What's New on the 'Net:
E-Commerce - Business on the Web
Robert D. Duval and Rebecca Barrett-Duval
E-commerce. This particular piece of Internet jargon is perhaps the major buzzword for the start of the millennium. It connotes a new frontier for business and entrepreneurial endeavor, with every bit of the riches and lure of wealth of the California gold rush of 1849, or West Virginia's oil boom in 1860. "Thar's gold in them thar websites!"
The issues that arise with an examination of this topic are somewhat different than the policy issue areas we have examined in previous "What's New on the 'Net" articles. As a result, we examine this topic in a slightly different manner. We forego the lengthy lists of Web sites offering a wealth of information. Instead, we cover selected topics with some representative Web sites that are of interest to or concern e-commerce. We also address several significant policy issues concerning e-commerce. Finally, we provide examples, somewhat arbitrarily selected, of Web sites that are engaged in e-commerce.
The Nature of e-commerce
E-commerce manifests itself in several ways. We omit the Web's most obvious use for e-commerce - advertising. Instead, we focus on sites where the conduct of business occurs.
First, there are some e-commerce sites that are natural extensions of those businesses' normal commercial operations. Please note as we proceed that the nature of this article requires that we mention and discuss a number of e-commerce sites. The mention of and link to any and all of the sites listed in this article in no way endorse products or organizations, but are used only as examples of e-commerce Web sites. For example, there are plenty of quality pizza parlors in the marketplace. Papa John's was simply the first one that we found that has a Web-based ordering system.
Papa John's Pizza
Order On-line
This Web-based pizza-ordering page provides a new way to accomplish food service delivery. Businesses such as these typically maintain normal business operations, and continue to have local or regional facilities with storefront operations.
Many large retail establishments have also added extensive Web shopping sites.
Sears
JC Penney's
Wal-mart
http://www.walmart.com/estore/pages/pg_g1.jsp
K-Mart
Most large department stores now have on-line catalogs. You can often find the appropriate Web site by putting the store name before the .com part of the standard Web address.
Other e-commerce sites are extensions of traditional mail order or catalog sales organizations. Perhaps Sears should also be listed here, but they abandoned their long running catalog sales division a number of years ago. The Web has since led them to re-enter the business with their Web-based catalog. These organizations simply use the Web as an additional vehicle for their traditional catalog sales. Most of them do not maintain walk-in storefront operations as part of their regional, national, or even global sales operations.
L.L. Bean
Land's End
http://www.landsend.com/cd/frontdoor/
Computer Discount Warehouse
Lillian Vernon
Once the web page has been developed, the distribution costs of on-line catalogs are exceptionally marginal. In addition, updates, corrections, and future innovations now cost less than traditional mail order catalogs because the entire site does not need to be reprinted, as would a print catalog. Corrections, additions, and other changes can be updated instantly, and continuously. The mail order component of many of these enterprises was in place well before the World Wide Web. The Internet provides an alternate means of distributing product information and collecting sales requests. Putting a business's catalog on-line is a very cost-effective means of delivering information. For these sites, the added benefit of on-line payment makes them much more efficient.
As perhaps the archetypal e-commerce mail order Web site, we need to include
Amazon.com
Amazon is one of the most widely known Web commerce sites. Its success and visibility has prompted many businesses to follow suit. It is now one of the largest book sales companies in the world, and has only been in existence for about five years. It is quite interesting and instructive to watch Amazon because it started out as a book seller and has since added CDs, videos, toys, tools, kitchen supplies, and even new cars. This is an interesting development. Is there anything Amazon won't sell?
There are also e-commerce sites that are completely Web-based. These sites developed as a result of the Web, often engage in a Web-related activity, and would likely not survive independent of it. Many consulting companies and individuals doing business via the Web conduct their business in this fashion. Understanding this form of e-commerce works best with some examples.
Suppose, for example, that a West Virginia company needs to hire an individual or organization to develop a set of Web pages to promote a certain aspect of their business. If no local individuals or businesses meet their needs, they can search the Web for a consultant to hire. To do this, the company would choose a search engine, such as Alta Vista or Lycos, and search for Web page consultants.
