Chapter 2

From Eftpos to Trade Me:
The growth of electronic commerce

Janet Toland

New Zealanders, particularly those in rural areas, have a reputation for creating innovative solutions with available technology, whether that technology is No. 8 wire or information and communications technology (ICT). New Zealanders have always been ingenious and the country has produced many original thinkers and achievers. In 2001 the Global Entrepreneurship Monitor placed New Zealand as one of the top three countries in the world for innovation. New Zealand’s remote location puts it at a disadvantage in the international trade market, and any technology that helps to overcome this inconvenience is eagerly seized upon. When refrigeration was invented, its potential for expanding the market for sheep meat was quickly spotted, and New Zealand was one of the first countries to start using freezing technology on a large scale. Since the 1980s, ICT has opened up similar opportunities to overcome the barriers of distance. Central to this have been the development of the Internet and the growth of electronic commerce. This chapter tracks the adoption of these two technologies in New Zealand by taking a snapshot approach which uses reports from the national and regional newspapers of the time to give a depiction of their use at three key points in the last 25 years: 1985, 1995 and 2005.

1985 — The economy in turmoil

In 1984, David Lange’s Labour government came to power after a snap election. They inherited a currency crisis and the new finance minister, Roger Douglas, implemented a number of sweeping economic changes that became known as ‘Rogernomics’. These included the devaluation of the New Zealand dollar, deregulation of the financial market, taking away controls on foreign exchange and the removal or drastic reduction of subsidies to agriculture and other industries. By June of 1985 the government had managed to reduce the financial deficit to half of what it was in 1984 and was being praised by international organisations such as the International Monetary Fund. However, at home the effects of these economic reforms hit hard, unemployment rose rapidly, the manufacturing sector was under considerable pressure and farmers struggled to stay in business.

Relations with the USA were strained due to New Zealand’s insistence on remaining nuclear free, and came to a head during a well publicised debate at Oxford University when David Lange accused American televangelist, Jerry Falwell of having ‘Uranium on his breath’. At home the New Zealand Computer Society celebrated its silver jubilee; a planned tour of South Africa by the All Blacks was cancelled after widespread protests against apartheid; HIV/AIDS was beginning to be recognised as an issue for New Zealand; and the Greenpeace ship Rainbow Warrior was blown up by French Secret Service in Auckland Harbour. It was also the year in which local author Keri Hulme won the Booker Prize for her novel The Bone People.

A 1985 survey of over 800 personal home computer users found that the average home computer user in New Zealand was relatively young, affluent and likely to be an impulse buyer. About 5% of homes had personal computers and the largest number were in homes where the breadwinner was in the 30–40 age bracket and had an income in excess of $30,000. The most popular use of home computers was to play games, with four times as many games being sold as any other software package.

During the late 1970s and early 1980s teletext and videotex were developed in the UK. Teletext is the over the air distribution of print and graphical information using the vertical blanking interval in the television picture. Videotex services use the public switched telephone network to access computer based data storage facilities; the retrieved data is displayed on a modified television receiver. In New Zealand the initial motivation for teletext was to provide captioned television for the hearing impaired. In 1984 the first operational videotex system was introduced in New Zealand, and as of 1985 there was rapid adoption of this new technology across a number of sectors. A significant reason for this was its user-friendly menu and response-driven access approach. Videotex systems were being implemented or strongly considered by a range of organisations including Federated Farmers, New Zealand News, Dairy Board, Ministry of Agriculture and Fisheries, Travel Agents Association, Bank of New Zealand, ANZ Banking Group and the Racing Industry. The three main players in the videotex industry at the time were BPI Systems, Datacom and ICL. The Post Office, which had a monopoly on telecommunications at the time, agreed to support all three types of systems on its packet switched communications network. In Auckland, AT & T, one of the biggest names in international telecommunications, commissioned Microprocessor Development Limited to design a Prestel Viewdata terminal. A North Island fertiliser company set up a novel promotion for videotex, where farmers who ordered a tonne of fertiliser could purchase the Aditel videotex services plus a micro computer for $900.

