|This paper was written as a personal research effort by the author while on placement as an Intern with the International Development Research Centre (IDRC) Asia Regional Office in Singapore. The findings are based on independent observations, and in no way represent the official standpoint of IDRC.|
In developing countries, thousands of NGOs have gone online over the past five years, realizing the importance of the Internet for the exchange and distribution of information. With the rise in e-commerce over the Internet and the subsequent decline in development aid over the past five years, NGOs may be able to tap into this new business modality to offset their operating costs. Many NGOs already produce and sell products, such as publications, publicity materials, and locally made handicrafts through "traditional" means of marketing and distribution. As NGOs are nonprofit organizations, the revenue generated is plugged back into projects and activities, offsetting costs. Marketing and selling their products online could mean wider distribution of development material and diversification of revenue sources. However, various issues must be considered for e-commerce to be an effective tool for NGOs to generate revenue. Issues such as costs involved in setting up shop online (both capital and noncapital); how the NGO approach to e-commerce may differ from that of business; ease of use by consumers, sellers and distributors; time taken away from other activities; type of products that can be sold easily online.
These issues are examined in the context of the International Development Research Centre's Pan Asia Networking e-commerce initiatives. For the past three years, Asian NGOs have been selling their goods online, with support from PanAsia. In June 1998, Pan Asia Networking launched its first Web-based platform for selling goods online. The Pan Asia E-Commerce Shopping Mall initiative has been set up to provide support for Asian NGOs wishing to tap into e-commerce facilities. A Web-based program has been developed to allow NGOs to sell both physical goods (publications, handicrafts) and virtual goods (online data, multimedia video and audio clips).
Will the opportunity cost of generating revenue online outweigh the amount of revenue generated? Do NGOs have the time to dedicate to selling products online, considering what is often the case of low staffing and high demand for services? What type of support mechanisms can be set up to assist NGOs in the use of e-commerce? If e-commerce can be a means for NGOs to increase the sustainability of their operations in times of budget cuts and funding cuts, then the findings presented in this paper provide both timely and valuable information.
The Organization for Economic Cooperation and Development (OECD), in a paper on the economic and social impacts of e-commerce, points out that due to a combination of both regulatory reforms and technological innovation in the past three years, the barriers to entry have fallen dramatically for many e-commerce businesses. Their estimates have put the level of e-commerce traffic at US$ 1 trillion by 2003 to 2005 . If these projections hold true, then the online business community stands to benefit considerably from this new form of conducting business. Combined, these encouraging factors lead to the question of whether e-commerce can move beyond the commercial sector to be used effectively by other sectors to generate revenue.
Thousands of development organizations have gone online in the past five years, having realized the importance of the Internet for the exchange and distribution of information. With the rise in e-commerce activities over the Internet, and the subsequent decline in development aid over the past five years, development organizations may be able to tap into this new business modality to offset their operating costs.
One effort that supports this type of activity is Pan Asia Networking (PanAsia), an initiative of the International Development Research Centre (IDRC). PanAsia has provided support over the past three years to various development organizations in the Asia Pacific region to assist them in realizing the benefits of selling their publications and goods online. The lessons learned from this example can provide a means for assessing the challenges and opportunities faced when the development sector uses e-commerce for resource expansion. This paper therefore examines the question of whether e-commerce can provide an effective means of generating revenue for the nonprofit development sector.
The issues surrounding this latest Internet phenomenon are examined by drawing from the experiences of development organizations that have been selling goods online for the past three years with the PanAsia initiative. The issues that arise from PanAsia can provide experience for formulating strategic approaches to the use of e-commerce by development organizations. Specifically, this paper discusses the challenges that arise for development organizations, and how these issues can be addressed. It concludes by presenting new methods of support offered by PanAsia, taking into account the specific nature of development organizations and the need to provide assistance for the effective use of e-commerce for resource expansion and future opportunities in this area.
The scope of this paper does not allow for an in-depth analysis of all of the issues involved with the use of e-commerce by development organizations. For this reason, efforts have been made to distinguish between the issues particular to this question and those issues associated with the use of the Internet by users from developing countries (such as language barriers, access to technology, training, and social barriers). Furthermore, certain factors are shared among all online retailers, regardless of whether they come from the public or private sector (such as location of e-commerce operations, country-level infrastructure, distribution, and policy and legal framework for e-commerce). This paper focuses primarily on issues of concern to development organizations and their use of e-commerce as distinct from private businesses or companies.
