Whilst there are methods that a business can use to limit their exposure to the impact of currency fluctuations, many small businesses may well conclude that they are in the business of selling goods and services and not international finance.

So what do I recommend? I would propose that most Web merchants should hold off for now, with one possible exception. European e-tailers whose merchant account limits them to trading in their own national currency and whose customers are mainly in Europe should investigate switching to the Euro as soon as possible.

There are several reasons behind my wait-and-see approach. As well as the challenges detailed above, there are still eminent economists who are confident that the Euro will fail. And there also has to be some doubts about whether or not the entire necessary financial infrastructure will be in place by January 1st. Let's be honest, it's a massive change and there are bound to be some "teething problems" which Web merchants will want to avoid.

The key factor though will be how strong a currency the Euro turns out to be. A stable, strong pan-European currency will without doubt provide a major boost to global electronic commerce. Now I am neither a financial expert nor an economist, but I suspect that it is likely to be at least the middle of 1999 before we can get a good feeling about the strength of the Euro and its likely future.

In the meantime I don't suggest that you rest on your laurels. As well as keeping a close eye on developments with the new currency, savvy merchants should begin a dialogue now with the providers of their e-commerce software and credit card merchant account facilities.

Do you agree with me? I'd love to hear your comments.