E-Commerce Diffusion in Serbia; Bob Travica – The Delivery Layer; Draft 2.1, Nov. 6, 2005 2. Delivery Layer When goods are transacted electronically on the Internet or a private computer network, the service of delivering goods to the buyer (be it an individual or an organization) must be secured in order to complete the trading cycle of e-commerce (see Travica, 2002). Delivery refers to moving the goods from the seller to the buyer. It involves transportation or courier service, warehousing, freight forwarding, logistics (planning the shipment routes and timing, shipment tracking), and possibly other services that are considered steps in the order fulfillment process. Fulfilling an order is the final step in a supply chain for a particular commodity. The delivery layer is necessary for shifting commerce into the electronic context. E-commerce is not just about putting up a Webs storefront or establishing EDI or extranet links between institutional sellers and buyers. If a seller participating in e-commerce markets does not provide delivery on its own, such a seller needs to have stable relationships with providers of delivery services. These relationships could be realized via long-term contracts between sellers and delivery firms. Alternatively, short-term deals suit the purpose, provided that delivery firms operate in the geographical regions in which sellers and buyers reside. The price of jumping into e-commerce without including delivery services into business models can be high. Some e-tailers learned this a hard way. For example, Toys “R” Us, the global brand in toys retailing, experienced delivery difficulties with the opening of its e-commerce outlet Toysrus.com in 1998 (DiSabatino, 2000; Hoovers, 2005). Delivery draws on the transportation infrastructure for physical movement of the goods as well as on telecommunications for order placing and shipment management. 2.1. Terrestrial Delivery The main provider of delivery services in Serbia is Serbian Post (the official name is Public Enterprise of PTT Communications “Srbija,” where “PTT” stands for “Post, Telegraph, and Telephone”). It is a government-owned monopoly that has major stakes in a number of subsidiary companies, covering landline and mobile telephony, banking, and Internet services (see the section on telecommunications). (PE PTT Serbia, 2005) Currently, Serbian Post offers several delivery services for business customers. These include door-to-door service, delivery of semi-finished goods from one manufacturer to another, delivery from manufactures to retailers, warehousing, and handling of returned shipments. Another set of services caters to international delivery. Among these services is the carrying out of clearance procedures before Serbia’s customs authorities on behalf of customers (PE PTT Serbia, 2005a) In a process of diversifying its portfolio, Serbian Post has partnered with Neckermann, a German retail firm with a long tradition of catalog sale. Serbian Post delivers products ordered through the catalog, and supports the manual payment procedures. (PE PTT, 2005b) There are other players in the delivery industry, although their capabilities are limited. Specifically, some whole sellers and retailers offer their own transportation and warehousing services. In addition, about 20 smaller firms offer some delivery services E-Commerce Diffusion in Serbia; Bob Travica – The Delivery Layer; Draft 2.1, Nov. 6, 2005 (Cruiser, 2005), and there are dozens of independent truckers (Serbian Yellow Pages, 2005). Serbian Post was not spared of the calamities that impinged on the country’s economy in the 1990s. Our anecdotal observations indicate that Serbia Post appeared to be capable of escaping maladies that plagued some other infrastructural enterprises. In spite of the gasoline and other shortages, letters and parcels would find their way to receivers within a reasonable time. Today, however, Serbian Post and its stakeholders appear to be slow in adapting to a new market economy. For example, a limited privatization of telephone businesses was not coupled with deregulation that would open up the space for competition. Privatization does not bring benefits unless it is coupled with the breaking of old government monopolies. Only if both processes are brought in sync, market dynamics can engender radically new value propositions for the customer—decreasing prices, increasing quality of service, and diversifying offerings. A general slowness of the economy in catching up with transition trends in South/East Europe might be making Serbian Post to feel safe as the country’s main supplier of delivery services. By