The State of E-Compliance Among U.S. Retailers

Introduction

The advent of the Internet coupled with advances in information technology has dramatically changed the competitive landscape by allowing U.S. retailers to market products to consumers around the globe. It has been estimated that 75.2% of U.S. retailers sell their products internationally on-line, and of the 24.8% not selling internationally on-line 60.3% are assessing the possibility of selling to customers outside the U.S. (Internet Retailer, 2010). As a result of increased interest by both the consumer and retailers, retail sales in Europe are projected to reach €171.9bn (£145.8bn) a year by 2016 (Internet Retailing, 2012).

For consumers to shop on-line, they must trust the retailer and have confidence with the structural assurance of the Internet (Peeples, 2002, Mukherjee & Nath, 2007). The propensity to trust a retailer is important as buyers have to make a conscious choice to put aside any doubts before entering a relationship with a seller who is often located in another country. Structural assurance hinges on the fact that the Internet has both protective legal and technological structures which insure that web transactions can be conducted in a safe and secure manner (McKnight, Choudhury, & Kacmar, 2002). Lui, Marchewka, Lu and Yu (2001) and Lee, Kang, and McKnight (2007) also found that the absence of these two factors diminishes consumer interest in buying on-line from a retailer.

Therefore, it is important that all digital transactions comply with local e-commerce law. The act of meeting regulatory conditions is referred to as e-compliance, which according to Gasser and Haeusermann (2007) is the management of the risks at the intersection of law, technology and the market that have emerged through and in reaction to computerization and digital networking. To be e-compliant retailers must: 1) know what laws, statutes and directives apply to various customer interactions; 2) decide to comply with the laws and regulations; and 3) make a good faith effort to modify their Web site such as matching the terms and conditions of sale with local requirements. For the purpose of this paper, we define e-compliance as the degree to which a company’s Web site complies with the laws and regulations of the targeted marketplace.

Rugman and Verbeke (1998) argue that a company’s decision to comply with international policy is often driven by the expected economic benefits derived from that decision. That is the cost of modifying one’s Web site is offset by the revenues gained. Therefore, management tend to employ one of four strategies: 1) a performance-driven strategy that accepts international regulation because it is a proven way to do business abroad; 2) an enforcement-driven strategy that avoids costly sanctions such as fines and lawsuits; 3) a non-compliance strategy where management sees no value in following the laws; and 4) a conditional non-compliance strategy where management realizes that the governing body has limited means to enforce the laws and regulations.