For the home user, videotex offered the potential for electronic news, home banking, computerized shopping and entertainment. In New Zealand, a teletext home information service had been available since 1984; its uptake has been impressive by international standards; however, among the hearing impaired who were the initial target market, uptake was slow.

In February 1985 New Zealand became one of the first countries in the world to experiment with electronic commerce, when the trading banks launched an eight month trial of Eftpos. At a cost of around two to three million dollars to them­selves, the banks provided free terminals to stores in a bid to attract their initial customers. Eftpos took off throughout the country and from August to October over $1 million worth of transactions were recorded. Some customers expressed concern that their ‘electronic footprint’ could be tracked, but the banks reassured them by stressing they had neither the time nor the inclination to follow customers movements. Once the trial ended in October, Eftpos was launched nationwide, and stores now had to buy their own terminals; however, as the banks correctly predicted there was little drop off. Microprocessor Development Limited manufactured the terminals and was also beginning to market them internationally.

The first indications of electronic government came with Hamilton City Council planning a completely integrated computer system, and the possibility of using e-voting during Parliamentary debates being explored. Home banking, bill payments and electronic shopping were also being piloted by Development Finance Corporation using their Screenlink videotex system. The New Zealand Stock Exchange planned to be fully computerised by the end of the year. The rural sector was not left behind, with a video auction of embryo-implanted goats being broadcast from Oamaru.

1995 — The Internet takes off

In 1995, Jim Bolger’s National government had been in power since 1990, and Maurice Williamson was the country’s first Minister for IT. Both the Queen of England and Nelson Mandela visited New Zealand. The reaction to these two visits illustrates how the country was changing; the Southland Times noted that there was such low interest in the Queen’s visit that no local schools planned to make the trip over from Southland to Dunedin to see her. On the other hand, Nelson Mandela’s departure from New Zealand moved the Governor General Dame Cath Tizard to tears. The trial of David Bain for the alleged murder of five members of his family gripped the country, while in the country town of Carterton; Georgina Beyer became the world’s first transsexual mayor.

The Internet was first introduced to New Zealand in 1989, and by 1995 commercial use was beginning to take off. A 1994 survey by the Internet Society showed that the growth in the number of computers connected to the Internet was second only to the USA; there was a 441% increase with 31,215 computers directly connected to the Internet. Another report put New Zealand in fifth place behind Iceland, Finland, the USA and Norway with 43,864 computers connected to the Internet as compared to 1193 in 1991. While these two sets of statistics and rankings do not quite match up, there was no doubt that the use of the Internet was growing more rapidly in New Zealand than in the rest of the world.

Wellington based research company, IDC, estimated that businesses accounted for about 50% of computers connected to the Internet, government 28% and educational institutions 11%. The main growth areas for businesses were international data transfer and electronic mail. George MacGibbon, IT manager at Fletcher Challenge, commented that: ‘It seems to be a year when the Internet started to become of commercial age.’ His view was supported by Cyril Snow, Auckland HealthCare’s general manager of information services, who reported that his department had experienced a huge increase in demand for electronic mail: ‘Everybody’s now saying I need to be on the network, I need to have mail.’ Reg Hammond, manager of information technology policy at the Commerce Ministry recalled that the Internet was not even mentioned at an IT briefing organised for Prime Minister Jim Bolger’s enterprise council in 1993, whereas at a similar event in 1995 the Internet seemed to be the only word mentioned: ‘That’s just an indication of where it’s gone in such a short period,’ he said. The appearance of books such as Internet: a New Zealand Users Guide and articles entitled ‘Five models to help relocate your business on the World Wide Web’ also indicated growing public awareness of cyberspace.