Alta Vista
Lycos
After supplying several key words, such as "West Virginia" "Web Page" and "consultant,"
in the search fields, a number of sites are displayed, with many pages to search through.
This points to one of the very interesting aspects about e-commerce: the Web levels the playing field for both large and small organizations by providing information about all of them. Small independent entrepreneurs and large corporations can both emerge out of the same search engine procedures. Web page skills will influence search engine ordering, but the sites will all be there. Searching the Web is much like searching the Yellow Pages, except that the listings are not always organized very well. They do, however, have much more content in their listings than telephone books provide.
Of all of the sites one could list under this category, the one which truly stands out is
Ebay
Ebay Main Categories
http://pages.ebay.com/buy/index.html
Ebay is the premier on-line auction service, the epitome of Web-based enterprise. Auctions typically are either
professional regional sales of specific commodities or farm produce or, more frequently, the local sale of products
by individuals liquidating estates, businesses, or property. Until the Web, it was not practical to think of auctioning
goods to more than a local or regional market. Ebay changes this. You can auction anything on Ebay, and find almost
anything to buy. Their market is global. Ebay's auctions epitomize the maxim that something is worth what you pay
for it, and what you can sell it for, because the marketplace for items on Ebay has become truly global in a few
short years. The reader is encouraged to explore the listings of items for sale at Ebay to get a feel for the volume
and vitality of this market.
There is a rather profound component to e-commerce exemplified by on-line auctions. When the auction has a very large number of participants, the market contains much more information about the products for sale, and their true market value. The market is no longer just the people that come by your garage sale on a Saturday morning. Items sold find their appropriate equilibrium price because of the volume of potential buyers and sellers. This is market dynamics in its best and purest form. Ebay provides both the consumer and the producer much information about market value. In this one area alone, the Web shows itself to be characteristically different. The costs of collecting this information have dropped tremendously. It is here that the Web will change the world. We just can't say how yet!
Issues in E-commerce
E-commerce has indeed become a significant area of entrepreneurial endeavor. As such, there are many areas of interest and concern. A survey of these features will help us to understand it much better.
First, business conducts itself differently on the Internet. E-commerce pays little heed to either geography or normal social, face-to-face interactions. The fact that the organization's physical location may be 1,000 miles away, or even on another continent, is not critical to the commercial decision. Sales and distribution of goods via e-commerce generally do not need branch or district offices.
In addition, business is not conducted with a handshake, but rather a mouse-click. Conversation carries many nuances and connotations that cannot emerge on a computer display of a Web page, as they are likely to do in personal interaction. As a result, commerce on the Internet can have an information delivery problem. Customer relations on the Web are not built upon the sales representative's personal characteristics. The brunt of the information delivery must come from the Web page or catalog display. The only contact one has with a human being in the entire exchange is when the package arrives at the door.
This leads to an interesting aside. Because Web-based businesses do not have to be local, both shipping and the tracking of shipments are certain to have a growing impact on the national economy.
United Parcel Service (UPS)
UPS Tracking
http://www.ups.com/tracking/tracking.html
Federal Express (Tracking on main page)
U.S. Postal Service (Tracking on main page)
These organizations are likely to experience growth with the expansion of e-commerce.
E-commerce provides a commercial medium that is substantially different from traditional commerce, in that it is both information rich and information poor at the same time. A large volume of factual information can be provided at very low cost. The detail and depth can be substantial. Yet, the part of commercial sales that relies on intangibles such as reputation, personal testimonial, and professional sales experience is missing.
The tradeoff requires us to choose which type of information is more important to us. You can go to Amazon.com and play a track or two from a CD you would like to buy, and read a few reviews of some books in which you are interested. But you can't ask your trusted local salesperson about this or that book. Thus, the Web can provide information necessary to make an informed purchase, but that information may not be as complete as the information that can be provided by local merchants.
