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Shopping.com: Analysis of a trend

Just three years ago, relatively minuscule numbers of shoppers were making purchases on the Internet. Electronic commerce (e-commerce) in 1996 amounted to only about $2.7 billion. Management Review reports that by 1998 the dollar amount had exploded to $73.9 billion, and the U.S. Department of Commerce expects e-commerce purchases to total $300 billion in the year 2002. Internet shopping was almost unheard of until recently, but it has grown so fast that almost any good or service can be bought or sold on the Internet today. At the present time, that fact has a certain novel appeal for consumers and for the media.

The Wall Street Journal's Weekend Journal (September 1999) included an article entitled "I Was an Internet Bride" on its front page. At the request of the editors, Suein Hwang "didn't meet her fiance on the Web, but she did do everything else, from buying her wedding gown to finding the reception hall to registering for gifts, on the Internet."

A young family and consumer sciences teacher in rural Utah did Suein one-better. She not only found her fiance on the Web, but their courtship developed via their Pentium Ils. When the "flirting became serious," she announced her engagement, moved to another state, married, and left her frantic principal searching the Internet for someone to replace the teacher.

Though it may sometimes be presented as a modern novelty, e-commerce is actually part of a steady trend that began about 150 years ago when the telegraph was invented. The purpose was to relay information electronically, rather than by Pony Express. Since then, electronic transactions have continued to replace physical ones. The telephones, xerography, personal computers, the fax, and the Internet have all become standard means of conducting business. Nevertheless, the use of electronic machines does not alone answer the question of why the current explosion in e-commerce. There are other contributing factors. E-commerce is possible - and perhaps more importantly, it is a moneymaking venture - thanks to the wave of technologies that have matured and have become widely available. Broadband services now speed Internet connections, while faster and more affordable personal computers bring additional users online.

It is estimated that over one-third of U. S. households are online and that by the year 2000, 330 million people worldwide will have access to the Internet. Another startling statistic is the doubling of Internet traffic every 100 days. Well-designed Web sites lure large numbers of consumers with high-resolution graphics, extensive product information, and useful features, such as personal shoppers (Shop Bots) that search the Internet for the best price on a particular item or service.

An additional facilitating factor is the Internet Tax Freedom Act (ITFA), a recent piece of legislation that protects Internet access from new and discriminatory taxes. The tax status, in addition to the technology, has helped make e-commerce practical and profitable for both consumers and retailers.

Effective October 1, 1998 to October 20, 2001, ITFA protects Internet access from new and discriminatory taxes for three years. During this time, an Advisory Committee, composed of representatives from federal, state, and local government, and from the e-commerce private sector, will study international, state, and local taxation of Internet access and submit recommendations to Congress.

Although the ITFA exempts Internet access from new taxes, taxes that were imposed or enforced prior to October 1, 1998 are still in effect. That means that almost all businesses are required to pay income tax on revenues generated through e-commerce, but only a few states may charge sales tax on Internet sales. In the meantime, until future Internet tax laws are implemented, e-commerce is protected from potentially limiting taxation.

Many shoppers find great appeal in being able to choose specific components and custom design, for example, a new laptop or new car. Others love to save time and energy when shopping the market and applying for the mortgage that puts them in the house of their dreams. Careful consumers can save money by surfing their way to better buys. E-commerce affords advantages to consumers who report that by purchasing over the Web they:
* save time and money because of shortened search times and reduced activity;
* avoid traffic, lines, and sales clerks;
* can choose to spend more time at home;
* find greater variety and personalization in products and services;
* find better prices and customer service;
* encounter extensive product information;
* enjoy the convenience of big online shopping sites. At the same time, retailers doing business online find that e-commerce gives them certain advantages:
* lower production and sales costs;
* utilize a less expensive distribution channel;
* increasing market shares, as well as boosting sales to existing customers;
* compete with larger businesses on a more level playing field;
* customize their products online;
* perform well in an unsaturated market.

For many shoppers, however, e-commerce will not replace the warm fuzzy feeling of browsing the windows in the mall. There are other down sides to Internet shopping. In November 1999, a tongue-in-cheek Time Digital article by Danny O'Brien says, in part:

I've bought goods online that I'd feel ashamed to window-shop for in a mall. I'vegot a whole shelf of one-click mistakes... Sure, in an optimal world, we would all be using those find-the-best-price search engines, writing carefully pared-down shopping lists and eking out humble existences in [houses] furnished with stuff we need. As it is, I and the rest ofthe Pokemon crazy tchotchke grabbers are saving the world from - well, not communism but whatever it is that's the big threat to capitalism right now ... Anyway, those Consumer Reports-reading, superinformed purchasers that all the economists love so much are just parasites on the great big American Dream compared with the likes of me. [Ethical business practices]? Perfect competition? Informed consumers? Where's the profit in that? [However, the more the online world becomes like] a visit to my local shopping street, the more it reminds me that this is real cash I'm splashing out here. Day-to-day shopping means watching my expenditures. That's ajob for my superego. And it ain't my superego bidding up the Coca-Cola mementos on e-Bay, let me tell you.

A card reader in my home? Like I'm going to go near that thing without having flashbacks to my last scissored- Visa experience. No, ifthey want me to spend even more money online, my evil capitalist overlords should make it less like a day at the mall and more like blowing out 4 million bucks in Sin City. And for Pete's sake, don't make the "buy" icon a wallet. Make it a girl in a bikini knocking back a Bacardi and lime. And ifl click twice, she winks.

Micropayments are in the news, as a new digital currency. It is, therefore, a good idea for consumers to be certain that merchants from whom they would usually buy support any new micropayment system that interests them. Never confuse fake digital currency with the real thing.

Even though micropayments are on the horizon, most online purchases are made with credit cards. Visa reports that 8 cents of every $100 spent on the Internet is lost to fraud. That amount is just 1 cent more than is lost in traditional transactions. The message might be that, if you are careful, online shopping may not be any riskier than other types of shopping.

In addition, e-commerce is bringing with it a renewed need for businesses to have consumer representatives. While U. S. consumers are braver about shopping online than they used to be, one out of five surveyed recently reports being uncomfortable buying on the Web. Even when using a Bot, a surrogate comparison shopper for those who hate to shop or those who are time-starved, the consumer needs to shop for the Bot.

Along with all the other changes, there is a need for the security that comes from knowing a business has a consumer representative, who is knowledgeable and available to consult when placing orders or complaints. Enter the Family and Consumer Scientist in Business - more needed than ever as a special link between businesses and their customers in our new digital world. The image is slightly updated, but the need is not so different.

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Shopping.com: Analysis of a trend