A diverse group of organisations established World Wide Web home pages in 1995 including law practices, public relations firms and the media, large companies like Fletcher Challenge and Pilkington Glass, and smaller organisations such as Royal New Zealand Ballet and Sealord fishing company. In the public sector the National Library and the Treasury set up web pages. Richard Ram, marketing manager of the Internet Company of New Zealand, a commercial Internet gateway based in Auckland, believed most Internet usage was experimental, with email being the most popular service. Businesses were adopting the Internet due to customer demand; for example, a travel agent located near Waikato University adopted the Internet, as many of its clients were academics who routinely used email. Hotels also reported that international visitors were demanding email facilities while on holiday. A move to the Internet could also be prompted by a desire to keep up with competitors. Law practice Russell McVeagh McKenzie Bartleet was quick to follow competitor Bell Gully Buddle Weir in putting up a home page.

The use of the Internet was not confined to the business sector; a web page with a real time link to a camera on volcanic Mount Ruapehu received 700,000 hits in its first two and a half months. Videoconferencing was used to set up a link with Australia for a criminal jury trial. Artists and musicians were also experimenting with the Internet. An Auckland art gallery mounted an exhibition of electronic art over the Internet, and local musicians, such as Dave Dobbyn, began to put their performances out live on the net and use web pages to market their work. In the media, InfoTech Weekly was the first newspaper in the country to be made available online. Genealogists were also enthusiastic about the use of the web to research family history.

The increasing popularity of the Internet meant that governance had to be introduced around registration of domain names. This had previously been carried out by Waikato and Victoria Universities, but in May the Internet Society of New Zealand was formed to take over the administration of the Internet.

A survey of New Zealand web users found that the average surfer was a 34-year-old male earning a high salary who spent most of his time at overseas websites. Around half of the 1009 web users surveyed used it for work, and the other half were using the web for personal reasons. The web was responsible for a surge in sales of home computers and up to 65,000 were expected to be sold in 1995. Prompted by the increase in demand for personal computers by both home and business users, home appliance firm Noel Leeming opened two computer stores in Auckland and Wellington and planned to open four more by the end of the year.

In 1995 there was still scepticism about electronic commerce with trust, credibility and access being major issues. However, the increasing profile of electronic commerce was demonstrated by the formation of New Zealand Electronic Commerce as a special interest group of TUANZ.1 The group replaced the Electronic Data Interchange Association and planned to move away from a focus on technical standards to look at how technologies such as fax, fax-on-demand, interpersonal mail, email enabled applications, and active and interactive media could be used by businesses. There were also developments in both the areas of business-to-business and business-to-consumer electronic commerce. The wood products industry was hoping to save millions by using a locally developed electronic wood products exchange. Data General linked up with Wellington based Electronic Document Management to offer a service to companies wanting to set up electronic commerce systems.

Online shopping was emerging as a key trend in the retail industry, and supermarket chain Foodtown planned to make grocery shopping available on the Internet. ANZ bank was also attempting to persuade more customers to switch to online banking by increasing fees for manual banking. Multimedia based presentations were proving popular with companies hoping to boost sales, and in the real estate industry the Internet was beginning to make major changes to the way property was promoted. In Auckland a consulting company developed a system that would allow email to be sent to a digital phone.

Different online payment systems were being piloted; New Zealand Post was considering offering smart card services, though the idea of a national smart card for welfare and health services was squashed by Prime Minister, Jim Bolger. Retail chain Farmers entered into an agreement with Internet service provider Voyager to allow customers without credit cards to make payments online using store cards. Cheque guarantor TeleCheck Payment Systems also repurchased its New Zealand franchises. Other businesses were developing the idea of mobile Eftpos terminals.

New Zealanders were amongst the highest users of cellular phones in the world. Applications such as telephone banking were receiving a lot of interest from the rural community. The positive and negative sides of mobile phones were receiving attention. On the plus side a Southland fisherman was able to alert rescuers by mobile phone when he was stuck in a lagoon. On the minus side there were concerns about the ethics of selling mobile phones for as little as $1 to people who had no idea about ongoing charges. One beneficiary ran up a $25,000 bill after buying a $1 phone.

