E-Commerce: When to Get on the Bandwagon
By: Rob Holland
February 2001

Electronic commerce, or e-commerce, is touted as the fastest-growing segment of the Internet economy with greater than a 70 percent growth rate. E-commerce accounted for $171billion of the overall $524 billion in revenue in 1999. Estimates for e-commerce sales in 2000 run as high as $850 billion.

But before you expect tremendous sales online, pause. Potential e-commerce buyers must have access to the Internet. A 1999 report by the U.S. Department of Commerce found that access to Internet technology is influenced by education, income, race and living in a rural or urban site.

Americans with more education are more likely to be connected; Americans with more money are more likely to be connected; whites are more likely to be connected than African-Americans; and urban Americans are more likely to be connected than rural Americans.

The study also found that 22.2 percent of all Americans currently use the Internet at home, and 17 percent use it at some site outside the home. Almost a third (32.7 percent) of Americans use the Internet somewhere, but about 67 percent don't use it at all.

The South trails in all three categories of home (20 percent), outside the home (15.6) and total usage (29.8 percent).

E-commerce can be business to business or business to consumer. Business-to-business transactions are projected to continue an overwhelming dominance of e-commerce, with sales of $1.3 trillion. This compares to $108 billion for business-to-commerce transactions.

But business-to-consumer sales should soon represent about 7 percent of all retail sales. In addition, online expenditures per household should more than triple from 1999-2004. 

E-commerce is more than the sum of its sales. Businesses can use e-commerce to develop competitive advantages by providing information, expanding choices, developing new services, streamlining communication, enhancing purchasing and tracking, enhancing customer services and lowering costs.

According to a report by J. Nielson in 2000, Internet shoppers indicated why they buy online.

•  ease of placing an order
•  large selection of products
•  cheaper prices
•  fast service and delivery
•  detailed and clear product information
•  no sales pressure
•  easy payments

Men and women almost equally make purchases via the Internet.
 
So all indications are that the Internet is here to stay and that its role in the economy and on commerce will only increase. We advise most agri-entrepreneurial small businesses to prepare for an Internet presence, but they shouldn't expect significant sales from it exclusively.

Initially use the Internet to enhance value-added products and services as an information source, communication tool and customer-service feature.