One of the major elements required for e-commerce to function successfully is a secure, on-line payment system. The credit card industry has provided a ready payment system:
VISA
MasterCard
American Express
http://www.americanexpress.com/homepage/personal.shtml
Discover
However, some still question the security of using credit cards on-line.
Privacy and Security
Two highly related issues of central concern are privacy and security. Many individuals are concerned that information about their purchasing practices might be disclosed to others and used against them. For example, a stereotypical concern is that insurance companies might use information concerning the purchase of cigarettes or alcohol to cancel health insurance policies. This can even be taken to the extreme, where insurance companies could purchase grocery store sales records of customers using 'preferred customer' cards, and monitor their diet quality for, say, cholesterol.
Digital Certificates, Signatures, and Encryption
Privacy and security concerns have given rise to the use of digital certificates and signatures. A digital certificate, or signature, is a code that can be attached to an electronic document to encrypt data and verify the sender. Servers that advertise that they use Secure Sockets Layer are saying that they use digital certificates to encrypt the data transmitted over the Web.
The standard for digital encryption requires the use of a public key along with a private key. Both of these keys are large numbers that encode the signature or Web-based form information. There is a mathematical relationship between the two numbers such that if you receive a document encoded using the private key, you can decode it using the public key. This is very handy for confirming the sender's identity. You can also encrypt something with the public key, and send it back to the sender, who can decode it with the private key. The possessor of one key does not need to know the other key.
While it is conceptually possible to decrypt the private key, it is essentially impractical given the tremendous computing resources required to crack the coding system. Thus, with digital certificates, we can send e-mail for which the recipient can feel completely confident that the sender's identity is indeed correct, and that the data sent has not been intercepted and misused. A Web-based form might be intercepted, but the encrypted information will be unusable to anyone not employed by the National Security Agency.
Credit cards provide a fairly easy way to purchase products over the Web. With properly secured servers, your credit card information is as safe as it is at a retail outlet. One important hint: make sure that your Web browser (e.g., Netscape or Internet Explorer) shows a small padlock at the bottom status bar on the screen. When this lock is locked, the data on the page will be encrypted.
Digital signatures are small, encrypted packets used to secure e-mail. The e-mail is not encrypted itself, but the digital signature can verify that the user is indeed who he or she says she is. Anticipate that these will soon become much more popular. Congress recently passed legislation allowing digital signatures to be as legally binding as handwritten signatures. And, they are immensely more difficult to forge.
The American Bar Association has provided an extensive set of guidelines for digital signatures.
Digital Signature Guidelines Tutorial
http://www.abanet.org/scitech/ec/isc/dsg-tutorial.html
Internet Law and Policy Forum
Survey of International Electronic and Digital Signature Initiatives
http://www.ilpf.org/digsig/survey.htm
Netscape's How SSL Works
http://developer.netscape.com/tech/security/ssl/howitworks.html
Because most browsers use an encryption technology developed by RSA Security Systems, a link to their e-commerce
site is provided.
RSA Data Security, Inc.
Data encryption and certificates are certainly part of the jargon of today's e-commerce tech shops, but the issues
are worth some attention even from those of us who simply wish to shop.
Domain Names
No property of a business establishment is as important to it as its name. So, one area of great concern is Web site name registration. If you want to set up your own Web site, it must be on a server somewhere. For example, you might be established on your Internet Service Provider's Web site. This puts your business name on the end of their address. For instance, C & B Lamp Glass has their Web site hosted by Pinnacle Mall, a Web Hosting service and e-commerce site.
Pinnacle Mall
C & B Lamp Glass Co.
http://www.pinnaclemall.com/cnb_lampglass/
But, as the Web has expanded, most businesses have moved away from piggybacking their name on someone else's site. Most businesses want the name of their business either the same as, or at least included in, their Web name. Hence, e-commerce establishments often want to register their own name as their domain name. The domain name is the name that translates to the four number Internet Protocol address. The original domain name registration was handled by InterNIC, an organization set up by the U.S. Department of Commerce to handle name registration on a site hosted by Network Solutions, Inc
InterNIC
Network Solutions, Inc.
http://www.networksolutions.com/
The Accredited Registrar Directory
http://www.internic.net/regist.html
There are other agencies licensed to register domain names.