2005 — The digital strategy is launched

The 2005 general election saw Helen Clark’s Labour government voted in for a third term in office. New Zealand received widespread international praise when it became the first country in the world to launch a Digital Strategy. The main aim of the Digital Strategy was to leverage ICT to help communities realise their social, cultural and economic potential. The country was invaded by the ‘barmy army’ as 25,000 rugby fans arrived to follow a six week tour of New Zealand by the British and Irish Lions. On 29 April the Civil Unions act became legal, and 249* same sex couples took the opportunity to formalise their relationships.

By the end of 2004 there were 2.45 million Internet users in the country according to technology research firm Research and Markets; 900,000 used dial up and 165,000 broadband. Research conducted as part of the Hewlett Packard Connected Lives programme, which was tracking the technology use of 8000 households, showed that 91% of participants used the Internet every day. 94% of people logged on at home and 57% at work, 7% used Internet cafés and 2% Wi-Fi hotspots. ICT was used in a wide variety of everyday activities; 80% of people used it to manage their money, 72% to manage work, 64% to organise travel, 63% to run their social life and 44% to coordinate family activities. A further online survey of 1500 people by Conversa Global found 79% of respondents were sending up to 20 emails a day, for 54% of them up to three quarters of the emails were personal.

More and more organisations were developing an online presence, in some cases these were new sites, in others it was a case of extending or revamping existing sites. Hawkes Bay fruit growers set up a website to find fruit pickers; the Humanities Society set up a one stop shop website for people seeking information on arts and social sciences; New Zealand had the worlds top rated dinosaur news site according to Google rankings; New Zealand Education Trust launched a new site aimed at international students, New Zealand embassies around the world went online and the government put up a website to attract ex-patriot New Zealanders back home. Te Ara (The Pathway) was launched by the Ministry of Culture and Heritage as the country’s first online encyclopedia. Local Government Online revamped its web portal and built on additional services such as an online tendering system, a recruitment service and emergency management information. Fairfax Publishers upgraded their job recruitment site, and Archives New Zealand set up a searchable electronic index. Websites were becoming more interactive: National Business Review launched a weblog for discussion of Chinese issues; the National Library spearheaded a project to fund and host original New Zealand digital content; an estate agent put up an online questionnaire and psychometric test for potential job applicants; and a cattery set up web cams so owners could monitor their pets’ progress while on holiday.

Internet and email were becoming available on long haul bus services, train and ferry services, and there were moves to make it available to air travellers. Hotels were also making broadband services available to their guests.

Despite reports that New Zealand had dropped two places to number 19 in the world e-readiness rankings, 2005 saw a dramatic increase in the use of electronic commerce. Consumers were able to check the history of a used car using the Automobile Associations online ‘Lemon Check’ service, car ownership could be transferred online using the Land Transport website, cargo insurance could be arranged online, a website could be used to subscribe to a magazine, trampers could book mountain huts online, and golfers used the Internet to book their time on the course. Online auction site Trade Me was now the most popular site in the country according to web researcher Hitwise, though Telecom were giving it some competition with the launch of their electronic commerce portal, Ferrit. Electronic commerce was being used by both large and small retailers, at one end of the scale supermarket chain PAK’nSAVE was installing self scanning systems and electronic shelf labels in nine of its stores, and at the other end boutique wineries and a lavender grower were using the Internet to sell their products. A Dunedin firm was offering free electronic commerce software and web hosting to 2000 small businesses. Charitable trust E-Regions was helping over 130 small businesses to market their products globally through their Comet scheme, which provided free electronic commerce software and web hosting.

Another trend was the interest in electronic forms and smart cards, the government started to issue biometric e-passports, and customs were investigating self-service border control kiosks. The Ministry of Economic Development issued staff with a smart card to access its network services, and Datacom was awarded the contract to develop a secure single logon for all government services. The Fisheries Ministry was also trialling the use of e-forms so observers could input catch information while out at sea.

