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The explosive growth of the Internet has created at least 14 new billionaires in just the last few years. Companies like AOL, Yahoo, E-bay, Netscape and Amazon.com are household names in an industry that barely existed a decade ago.
And more and more each day, the Internet is fast becoming the hot, new marketplace, a kind of electronic bazar for buyers and sellers. "E-commerce" on the Internet is beginning to permanently reshape the economy, says Stanley Reynolds, professor and head of economics at the UA.
Reynolds has begun to focus on e-commerce as a research topic. Shopping on the Web is so new, he says, that most of the 100 million Americans who have access to the Internet have not ventured inside the e-store.
He says business-to-consumer retailing on the net was roughly one percent of all retail activity in the United States in 1998, or about $60 billion. This type of commerce is growing rapidly and may amount to three percent of all retail activity this year.
But the real growth may likely be where businesses buy and sell among one another.
"The potential volume of business-to-business electronic trade may be even larger. It is becoming routine for companies to look for suppliers or services on the Internet. Some Internet sites are devoted to auctions in which businesses sell goods or services to businesses that place the highest bids," Reynolds says.
Just how far computers and the Internet will drive the economy is still not certain, but it is clearly moving us away from the industrial-based economy that has dominated the U.S. since the 19th century. Productivity is increasing as companies use computers to find new ways to work more efficiently.
It has also helped decrease inflationary pressures. Reynolds says the Internet makes shopping around easier, which makes for more informed customers, which in turn forces retailers to keep their prices down.
Conversely, the Net also allows sellers to learn more about their customers, making them easier to target with specific discounts and individualized pricing mechanisms.
Selling on the Internet also is redefining how traditional brick-and-mortar stores fit into the retail economy. In some instances the overhead that comes with running a store might be a liability in doing business. On the other hand, local merchants still can benefit because not everyone likes to e-shop. Reynolds says stores are doing well now in an up-beat economy, but that could all change. And hybrids of stores and e-businesses, he adds, might become a trend.
Contact: Stanley Reynolds, UA economics department, 520-621-6224.
TopicsArts and Humanities
University of Arizona in the News