Transparency

The term transparency is used to describe conditions under which information flows freely and important business information is readily disclosed so that it is obvious and easily understood. In the realm of e-commerce, the term transparency can be applied to different aspects of business, including the general concept of fair and honest business practices; pricing; and the degree to which companies can benefit by sharing data without compromising security.

In the area of pricing, transparency can refer to the very basic principle of honesty. If consumers order goods or services online, the listed prices for those goods and services should be all-inclusive. In other words, consumers should not find surcharges or extra fees added onto their credit card statements for purchases. Transparency is an important concept, because the consumer's fear of making purchases online has serious consequences for companies engaged in e-commerce. Although the practice of buying goods and services online was widely accepted by mid-2001, a study conducted by Brigham Young University revealed that many individuals were still fearful of online shopping at that time. For those who were reluctant, the biggest fear factor involved revealing credit card numbers.

Pricing transparency also applies to the business-to-business sector, especially in the area of online marketplaces or exchanges. Online marketplaces are Web sites (both public and private) where corporate buyers can purchase goods and services from a wide variety of sellers. In the early 2000s, such marketplaces existed for many industries, including packaged goods, electronics, chemicals, and food and beverage. These venues gave companies the power to break long-established relationships with local suppliers and more easily seek out the best price, nationally or worldwide. In this scenario, transparency comes in the form of a supplier's price being visible to every other party (both buyers as well as competing sellers). Online marketplaces can lead to increased competition and more uniform prices, and, in some cases, lower prices. According to E-Commerce Times, a report from Morgan Stanley Dean Witter indicated transparency leads to specialization among suppliers seeking an advantage in an increasingly competitive marketplace, and predicted this would "lead to more customization, more choice, and better service."

E-commerce requires the disclosure of information from one entity to another (suppliers to manufacturers, manufacturers to distributors, customers to retailers, and so on). For example, Wal-Mart placed its entire supply chain online for all to see. This form of transparency creates value for trading partners in a supply chain, but also poses potential security risks. Companies that reveal too much data regarding prices and production can open themselves to pressure that may result in reduced profits. Additionally, partners in a supply chain need to be careful about the information they impart in order to prevent the violation of antitrust laws or the revelation of too much company intelligence to competitors.

Despite concerns about sharing details with outsiders, some companies have benefited significantly from this transparent approach, relying on end-users to help them develop new products and services. Microsoft relied on the input of more than 500,000 software engineers to test its Microsoft 2000 operating system. Their feedback was useful in working kinks out of the final product and making it better in many ways. Similarly, the Linux operating system (used as on many Web servers) also benefited from a collaborative developmental process.