Mobile technology was also being used to make life more convenient in both the public and the private sectors. Doctors and nurses at a Christchurch hospital emergency department were able to take phone calls while on the move, using voice-activated pendants connected to the hospital’s wireless network. Wood manufacturer, Carter Holt Harvey, gave its sales representatives notebook computers equipped with mobile data cards so they could take orders while on the move, and the Police were also considering equipping frontline officers with handheld computers. Supermarket chain, Progressive Enterprises, installed Wi-Fi networks in 200 of its stores so staff could carry out stock checks using wireless handheld computers. Mobile banking was popular, though IT firm Unisys claimed that New Zealand banks were lagging behind the rest of the world. Camper van rental company, Kea, installed personal computers in its mobile homes as international tourists now expected to have access to the Internet. A pilot project to make tourist information available on mobile phones was being trialled in the Wellington area. Mobile telephones were also being used to reach out to people; the Electoral Enrolment Centre found it had improved take up from young voters when it used text messages to encourage them to enrol.

The use of mobile technology was not without its inconveniences; 80,000 businesses were affected by a nationwide Eftpos outage, and the Vodafone network was hit by technical problems for two weekends in a row.

Geographic Positioning Systems (GPS) and Radio Frequency Identification (RFID) were also being used. The Corrections Department was trialling the use of GPS systems to track offenders by satellite, and travel publisher, Jasons, added GPS to its website. Retail giant, the Warehouse, was considering the use of RFID technology in its stores, and Manukau City Council was looking at introducing it in public libraries.

Local airports were installing wireless networks for baggage handling systems. The ASB bank experimented with the use of a virtual receptionist. Wellington City Council launched an e-democracy initiative which was the first of its type by local government in New Zealand.

Archived web casts of council meetings were made available, and elected members were given the tools to produce blogs and electronic newsletters to communicate directly with the public. Citizens could use electronic petitions and interactive forums to contact their elected members and council officials on issues affecting the city; members of parliament held online clinics to engage with their constituents.

In rural areas the FencePost website (www.fencepost.com) operated by dairy cooperative Fonterra was being widely used. It consisted of a range of information and tools relevant to the dairying community, such as accurate regional weather forecasts, agricultural news, classified advertising and a rural jobs marketplace. Farmers could sign up for a package which would let them benchmark their production figures against other New Zealand farmers. There were a number of discussion boards where any topic relevant to the rural community could be debated. Subjects ranged from detailed question and answer sessions on dairy herd management to more general debates on work/life balance.

Conclusion

Between 1985 and 2005, New Zealanders consistently demonstrated a strong interest in new ICT-based technologies. Throughout economic ups and downs the passion for new technology remained constant. The interest was evident in sectors as diverse as health and agriculture, and was widespread throughout private business, the government sector and in the general public. New Zealand was one of the first countries in the world to introduce Eftpos, and the country embraced the Internet with enthusiasm.

When it comes to the adoption of new technologies such as Eftpos, the Internet and mobile phones, there is no doubt that New Zealanders have one of the fastest take-up rates in the world. This eagerness and curiosity has helped New Zealand become more connected to the rest of the world during the last 25 years. However, this passion for ICT has yet to bring the major boost to the economy that the introduction of refrigeration did back in 1882. The goal for the years ahead is to learn how best to mobilise the pioneering spirit of New Zealand citizens to leverage the full potential of ICT in order to achieve long term economic success.

Janet Toland is a Senior Lecturer in the School of Information Management at Victoria University of Wellington. Originally from the UK, Janet has lived in New Zealand for the last nine years after spending time in Botswana and Fiji. Janet teaches in the areas of information systems management and business systems analysis and design. She has a Masters degree from City University in London and has published over 30 conference and journal papers. Janet’s PhD thesis, which tracks the growth of information and communications technologies in two regions of New Zealand between 1985 and 2005, is currently under examination.

References

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Newman, K (2008). Connecting the Clouds: the Internet in New Zealand: Activity Press

NZ Government (2005). The Digital Strategy: Creating our Digital Future. Wellington