Page 36 - Electronic Commerce

Introduction to Electronic Commerce

single event, but as a series of developments that took place over a 50- to 100-year period.
11
Economists Chris Freeman and Francisco Louçã describe four distinct waves (or phases)
that occurred in the Industrial Revolution in their book As Time Goes By (see the For
Further Study and Research section at the end of this chapter). In each wave, they found
that different business strategies were successful.
Electronic commerce and the information revolution brought about by the Internet
will likely go through a series of waves, too. This section outlines the defining
characteristics of the first wave of electronic commerce. Subsequent sections of this
chapter discuss the evolution of electronic commerce through its second and third waves.
The first wave of electronic commerce was characterized by its rapid growth, often
called a “boom,” which was followed by a rapid contraction, often called a “bust.”
Between 1997 and 2000, more than 12,000 Internet-related businesses were started with
more than $100 billion of investors’ money. In an extended burst of optimism, and what
many later described as irrational exuberance, investors feared that they might miss the
moneymaking opportunity of a lifetime. As more investors competed for a fixed number of
good ideas, the price of those ideas increased. Many good ideas suffered from poor
implementation. Worse, a number of bad ideas were proposed and funded.
More than 5,000 of these Internet start-up firms went out of business or were
acquired in the downturn that began in 2000. The media coverage of the “dot-com bust”
was extensive. However, between 2000 and 2003, more than $200 billion was invested in
purchasing electronic commerce businesses that were in trouble and starting new online
ventures. This injection of financial investment was not reported widely in either the
general or business media, but these investments quietly fueled a rebirth of growth in
online business activity. This rebirth provided another chance at success for many good
online business ideas that were poorly implemented in the early days of the Internet.

The “Boom and Bust” Myth
Despite the many news stories that appeared between 2000 and 2002 proclaiming the
death of electronic commerce, the growth in online B2C sales actually had continued
through that period, although at a slower pace than during the boom years of the late
1990s. Thus, the “bust” that was so widely reported in the media actually turned out to be
more of a minor slowdown than an all-out collapse. After four years of doubling or tripling
every year, growth in online sales slowed to an annual rate of 20 percent to 30 percent
starting in 2001, which is a very high rate of expansion. This growth rate continued
through the recession of 2008–2009.
The 2008–2009 global recession devastated many traditional retailers, particularly in
the United States and Europe. Large Asian economies, such as those in China and India,
were affected less and continued to expand. Around the globe, online sales overall
continued to grow during that period, although at a lower rate than the 20 to 30 percent
annual rates achieved earlier in the decade. As many traditional businesses remained mired
in the aftereffects of that recession, online business activity picked up and was at the
leading edge of economic growth. Online business growth in Asia continued at relatively
high rates throughout the recessionary period, which boosted global online sales totals.
In addition to the growth in the B2C sector, B2B sales online have been increasing
steadily for almost two decades. The dollar total of B2B online sales has been greater than

Copyright 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.