From the 1970s to the present, NGOs have grown in number and evolved, assuming a complex array of organizational forms and functions. David Korten, in his definition of the "third sector" (as distinct from the state and the market), presents four general categorizations of NGOs:
The rise in the number of development organizations in the 1990s has paradoxically coincided with a decrease in ODA levels during the same period. According to the International Monetary Fund, ODA from OECD member countries fell to 0.25 percent of gross national product in 1996, the lowest level in the past three decades. They go on to note that this decline comes at a time when the poorest countries increasingly need ODA to fight poverty. 
As ODA levels continue to fall, development organizations are forced to cut their spending on project activities, adversely affecting the most marginalized sections of society. Competition for funding has been increasing, forcing development organizations to re-assess the way they attract and generate revenue for their operations. Therefore, new approaches must be found in order to bridge the funding gap that has emerged in the 1990s.
In some instances, development organizations have been very successful in producing and marketing goods for sale. One example is the British development, advocacy, and relief agency Oxfam and its sale of Bridgehead coffee. This product is organically grown and bought at "fair price" from local, South American producers, and is packaged, marketed, and sold in North America as an environmentally and "developmentally" sound coffee product.
By the mid-1990s there were also an estimated 500 Oxfam "charity shops" operating in Britain, selling used clothing, books, handicrafts, and selected commodities. Ian Smillie, in his review of development organizations, notes that sales from these "charity shops" are negligible in comparison to commercial retail stores. However, these low-level sales are often justified because of the added publicity and exposure of the development issues it supports. Furthermore, costs are lower because of volunteer staffing. The Oxfam fair-trade stores in Britain turned a profit of UKP 17 million on income of UKP 52 million in 1993 alone. 
Another indication of the growth in the use of the Internet by development organizations is the amount of donor-assisted projects that target the NGO sector. As the Internet began to emerge in the early 1990s as a possible means of improving communication networks in developing countries, various donor agencies began to target development organizations as a possible beneficiary group. Donor agencies such as the Canadian International Development Agency, IDRC, UNDP, the World Bank, and NORAD (the Norwegian development agency) saw the potential for development organizations to benefit from wider access to information and improved methods of communicating across distances. Initiatives were under way in Africa, Asia, and Latin America to allow development organizations to have access to the Internet. Early projects included connecting health networks in parts of Africa, and establishing NGO networks, such as the IDRC-funded SANGONet (South African NGO Network). Larger efforts saw a consortium of agencies collectively working toward the goal of promoting connectivity and content building for development. An example of one such effort is Bellanet, which promotes interagency collaboration for the promotion of information and communications technologies (ICTs) for development. Today hundreds of projects are working to get development organizations online and to tackle some of the barriers they face with access to ICTs. [iii]
In January 1997, PanAsia hosted the first Pan Content Partners Training Workshop at its Singapore hub. One of the aims of the workshop was to discuss with Pan Partners the potential opportunities for online sales and how to go about e-commerce. The Pan Partners identified various products that they could produce and sell online. These products include journal subscriptions, books, CD-ROMs, databases, and videotapes. The issues raised at this workshop helped to form the basis for PanAsia's online resource expansion activities.
PanAsia received a small percentage of the Web-sales value from the Pan Partner as a contribution toward the operational costs of hosting the site, and provided training and support for the online selling activities. The level of contribution varied according to the financial resources of the development organization in question.
In 1998-99, PanAsia developed a more sophisticated e-commerce platform. The new system will be discussed in a later section.
One overarching characteristic that has emerged is the pattern of sales. The level of total sales to date varied between the Pan Partners, with some experiencing higher overall sales than others. Most Pan Partners experienced erratic sales patterns; the level of sales might be high one month and drop off to zero the next month. These erratic sales patterns may be attributed to two factors. First, for many development organizations the main goal of this activity is not generating revenue, but rather disseminating information on specific development topics. Producing and distributing publications is a secondary activity that is done alongside larger projects for which they receive their funding. This is contrary to the private-sector online selling community, whose primary focus is profit-making. Because of this, private companies spend a lot on marketing their products in order to gain a competitive edge in the marketplace. As e-commerce is seen as a secondary activity for development organizations, they may not be able to put as much capital into marketing their products as private companies do.
Generally, Pan Partners have promoted their online products through advertisements in brochures, journals, and publications, announcements at conferences and events, and on their website. Without employing more strategic marketing techniques, potential customers may not know the product exists, or may not know that they can purchase the item online. The monthly rise and fall of sales figures can possibly be attributed to 1) customers' ad-hoc online purchasing patterns, when one month more individuals may visit the site, compared with other months, or 2) the release of a new publication with an advertisement listing the online sales option, or a conference or event where this service is announced.