The Accredited Registrar Directory
http://www.internic.net/regist.html
You can also search to see if your desired domain name is in use.
Registry Whois Search
http://www.internic.net/whois.html
Domain registration costs vary (typically $30 to $35 per year), and are usually good for a fixed period of time,
usually one to two years. They may be renewed, but if a business has a good domain name, forgetting to renew the
registration could be an exceedingly costly mistake. Some businesses were simply astute enough to get there first.
Take for instance:
Rx.com
Loan.com
Pets.com
books.com
This last one is an example of using an alias, along with multiple domain names, to get traffic to your site. This
Web address sends you to
Barnes & Noble
and
All three of these Web addresses direct the browser to Barnes & Noble's Web site. Even the browser that is not aware of the company is likely to find it because of the premium domain name. If you simply say, "Where can I order a book on the Web?" you are walking into Barnes & Nobles' front door.
Domain names are truly a valuable commodity. Indeed, a casual look at that paragon of e-commerce, Ebay, reveals that the sellers at least believe that domain names are very valuable commodities. Asking prices in excess of $1,000,000 appear frequently on this virtual auction block for such names as e-cellular.com or clickandlook.com.
Ebay (Search for "domain names")
Spam
Spam is junk mail. Unlike junk postal mail, spam costs the sender nothing. Sending out a million e-mails costs little more than sending out one. Even bulk rate postage is expensive at this level of magnitude.
Spam is essentially unwanted solicitation for sales or services. Much spam is of the chain letter variety, offering get-rich schemes much like pyramid schemes in securities fraud. This sort of spam is not only a nuisance, it is illegal. We suggest that you never forward any such solicitations that you receive.
Spam is an inevitable part of living on the 'Net. If you provide your e-mail address to any Web page, you may end up on a mailing distribution list. If you send mail to any of the thousands of newsgroups, you may end up on a spam list. If you subscribe to a mailing list service for some desirable product, you have no control over that organization's distribution of that mailing list. Spam is simply part of the package, although there are regulatory remedies for particularly intrusive spam.
There are many sites concerning spam. One site of interest to e-commerce is the
Center for Democracy and Technology
Legislation affecting the Internet
http://www.cdt.org/legislation/
This site monitors federal legislation that can affect standards for privacy, encryption, domain name registration, digital signatures, spam, and security.
Privacy
Privacy issues are a major concern on the Internet. As mentioned earlier, consumers want to protect themselves from the misuse of sensitive or proprietary information that they might provide in the course of a business transaction. For instance, a consumer might be willing to provide a telephone number on-line, but another might not because they are concerned that the number will be provided to telemarketing organizations.
The Platform for Privacy Preferences (P3P) is a software solution being suggested. P3P allows the browser to set policy preferences concerning the individual user's desired respect for privacy. Web sites participating with this platform conform to a set of standards determined by each user, and communicated with the site prior to any exchange of information.
There are many sites interested in improving e-commerce, and working to establish privacy standards.
The BetterWeb Program
http://www.pwcbetterweb.com/betterweb/
Electronic Commerce Modeling Language
E-Commerce and Local Government
E-commerce is a relevant topic for state and local officials for several major reasons:
• It may be a source of revenue via taxation.
• It may require regulation.
• It may attract economic development.
• It may be a desirable way to conduct government contracting and purchasing.
This is a new area for governments and, as such, the dust will not settle for some time. Yet, along with its new technologies, there are many legislative innovations being tried. Revenue concerns tops the list.
The Internet Tax
One of the major areas of interest and concern about e-commerce has to do with taxation. Sales made across the Internet, like mail order purchases, are generally not subject to state imposed sales taxes as long as the purchaser resides in a different state than the seller. While mail order commerce has enjoyed this privilege for many years, the growth in e-commerce, or at least the growth in talk about e-commerce, has created great interest in this tax policy. Local governments concerned over the loss of local sales tax revenues as purchasing migrates to the Web may seek to recoup their losses by seeking to tax these transactions.
