Copyright ©2000-2006 Janene Carey

Potential Impact of E-Commerce on Regional Australian Communities

This article examines the likely impacts of e-commerce on rural and regional Australian communities, identifying both advantages and disadvantages. It includes a set of recommendations describing how these communities should respond in order to thrive in this new economy.

Author: Janene Carey, Hutchinson Software

Introduction

This article focuses on the effects of electronic commerce on regional Australian communities. A broad definition of e-commerce will be adopted, covering not only trade in goods and services across the Internet, but also the new ways of doing business and communicating with customers, suppliers and partners made possible by Internet technologies. This is in line with the definition adopted by the Australian government: ‘Electronic commerce is defined as every type of business transaction in which the participants (i.e. suppliers, end users, etc.) prepare or transact business or conduct their trade in goods or services electronically’ (Department of Communications, Information Technology and the Arts 1999, p. 3). Although e-commerce is a relatively recent phenomenon, already it is clear that it will have a profound impact on life in country Australia. Breaking through the tyranny of distance will cause unprecedented changes, opportunities and threats in the key areas that will be explored below: business, employment, and provision of government, banking, education and health services. Whether regional communities thrive or even survive in the future will depend on how successfully they make the unavoidable transition to being part of a new global economy.

Business

E-commerce has been touted as an economic lifeline for rural Australia (Kuras 1999), offering businesses a cost-effective way to expand into global markets; lower their transaction costs by dealing directly with overseas suppliers and customers; and streamline their business processes. Gallagher (1999, p.16) sees small and rural businesses as potentially being amongst the biggest beneficiaries of e-commerce, suggesting that:

Skilful use of the Internet can create opportunities by giving farmers, small business people and communities the capacity to present a regional image to the world, create focal points for inquiries about local businesses and their offerings, create global businesses and develop new products and services.

Over the last few years the Federal Government has been impressively proactive in terms of raising awareness, facilitating initiatives, and funding infrastructure developments designed to enhance Australia’s ability to participate in the information economy. Recent figures from the Bureau of Statistics suggest that rural Australia is experiencing the benefits of interventions such as the Networking the Nation program. Between May 1998 and May 1999 the number of non-metropolitan households with Internet access grew by 112%, from 8% to 17%; a rate outstripping the quite healthy 44% rise (from 18% to 26%) for capital city households (ABS 1999a). From March 1998 to March 1999 the proportion of farms using the Internet increased from 11% to 20% (ABS 1999b).

An example of a rural-based business actively reaping the benefits of access to global markets is Ruddweigh International Pty Ltd, based in the small town of Guyra in northeastern N.S.W (Hunter 1999). Ruddweigh has become a world leader in electronic agricultural weighing systems and use of the Internet is critical for their marketing activities, handling sales enquiries and distributing upgrades.

In their report, "Putting Australia on the New Silk Road", the Department of Foreign Affairs and Trade (1997) offers an example of a group of farmers in Victoria profiting from the immediacy of e-commerce transactions by retailing custom orders of fresh produce at premium prices directly to Asian markets. Email and electronic funds transfer enabled the elimination of intermediaries, higher responsiveness and flexibility, and the consequent reduction in transaction costs and increase in profit margins.

Streamlining of rural business processes to increase efficiency is occurring as farmers use online exchanges to reduce procurement costs for seed, feed and chemicals and maximise prices for products (Little 2000; Grebb 2000). Decision-making can be aided by detailed Web-based information such as weather, marketing and industry reports. The Queensland Department of Primary Industry’s FarmLink site provides such services to 5000 subscribers and is growing rapidly (Donovar & Wilson 1999).

However the same forces that are allowing rural Australian businesses to break through the barriers of time and distance to provide speedy, efficient service to the world also provide a similar access in the other direction. In the 12 months to May 1999, 650 000 Australians made an estimated 3 million e-commerce purchases, of which more than half were from overseas Web sites. Just over 41% of the online shoppers purchased only from Australia, 43% bought only from overseas, and 16% from both Australia and overseas (ABS 1999a).