A second factor that may account for the erratic sales patterns is the type of products offered by development-focused organizations. The types of publications and other products offered by these organizations are very topic-specific, focusing on particular development sectors such as health, disaster relief, agricultural sustainability, gender equity, the environment, and so on. The markets for these publications, although significant, can be small in size compared with mass-market products such as popular books or music. The target markets are primarily with the development sector or academics and researchers. It is possible to assume that only a small portion of the overall online customer community would be interested in purchasing these items. This, combined with the fact that there is little or no marketing of the products, means that the level of sales will depend on the consumer first knowing that the product exists for sale online and second, being interested in purchasing the items.
Other trends that have emerged in the sales patterns of the development organizations that are worth noting are the purchasing patterns of online customers. [v] These patterns include the number of items purchased per customer and the number of repeat customers. Generally, Pan Partners experienced low total number of items purchased per customer and few repeat customers. These indicators can allow development organizations to determine the level of interest in the publications being offered. This includes not only the topic covered, but also the frequency of new publications added to the site and the variety of publications offered. Some Pan Partners update their sites regularly with new publications and they also offer a wide variety of products. When new publications are available on a regular basis, customers can return to purchase more items at a later date. Also, with a larger variety of publications available for sale, some customers may be attracted to purchasing more than one item.
It appears that the overarching question that development organizations should ask when deciding whether to embark on e-commerce initiatives is "What does our organization wish to gain from selling goods and services online?" As noted by Randy Spence, e-commerce may not be right for every development organization.  It is important to first look at the mandate of the organization -- are there any conflicts that may arise with allocating resources, both capital and noncapital, to e-commerce? Does the organization wish to generate revenue? If so, to what extent?
The answers to these questions can determine the amount of time and funding that will go toward developing the e-commerce facilities, and time put in developing strategies for sales and marketing plans. If the development organization has few resources (both capital and noncapital), but still wishes to sell its products online, it can expect to generate a lower amount of revenue. However, the dissemination of information, not revenue generation, may be the main goal, as previously mentioned. In this case, any revenue generated could be a useful spin-off benefit, used toward the costs of producing further publications. As noted by Vivien Chiam, Partnerships and Business Development Manager at IDRC's Asia Regional Office, the gains from e-commerce can be more intangible for some development organizations than making a sale; it increases publicity and exposure for the organization and promotes development issues.  If development organizations make a strategic decision to use e-commerce as a means of both disseminating development-focused products and services and for generating revenue, increased effort will have to be put into developing the service.
Taking into consideration the issues that have emerged from the examples above, development organizations may find it useful to construct an e-commerce strategy. This can allow them to gauge what they expect to achieve with e-commerce, and how to approach the initiative in a strategic manner to maximize the benefits and reduce costs.
Resource Expansion -- Is the main goal of selling goods and services online the generation of revenue to offset operational costs? If so, how much revenue does the organization expect/wish to generate? These strategic questions will allow the organization to assess how much funding will go toward e-commerce activities. If the organization is approaching e-commerce as a means of covering not only the costs of producing the goods and services and disseminating development-focused products, but wishes to expand its revenue base to support other project costs, then it may want to develop an e-commerce platform and strategy that can attract customers. The organization may have to approach e-commerce as a resource expansion activity that uses business strategies and a full marketing approach. This leads to the question of whether this fits in with the development mandate of the organization and its charitable organization status. Will e-commerce activities distort the tax-free status of the development organization? Is the organization liable in the case of legal conflicts? Most development organizations have already faced these questions if they sell publications and other products by "traditional" means.
Capital Costs -- How much funding is the organization willing to put into e-commerce activities? E-commerce platforms can be high priced, depending on the level of sophistication. A development organization undertaking e-commerce activities should consider whether it wants to incur higher costs, with the possibility of cost recovery from an expected higher level of sales. What are the possibilities of receiving financial assistance from donor agencies or partner organizations for this activity? Development organizations pursuing e-commerce activities may have to decide between a variety of options for their online selling activities, depending on their financial capacities. These options can be divided into 1) technical hardware and 2) site design and maintenance. The organization will have to decide whether it wants to invest in setting up its own in-house server, depending on the organization's size and computing requirements, or find a third party that is willing to host the site on its server. Is the third party another development-focused organization, or is it a private company/ISP? Regarding design and maintenance of the e-commerce site, is the organization able to hire in-house technical personnel to handle design, development, and maintenance, or is it more cost effective to hire an outside party to handle these tasks? Developing an e-commerce site that generates high levels of revenue will have to respond to the changes in e-commerce platforms in the commercial sector. The development organization may want to consider using security encryption software for credit card payment, increasing costs to an extent yet benefiting from increasing customer confidence in the transaction process. Will the site be eye-catching, with the hope of attracting customers, possibly increasing site development costs for higher level graphics and design? Pan Partners currently do not have to bear all of the above-mentioned capital costs, but may one day have to consider them when they initiate an e-commerce site on their own.