There are several governmental sites that address this issue in some detail:
National Governors' Association
National Conference of State Legislators
Council of State Governments
National Association of Counties
NACo press release on the Internet Tax
http://www.naco.org/pubs/releases/9-14-99.cfm
National League of Cities
NLC: 2000 Action Alert - #1 priority
http://www.nlc.org/act-agda.htm
U.S. Conference of Mayors.
USCM: E-Commerce and the Digital Divide
http://www.usmayors.org/uscm/news/press_releases/documents/newmexico052600.htm
The dispute centers over whether states and local governments have the right to impose taxes on purchases outside their jurisdiction. Is the tax imposed on the seller at the point of sale, or at the point of delivery? States may still impose an Internet sales tax if it is imposed in the same manner as mail order purchases.
Congress passed the Internet Tax Freedom Act in 1998, proving a three-year moratorium on the imposition of the Internet sales taxes. Some argue that the moratorium should be continued, while others argue that the moratorium should be lifted.
Representative Chris Cox's Internet Tax Freedom Page
http://www.house.gov/chriscox/nettax/
Fight Internet Taxes
The Internet Tax Fairness Coalition
http://www.nettaxfairness.org/
The 1998 Act also set up the Advisory Commission on Electronic Commerce.
Advisory Commission on Electronic Commerce
http://www.ecommercecommission.org/
Report to Congress
http://www.ecommercecommission.org/acec_report.pdf
Needless to say, most owners of retail sales outlets feel that e-commerce sites have an unfair advantage in the
marketplace. There are also sites that want equality of treatment. Since they do not articulate positions advocating
the use tax, one can presume that repeal of the sales tax would be an acceptable policy option for these entities
as well.
E-Fairness
The Internet tax is an area that will see substantial legislative debate in the next decade. The stakes are high
in this arena, and both commercial interests and governing bodies have strong claims and compelling interests.
This is what politics is all about.
Regulation and Legal Issues
There are many legal issues that arise when considering e-commerce. For instance, does the commercial enterprise incur a criminal or civil liability in the case of computer hacking? Consumer protection laws, and the relevant regulations on mail order and telephone sales, apply to e-commerce as well as mail order businesses. Also, Web business sites fall under various rules for determining jurisdiction. A Web-based company in West Virginia can find itself being prosecuted in another country due to differences in business practices there. Also, decency standards differ from country to country and from community to community. Who has jurisdiction is not always easy to determine. Anyone interested in creating an e-commerce site will have to follow these issues closely.
News and e-commerce Guides
There are many commercial sites for e-commerce news. As is befitting the subject, it is difficult to distinguish which sites are information providers, and which are advertising for service oriented e-commerce entrepreneurs. A few sites do emerge as invaluable resources, though.
E-Commerce (from the law firm of McBride Baker & Coles
http://www.mbc.com/ecommerce.html
About.com
About.E-commerce
http://ecommerce.about.com/smallbusiness/ecommerce/
E-commerce 101
http://ecommerce.about.com/smallbusiness/ecommerce/library/bl101.htm
There is much to learn and watch concerning e-commerce. It is already a vital part of our economy, and it will generate much discussion and interest for some time to come. The face of global culture is going to change as a result of the large-scale impacts of this means of doing business. We cannot say where things are headed with any confidence, but we know that they will not be standing still. So, stay tuned.
The next issue of "What's New on the 'Net" in The West Virginia Public Affairs Reporter will examine information from an entirely different perspective - the provision of free information on the Web. We will examine reference materials available on the Web. If you have, or know of, sites that you would like to have listed, please let us know.
Robert D. Duval Rebecca Barrett-Duval
bduval@wvu.edu rduval@wvu.edu
_____________
Robert D. Duval is an Associate Professor of Political Science at West Virginia University. Rebecca Barrett-Duval is a social research consultant based in Morgantown. In addition, they serve as Resident Faculty Leaders at West Virginia University.