In 1997 the Deputy Prime Minister and Minister for Trade, Tim Fischer, warned that Australia must be a pace-setter rather than a follower in the e-commerce arena or it would run the risk of being swamped by competing overseas companies (Plunkett 1997). In the new online global economy, rural businesses face not only international competition, but also competition from e-commerce enabled businesses reaching into their markets from urban and larger regional centres. The marginal profitability of many small town businesses makes them particularly vulnerable to even small shifts in customer loyalty (Hunter 1999). Lack of resources may make it difficult for them to deploy the kinds of innovative solutions that could keep them competitive. In more ways than one, e-commerce may mean the end of business as usual for rural businesses.

Employment

Internet technologies have the capacity to increase employment in regional communities in two distinct ways: by there being more work located in the country; and by country people being able to work remotely for urban-based enterprises (teleworking). Either form of growth would help improve the economic and social vitality of regional communities. More jobs could reduce the exodus of rural youth to urban areas; alleviate the shortage of doctors, academics and other professionals by improving the chances of their spouses finding work; and make it easier for people on the land to supplement their income with off-farm work (Hunter 1999).

However, e-commerce could cause job losses in regional areas as well as gains. As discussed above, the global marketplace may prove too competitive for some rural businesses. The efficiencies that e-commerce can bring to business operations and the disintermediation effects of e-commerce on travel agents, booksellers, real estate agents and music stores will exert a downward pressure on employment levels (Department of Foreign Affairs and Trade 1997). Kuras (1999, p. 31) concludes that:

Net employment impacts are therefore uncertain, with downward pressure in larger firms and sectoral disintermediation perhaps more than offset by upward pressure from smaller firms, emergence of new firms and the level of overall economic growth which e-commerce generates.

The current business trend of outsourcing work in areas of non-core competencies combined with the potential for ‘anytime, anyplace’ work offered by Internet technologies could offer new employment options for skilled people living in rural and regional Australia. An example of an initiative aimed at bringing teleworking opportunities to regional communities is TeleTask, based in northeastern N.S.W. It has an online register of workers whose skills have been assessed and certified, and it actively solicits contracts for services ranging from data entry or secretarial work to research and computer programming. The CEO, Andrew Hunter, describes it as ‘a rare new opportunity for regional Australia’ (Hunter 2000) but freely admits that the project has encountered significant problems in terms of employer acceptance.

Preliminary results of a survey conducted by TeleTask reveal that business managers in Sydney are not keen to outsource to regional workers (Hunter 2000). 53% of respondents said they would be ‘very confident’ in the performance of outsourced work being done within their own metropolitan area but only 16% would be as confident in using regional workers. The ‘very confident’ figures for workers based in ‘other metropolitan areas’ and ‘overseas’ were 21% and 26% respectively, showing that the attitudes are not just related to proximity (Hunter 2000, p. 11). Hunter speculates that rural Australia has been ‘too good at telling everyone how much we lack in services and even education…and now they consider us too inadequately serviced to be capable of working for them’ (Hunter 2000, p. 12).

Provision of Services

E-commerce is causing profound change in service provision to rural and regional Australia in key areas such as government services, banking, education and health. Like most profound change this poses both opportunity and threat. On the one hand there is the promise of using Internet technology to provide better, faster, cheaper and more flexible service delivery for all Australians, no matter where they live. On the other hand, there is the risk that inequitable access to the online world could cause a digital divide between the information-rich and the information-poor.

The Australian government is working towards the strategic goal of bringing ‘all appropriate government services’ online by 2001. Surveys undertaken in 1999 by the Australian National Audit Office and the Office for Government Online indicate that there has been considerable progress towards this goal: ‘The vast majority of agencies have websites, and nearly half of agencies surveyed offer some degree of interactivity with online services or databases’ (Government Online 2000).

Kuras (1999) argues that although there may be some loss of physical service infrastructure in rural towns, the overall impact of the Government Online initiatives will be positive, not just for the general community but also for business. ‘Rural Australians and businesses will benefit both from more coordinated and proactive government online service delivery programs and from e-commerce systems that facilitate procurement from small suppliers who are remote from the government buyer’ (Kuras 1999, p. 85).

The risk for regional communities is that current physical doors to service provision will close before everyone has the capacity to take advantage of the new virtual doors. The publication of the report "Falling through the Net: Defining the Digital Divide," released last year by the U.S Department of Commerce, focussed attention on the problem of inequitable access to Internet resources. The cost-efficiencies to be gained by replacing the bulk of government information services and publications with Web-based services and documents are compelling, but may result in an information underclass consisting of rural residents, minorities and the poor, who are less likely to have Internet access (Irving 1999).

