E-Tailing

Electronic retailing, or e-tailing, refers to the practice of selling goods and services over an electronic medium like the Internet. Many traditional brick-and-mortar firms like Toys 'R' Us and Barnes and Noble also sell their wares via Web sites. Other companies, such as Amazon.com, rely solely on the Web to conduct business. While books, CDs, and computer software and hardware are the most common goods sold by e-tailers, clothes, cosmetics, perfume, plants, toys, and other types of merchandise also made their way to the Web in the late 1990s.

One of the first and most well-known e-tailers, Amazon.com got its start in July of 1995. Because the business-to-consumer (B2C) model was relatively new and unproven then, Amazon had to develop its own architecture and manage its own site. As online shopping grew in popularity—accounting for $3 billion in consumer spending in 1997 and $7.1 billion in 1998—technology vendors like IBM Corp. moved into e-commerce and began offering to build and even oversee sites for companies wanting to launch an e-tailing venture.

Several e-tailing blunders occurred during the 1999 holiday shopping season. For example, Toys-rus.com found itself ill prepared to handle an unexpected surge in orders and failed to deliver shipments by Christmas day that year. Some analysts believed that the resulting dip in consumer confidence did not bode well for the future of online sales. However, as sites continued to address issues important to consumers, such as the security of online payment via credit card, an increasing number of consumers continued to make online purchases.

Although surveys conducted by Ernst & Young showed that in the year 2000 consumers were not fond of the shipping costs quite often associated with online purchases, they did like the convenience of being able to shop from their personal computer, as well as the wide selection available on the Web. More importantly, concerns about the security of online transactions were waning, perhaps because online shoppers could access watchdog sites like the Better Business Bureau's BBB Online and e-tailer rating service Bizrate.com. These served as resources for consumers to gather information about an e-tailer's track record prior to making a purchase. Many analysts believe the likelihood that consumers will continue to embrace e-tailing as a viable shopping method is high. They point out that although more online shopping takes place in the United States than in any other nation, only 34 percent of U.S. households access the Web, and only half of those make online purchases. While worldwide online spending may or may not reach $40 billion by the end of 2001, as predicted by research companies like Jupiter Communications and Boston Consulting, there certainly appears to be room for growth.