Staffing/Training -- Along with the capital costs comes the assessment of whether the organization has trained staff that can maintain an e-commerce site, including both the technical staff mentioned above, and the administrative staff that can process and fulfil the orders. Is the current staff able and willing to take on these activities? Will capacities be taken away from other projects and activities? Will the organization have to employ new staff to concentrate on e-commerce? Would it be cheaper/more effective to hire an outside company to do this? Can the organization afford these costs? Will the staff have to receive training? All of the above questions are important, not only for the success of the e-commerce initiative, but also to ensure that capacities are not taken away from other development activities.
Once the above-mentioned issues are addressed, it is possible to move on to the operational strategy. The operational strategy addresses the issues highlighted in the examples above. These issues are important to address because of their impact on the overall expected sales patterns of development organizations.
Marketing -- As evident from the discussion above, a good marketing strategy forms the basis of the operational strategy, in order to attract customers to the e-commerce site and ensure a steady pattern of sales. Development organizations often need not employ capital-intensive marketing programs in order to have a successful marketing campaign. The marketing strategy can be divided into two main categories: 1) online markets and 2) offline markets.
Online markets include those customers that have already used, or are able to use, e-commerce for purchasing products. The Internet can be used as a tool in itself in order to capture online markets. Techniques include identifying other sites that would be willing to link to the organization's e-commerce site, or cross selling on these sites. These sites include organization partners and sites that offer links to development information and online resources. Another technique includes identifying target markets that would be interested in purchasing the specific development-focused products that the organization is selling online. Once the target markets are identified, potential customers can be identified and a personalized e-mail sent, providing a description of the products being offered and why they might be of interest to the potential customer. As well, individuals and organizations that have already been in contact with the organization can be contacted by e-mail with a similar message. In this way, the development organization is targeting markets that it knows will be interested in the products it offers.
Offline markets include those individuals and organizations that have access to the Internet, but have never used e-commerce or are unlikely to do so. In these cases, "traditional" means of marketing can be employed to attract the potential customer to the e-commerce site. This includes advertisements in publications, newsletters, announcements at conferences and events, mailings to members, and supporters.
Other innovative means of marketing can be employed, such as advertising promotional offers (e.g., "buy one, get one free," or announcements of discounted items) on the home page of the development organization's website.
Types of products offered for sale online -- As previously noted, the products that are produced by development organizations primarily serve the purpose of disseminating information on a specific development topic or issue. These are products that are not often produced for mass markets, but for particular groups with an interest in the development sector. Should development organizations wish to broaden their market sector, they can develop products that have a wider appeal, while still maintaining a focus on the dissemination of information on development issues. These products could include general information and educational publications on a particular development theme (e.g., a survey of regional environmental issues). Such products could draw in new markets, such as schools and libraries.
Development organizations could also look at innovative ways of using the Internet to create Web-based products for sale. For example, electronic versions of books and journals can provide a low-cost means of both producing these products and distributing them. Text can be digitized and offered for sale online. The product can then be sent to the customer electronically, cutting down on the cost of printing the text and sending the item by post. Other products could include digitized audio and video materials and electronic greeting cards. One such initiative is E-cards, an online greeting card company that supports the World Wildlife Fund (WWF). The virtual cards contain photographs of endangered animals and habitats. The site is sponsored by advertisers and for every greeting card sent, E-cards donates a significant portion of the revenue to the WWF. It also assists by sending Web traffic to the WWF website and, as an extension, drawing attention to the cause of endangered species and the environment. Another possibility that development organizations could pursue is allowing charitable donations and contributions to be made online. This would allow individuals that would like to support the efforts of a particular organization to submit their contribution in the form of an online transaction. This may increase overall contributions, as it provides a convenient way for individuals with access to the Internet to donate.
