Electronic Commerce, 2007

Defining the Electronic Commerce “Sector”

Electronic Commerce (e-commerce) is global in scope and is deployed in virtually all industry sectors. There are several sub-categories of e-commerce: business-to-consumer (B2C), business-to-business by manufacturers and merchant wholesalers (B2B), government-to-consumer (G2C), and government-to-business (G2B) types of activities. G2C and G2B, or e-government, focuses on delivering citizen-centric services via the Internet that enable the population to file income tax returns, renew automobile registrations, submit a request for a passport, and access and comment on proposed regulations that could affect their lives. For statistical purposes, the U.S. Census Bureau defines e-commerce as the value of goods and services sold online whether over open networks, such as the Internet, or over proprietary networks running systems, such as electronic data interchange (EDI).

E-commerce is widely viewed as having the potential to be a major economic force in driving growth for developed as well as developing countries. Its interrelationship with IT hardware, software, IT and telecom-related services, and the Internet is enabling small and medium-sized enterprises (SMEs) to engage in worldwide marketing and expand their outlook beyond their nations.

U.S. Market Overview

The United States has more than 210,080,067 Internet users as of November 2006, which amounts to a 69.6% penetration rate, according to Nielsen NetRatings. In addition, more than 69,431,802 of these Internet users are broadband subscribers.

Total e-commerce sales for 2006 were estimated at $108.7 billion, an increase of 23.5% from 2005. Total retail sales in 2006 increased 5.8% from 2005. E-commerce sales accounted for 2.8% of total sales in 2006, and 2.4% of total sales in 2005. eMarketer estimates that retail e-commerce sales will increase an average 18.6% per year between 2005 and 2009. That is strong growth, but still a downturn from the 26% annual rate seen between 2001 and 2005. This is not a cause for concern, however, but a sign of a maturing e-commerce marketplace. Still, exciting developments are taking place on the market's edge, where small Web retailers are emerging to meet the needs of shoppers with special needs and interests.

The U.S. e-commerce marketplace is highly competitive and is open to foreign firms with very few exceptions. Foreign companies that wish to use e-commerce as a means to provide goods and services in the United States generally may do so on a cross-border basis, through inward investment, or through portfolio investment.