Similarly, the move by banking institutions away from having branches in every town offering over-the-counter service, towards cheaper automated alternatives such as ATMs and Internet Banking, offers advantages for some customers and difficulties for others who can’t or won’t go online for services. Figures show that Internet usage by adult Australians declines markedly according to age group. Only 10% of the 55+ age group accessed the Internet in the year ending May 1999, compared to 39% of 40-54 year olds, 53% of 25-39 year olds and 74% of 18-24 year olds (ABS 1999a). Elderly Australians living in rural areas may have to drive increasing distances in future to find a bank teller to stamp their passbook.

Distance education and telemedicine represent a less contentious category of electronic service provision, in that the enhancement of services is not offset by the downgrading of existing physical infrastructure. However, their impact on the more remote regions of Australia will be largely determined by the adequacy and affordability of the telecommunications infrastructure servicing those areas.

Online education is a new channel for delivering traditional distance education services, with the bonus of immediacy, interactivity, and easy access to a wealth of online information resources, including bibliographic databases. Discussion groups allow students to share information and debate ideas with each other, enhancing the learning process through peer-support and active engagement with the material. This is particularly important for geographically isolated students who are unlikely to have anyone physically available who is studying the same subject. Kuras (1999) suggests that online services may help improve the distance education retention rates for rural students, which are ‘well below those for urban students’ (Kuras 1999, p. 87).

Telemedicine promises to give rural and remote communities a new way of accessing high-quality, real-time interactive health advice and assistance. Potential services include consultations with specialists via videoconferencing, electronic exchange of medical records and diagnostic tests, and general community access to an extensive range of online health information. The rurally-based GP can also benefit in terms of a reduction in professional isolation: via access to current ‘best practice’ information and through interactions with a virtual community of fellows (Health Online 1999).

The downside to telehealth services generally is the potential loss of privacy incurred by moving to an online national electronic health record. Facile storage and transmittal of this sensitive information raises legal, data protection and security issues that were not so crucial when health records consisted of paper files scattered across thousands of different filing cabinets. In the foreword to the Health Online action plan, the Chair of the

National Health Information Management Advisory Council offers the reassurance that ‘Underpinning all of the work articulated within Health Online is a commitment to ensuring that a robust framework is created to protect health information privacy’ (Health Online 1999, p. 2).

Recommendations

This section addresses the question of how rural and regional Australia should respond to the opportunities and threats e-commerce poses for business, employment and service provision. Regional communities cannot afford to ignore the changes being wrought by the information economy, nor can they afford to just sit back and passively wait to receive its benefits in the form of more convenient access to products and services, information and entertainment. So, how can a community ensure that e-commerce is a revitalising force for its region, boosting economic growth, enlarging employment opportunities and providing improved levels of services? On the information superhighway, what should it do to avoid being ‘run down’ by global competition, ‘bypassed’ as a viable source of skilled labour, or ‘railroaded’ into premature acceptance of substitute services?

The recently released parliamentary committee report into infrastructure and development issues in regional areas, "Time Running Out: Shaping Regional Australia’s Future", argues the merits of ‘bottom up’ rather than ‘top down’ approaches to fostering regional development. The committee found that regions that were faring the best were ‘those prepared to embrace change and work at developing new businesses, capitalise on emerging opportunities, and to accept responsibility for their own development rather than relying on government support and initiatives’ (Time Running Out 2000, p. 7). Therefore the following recommendations focus on proactive community-driven initiatives aimed at achieving regional self-determination as the best way to respond to the challenges of the new economy:

Learn from the success stories

Form community leadership teams

Think strategically

Raise awareness

Tap into government funding

Use demand aggregation strategies

Develop regional portals

Foster the right image

Manage the transition period

Conclusion

The power of e-commerce for regional communities is that it alleviates the constraints of distance and isolation on business, employment and access to services. This article has explored the positive and negative impacts of e-commerce on rural and regional Australia, discussing global markets, new ways of doing business, teleworking and online service provisions in the area of government, banking, education and health. In order to successfully confront the challenges posed by e-commerce, regional communities will need to muster strategic vision and leadership, foster initiative and enthusiasm, and take a proactive approach to ensuring that they have all the resources they need to take maximum advantage of the information economy.