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The term e-commerce refers to the buying and selling of information, goods, and services over computer networks. This way of selling goods goes back to a small set of private networks retailing, education, shipping, and airlines. Today the Internet has the support of major software makers and the news media. It is thought to be the most efficient marketing and distribution system in history. Consider methods to sell goods other then in-store: mail-order, door-to-door, direct mail and telemarketing. None has achieved the success or elicited the promise of e-commerce. About 50 million business transactions occur around the world every second. Among small businesses, some 900,000 have Web sites and nearly 50 per cent are conducting e-commerce. Many attribute this growth in on-line sales to the idea that there is now an opportunity to include a wide array of product services including buyer education, billing, paying options, and modes of delivery.

Using the electronic method makes it easier to enter new markets. Competitive advantage is often improved for even the smallest sellers B2B (business to business) commerce is expected to hit $2.7 trillion by 20004, according to a report by Forrester Research. Driving this expansion will be online auctions, aggregators, bid systems, and exchanges. Dick Anderson of IBM says that the IBM says that the B2B market will expand four to five times larger than the business-to-consumer market. Real-time shipping management, inventory control, warehouse management, and cash collection are areas where businesses can use electronic resources to improve the bottom line. General Electric reports more than 1 billion annually in sales online from more than 1,400 suppliers, including some small firms. This cuts the procurement (buying) cycle in half and saves them 30 percent.

E-commerce has caused some changes in the basic economics of business. In the past, physical assets have been the source of revenue. A car manufacturer’s facility was necessary to complete production. A network of distributors spent large sums to maintain showrooms and inventory. But e-commerce gives an advantage to sellers since various elements of the production and distribution process may be located in diverse locations- production here, billing process there, and so on –all linked electronically. They are able to capture specialized niche market share.

Sotheby’s and eBay, two auction houses, are a good example of this advantage. EBay went public in September of 1999 with a market value of $1.88 billion. The online auction has no inventory and just acts as the “virtual auctioneer”. Sotheby’s, a long-established and well-respected auction house, warehouses, displays, and sells items for its clients and thereby, incurs storage and selling costs. Its market value is $1.01 billion.

Bringing a wide array of goods and services to customers at prices that are fair has been the hallmark of a market economy. While various marketing and distribution methods have accomplished this goal, it appears that e-commerce will play a major role well into the 21st century.

 


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