Boom Time for Electronic Commerce
By Mukul Pandya
Entrepreneurs and acadmics alike find that dealing on the Internet is uncharted,
unregulated and, in many cases, potentially profitable
Earlier this summer Bruce Brownstein, W’80, paid $59 for
a new video game for his children. After watching it once
and deciding that it was too violent, he tried to sell the
barely used game to a dealer. The dealer’s best offer: $10.
Unwilling to take that loss, Brownstein’s wife Suzanne
decided to try another option: selling it through eBay, the
fast-growing online auction company in San Jose, Calif.,
where Brownstein is director of sales. Brownstein listed
the game on the company’s website and invited potential
buyers to bid. Seven days later, he had 21 bids — and
clinched the deal at $53. “That was the first time we used
eBay’s auction system to sell something,” he says. “It surprised
me how much fun it was.”
Thousands of people apparently agree. In the two-and-a-
half years since eBay was founded, it has emerged as one
of the Internet’s hottest sites. Media Metrix, a New York
firm that measures web traffic, has just named it the world’s
biggest personal trading site. Each day buyers and sellers
conduct some 40,000 online auctions over eBay’s website,
trading everything from Barbie dolls to rare coins. As the
deals multiply, eBay — which takes a small cut on each
transaction — has seen gross merchandise sales climb to
$250 million in the first half of this year, earning gross profits
of $13 million. Because eBay simply matches buyers and
sellers, it has neither inventory nor shipping costs. The
company is now on its way to Wall Street for an initial public
offering.
eBay is hardly alone. It is one of thousands of new businesses
springing up to create the global digital bazaar that
is driving the explosion in electronic commerce. Jupiter
Communications, a New York City consulting firm, estimates
that the number of online shoppers increased from
10 million last year to 16 million this year and will swell
to 61 million by 2002. The Gartner Group, a consulting
firm in Stamford, Ct., predicts that online consumer sales
will jump from $6 billion this year to $20 billion by 2000.
The growth in business-to-business deals, in the same period,
will go from $15 billion to $175 billion.
So far, compared with the economy as a whole, these
numbers are minuscule. Online consumer sales, for example,
amount to just 0.2 percent of U.S. retail sales. Yet the
reason for the breakneck growth of web commerce is that
once people buy books from Amazon.com or music from
CDNow, they tend to get hooked on the speed, ease and convenience
of the experience. According to a U.S. Department
of Commerce report, “The [World Wide Web’s] pace of adoption
eclipses all other technologies that preceded it. Radio
was in existence 38 years before 50 million people tuned in;
TV took 13 years to reach that benchmark. Sixteen years after
the first PC kit came out, 50 million people were using one.
Once it was opened to the general public, the [World Wide
Web] crossed that line in four years.”
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