contrast, Bulgaria’s national post attempts to account for competition coming from domestic suppliers of courier services (Bulgarian Post, 2005). In Romania, another neighbor of Serbia, a process of privatizing national post company is in progress (Association for Postal Service, 2005). Another challenge concerns limited capabilities of smaller delivery providers that can typically offer only the transportation service. In addition, Serbia is behind the neighboring countries in terms of the number of trucks, and nearly 40% of these vehicles have recently been unable to meet the technical standards of European Union (UNECE 2001; USAID, 2005). An overall poorer state of vehicles in Serbia combines with the unsatisfactory road conditions (see the previous section) to create a significant risk factor. In 2000, Serbia was among the highest ranked European countries on traffic accidents involving personal injury. The country’s rate of personal injuries was two to ten times bigger than in the neighboring counties (UNECE, 2001; note: the figures refer to the entire Serbia and Montenegro). However, with regard to the rate of road traffic fatalities, Serbia has faired better than the neighbors (ibid.). Finally, it is noteworthy that Serbia is included in international delivery routes owing to the involvement of major global delivery providers in the Serbian market. American FedEx and UPS (through a subcontractor), and German DHL are all present in Serbia. DHL has a deal with Serbian Post, which includes worldwide delivery and customers’ online tracking of shipments. (PE PTT, 2005c) Railroad traffic adds to the delivery capability of the country. The sole domestic player in this industry is the government owned enterprise Serbian Railways, which owns 158 of active tractive stock and 4800 cargo wagons. In 2000, about 4,000 rail lines were operated, which marked a moderate level of railroad traffic in comparison to the neighbor countries (Serbian Railways, 2004; UNECE, 2001—the figures refer to both Serbia and Montenegro). However, the actual cargo traffic was not at par with these countries, E-Commerce Diffusion in Serbia; Bob Travica – The Delivery Layer; Draft 2.1, Nov. 6, 2005 placed Serbia in 2001 next to the lowest ranked Bosnia and Herzegovina. (UNECE, 2001.) The railroad system in Serbia entered the new millennium by coping with the burden of the 1990s: “mismanagement of the economy, an extended period of economic sanctions, and the damage to Yugoslavia's infrastructure and industry during the NATO air strikes in 1999 left the economy only half the size it was in 1990” (The World Factbook, 2005). A likely consequence is a limited capability of supporting random variation in volumes of shipments that e-commerce may precipitate. 2.2. Delivery Via Air and Water Routes Delivery of goods via air routes is carried by the national airline Jat Airways (formerly JAT—Yugoslav Air Transport). This company is also the main carrier of passenger traffic. A high ranking airline company in Europe in the 1980s, Jat Airways suffered significant resource and market losses due to the breakup of the former Yugoslavia in 1991 and international trade sanctions imposed on Serbia soon after. The company was grounded abroad and it lost the financial capability to regularly maintain its fleet. The airline is attempting to bounce back, while operating an aging fleet of about 20 mid-range passenger planes (JAT, 2005; Luchtzac Aviator, 2005; Vazduhoplovni Vodic, 2005). The airline transportation also features several operators of passenger traffic (the charter company Aviogenex, which owns four mid-range planes) and a few independent operators of small passenger planes. Still, true competition comes to Jat Airways only from international airlines that have taken control of key international routes. In this situation, however, JAT Airways preserves an ownership structure that does not oppose inertia; the same applies to Serbian airports. Also, JAT Airways refrains from participating in international alliances of airline companies, and continues to be focused on passenger traffic. These facts are in a stark contrast to changing characteristics of air transportation industry in the world. For example, Bulgaria allowed split-offs from the main national air company, then privatized part of it, and provided conditions for private carriers to enter the business (Bulgarian Air, 2005; Bulgarian Ministry of Transport, 2005). Waterways delivery of goods is environmentally safer and can be more cost efficient than delivery via other routes. Since it is also capable of carrying larger shipments, delivery via water yields