Purchasing Patterns of Online Customers -- The frequency of updating new products can impact the number of items purchased by customers and the number of returning customers. In order to encourage customers to purchase more than one item at a time, it is important to offer a (wide) variety of products. Returning to the marketing strategies, development organizations can offer sales promotions mentioned above. This can increase the per-customer volume of sales, increasing overall revenue. Development organizations can consider organizing a schedule for updating their e-commerce site, adding new products and promotional offers on a regular basis. This way, previous customers will see that new products are available for sale and may be attracted to purchasing a second or third time. It may be useful to form a general profile of who the organization's likely customers might be, and what their purchasing patterns could be. Are they individuals, companies, research institutes, universities, donors, libraries, or governments? Further research on e-commerce customers could provide a useful tool for assessing online purchasing patterns.
Developing an e-commerce strategy can allow development organizations to approach this initiative with an understanding of what they want to achieve and how to achieve it. This can encourage strategic thinking of how to attract potential customers to the site and how to keep them returning. In order for e-commerce initiatives to be successful, whether generating revenue to offset production costs or increasing overall revenue to offset operational costs, development organizations can often use business strategies to more effectively achieve their overall goals.
The S-One grant to IDRC provided the necessary funding to PanAsia to tap into broad-bandwidth network for the development of multimedia capabilities. This includes streaming technology, object relational database management system, multimedia technology (audio, video, Shockwave), and an e-commerce platform. Pan E-commerce began to be developed in April 1998, with the Grameen Bank as its first "virtual shop" in July of that year. The Pan E- commerce site offers virtual goods, through the On-Web Shop, including text-based publications and digitized graphics, audio, and video. The Off-Web Shop contains physical goods, such as printed publications, textiles, and handicrafts. The On-Web goods are delivered in digitized form with Web-based access, while the Off-Web goods are shipped to the customer.
PanAsia E-commerce has experienced moderate but encouraging sales of its online products. A strategic marketing plan has been undertaken to promote the PanAsia E-commerce mall and the creation of a strong "brand" association with PanAsia E-commerce to attract customers.
Experiences of development organizations selling goods and services online with the support of PanAsia Networking has shown encouraging results. This initiative allows development organizations to choose the level of effort they wish to place on online selling, corresponding to levels of resource expansion. These experiences draw attention to a number of issues that emerge concerning the particular use of e-commerce by the development sector. Because development organizations do not function in the same manner as private businesses do, it appears important for these organizations to adopt strategies to maximize the potential resource expansion available with e-commerce.
Many development organizations will be impeded from entering into e-commerce because of high entry costs and technical barriers. It is therefore important for support to be made available to development organizations wishing to sell goods and services online. One such effort is Pan E-commerce, which provides varying levels of support, such as assisting to cut entry costs and offering technical assistance and marketing support to encourage the dissemination of development products and the realization of resource expansion to offset operational costs.
Maria Ng Lee Hoon, the PanAsia program officer in Singapore, notes: "Selling of intellectual information is not new. R & D [research and development] organizations have been doing that in the form of hard copy publications and audio, visual, and motion-based media for a long while. What we are offering our development research partners on PanAsia Networking is a new market segment -- the Internet clientele -- and a new means for their resource expansion activities." 
[ii] These include intergovernmental organizations -- umbrella groups that represent development-focused government departments on a regional basis. Intergovernmental organizations are dependent on both ODA and government funding for their operations.
[iii] Many critiques (Hamelink, Castells, Mansell, Wresch) have emerged over the past five years, warning of the marginalization of developing countries in the impending "information revolution." Issues such as lack of education and financial resources, geography, and sociocultural barriers have been identified as possibly impeding the growth of the Internet in developing countries. As an extension, developing-country NGOs face similar obstacles.
[iv] Only a small portion of Pan Partners engage in online selling activities. To view a full list of Pan Partners, go to the PanAsia website http://www.PanAsia.org.sg and click on "R&D Websites" in the top left-hand corner.
[v] This is an issue that impacts both the public- and private-sector online selling communities.
 UNDP Human Development Report. New York: UNDP, 1993.
 Korten, David C. (1990) as quoted in Smillie, Ian, "The Alms Bazaar." Ottawa: International Development Research Centre, 1995.
 International Monetary Fund Survey. Vol. 27, No. 8, 27 April 1998, p. 132.
 Smillie, Ian, "The Alms Bazaar." Ottawa: International Development Research Centre, 1995. P.156.
 Network Wizards Internet Domain Survey http://www.nw.com/zone/WWW/top.html
 OECD. Ibid.
 Spence, Randy. Personal Interview. Singapore: 26 January 1999.
 Chiam, Vivien. Personal Interview. Singapore: 1 February 1999.
 Spence. Ibid.
 Ng, Maria Lee Hoon. E-mail correspondence. 23 February 1999.