significant economies of scale. As discussed in the previous section, waterways in Serbia include several international rivers and the seaport Bar in Montenegro. The most significant river is the Danube, which flows through ten European countries and provides good conditions for sailing in its south/east portion, Serbia including. Conditions for intensifying the international traffic on Serbia’s portion of the Danube have recently been surfacing. One of the landmarks in this process was reached in October 2005 with the opening of a new bridge in Novi Sad, a key Danube port in Serbia. The new bridge replaced a pontoon bridge that blocked the international traffic for six and a half years, serving as a substitute for a six-lane bridge destroyed by NATO’s missiles. (See Danube Research, 2004). Since the city of Novi Sad sits on a branch of E-Commerce Diffusion in Serbia; Bob Travica – The Delivery Layer; Draft 2.1, Nov. 6, 2005 Corridor 10 (a highway and railroad), the enabling of sailing through Novi Sad implies that the second connection between Corridor 10 and Corridor 7 (the Danube itself) is achieved (the first connection is in Belgrade; see Figure 2). The Danube port Smederevo is poised to support the traffic needed for a gigantic complex of metallurgy factories recently acquired by U.S Steel. Steel products are shipped downstream the Danube to Black Sea ports located in Romania and Bulgaria. As opposed to the growing traffic on the Danube, the process of reviving what used to be a high frequency traffic on the river Sava has been slower. Countries that descended from the former Yugoslavia labor on upgrading the status of this river into an international waterway (CSEES, 2005). Serbian economy also uses the seaport Bar, which lies on the Adriatic Sea in Montenegro. This port is operated under special regulations that allow for a free movement of capital, goods and labor, and duty and tax exemptions. (IIPE, 2005). In summary, Serbian Post is the main provider of delivery services in the country. A number of delivery firms and small trucking enterprises also exist. Major global delivery providers are present and offer international delivery services. Competition that could bring up radically new value propositions for the customer is lacking, and traffic safety represents a risk factor. Railroad traffic adds to delivery capability in Serbia, although the cargo transport is modest and consequences of the devolution experienced in the 1990s are remarkable. The legacy of the 1990s constrains even more airborne delivery services. This industry appears to be locked in dated strategies and management that severely limit its role in the diffusion of e-commerce. Finally, the waterways of Serbia, which intersect with key terrestrial routes, are being upgraded and are becoming an important delivery option. References: Association for Postal Service. (2005). Available: http://www.postcom.org. Accessed: November 4, 2005. Bulgarian Post. (2005). Available: http://www.bgpost.bg/index.htm#Eng/About/about.htm. Accessed: November 2, 2005. Cruiser. (2005). Available: http://www.krstarica.com/eng/catalog/Business_and_Economy/Companies/Transportatio n. Accessed: November 4, 2005. CSEES. (2005). Serbia & Montenegro Infrastructure. Center for South East European Studies. Available: http://www.csees.net/?page=country_section&country_id=8&sec=5. Accessed: November 6, 2005. Hoovers. (2005). Toys ''R'' Us, Inc. Fact Sheet. Available: http://www.hoovers.com/toys- ''r''-us,-inc./--ID__11495--/free-co-factsheet.xhtml. Accessed: November 3, 2005. E-Commerce Diffusion in Serbia; Bob Travica – The Delivery Layer; Draft 2.1, Nov. 6, 2005 Jennifer DiSabatino. (2000). Boo.com failure raises questions about online boutiques. Computerworld, JUNE 12, 2000. Available: http://www.computerworld.com/news/2000/story/0,11280,45735,00.html. PE PTT Serbia. (2005). Available: http://www.posta.co.yu/english/onama/GodisnjiIzvestaj.asp. Accessed: October 25, 2005. PE PTT Serbia. (2005a). Available: http://www.posta.co.yu/english/uslugeicene/EkspresUsluge.asp. Accessed: October 25, 2005. PE PTT Serbia. (2005b). Available: http://www.posta.co.yu/english/uslugeicene/PaketskeUsluge.asp. Accessed: November 7, 2005. PE PTT Serbia. (2005c). Available: http://www.posta.co.yu/english/uslugeicene/ekspresusluge.asp#dhl. Accessed: November 7, 2005. Serbian Railways. (2004). Available: http://www.yurail.co.yu/eng/robni_saobracaj/robni-saobracaj.htm . Accessed: October 11, 2005. Serbian Yellow Pages. (2005). Available: http://www.serbianyellowpages.com. Accessed: November 4, 2005.
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