The naysayers are wrong about E-commerce

Summary:When it comes to placing bets, the smart money crowd is usually miles ahead of the rest of us -- and the subject occupying most of their waking hours these days happens to be e-commerce. Are they really on to something?

When it comes to placing bets, the smart money crowd is usually miles ahead of the rest of us -- and the subject occupying most of their waking hours these days happens to be e-commerce. Are they really on to something?

Considering all the hype about the Internet, one might easily assume that e-commerce is about to transform the world. But a new report from the Organization for Economic Cooperation and Development suggests that Internet business will have a much more limited impact on the global economy.

The report by the 24-nation body doesn't offer a call to arms to entrepreneurs around the world. Instead, it says Job No. 1 should be to find out just how much business is actually taking place across the Web.

"You have to ask, just how much more are you going to gain by extending the Internet to the mass market," says an OECD economist named Andy Wyckoff quoted by the Dow Jones service. "We've already got the fat cats online."

I don't know about fat cats but I do know a fat head when I see one.

Given that I'm a card-carrying member of the stick-in-the-mud club, you won't find any gushing from this corner. But Mr. Wyckoff and his well-intentioned associates at the OECD are simply bureaucratically blind to larger forces that are reshaping the way people organize their lives.

To be sure, the absolute volume of Internet commerce still remains a drop in the bucket compared with the amount of total international business. Most folks still use the Web to buy books, CDs and computers -- but that's changing fast. Over the next six months, people will start buying everything from dog food to cosmetics to you name it.

Here are some stats to chew on: Web commerce, which will account for sales of $32 billion this year, is expected to climb to $425 billion by 2002, according to estimates from the International Data Corp. There's a more juicy statistic: Over the same time frame, IDC projects that spending by companies looking to create online businesses will soar from $211 billion to $954 billion.

Of course not everyone has embraced the cyber future with the same alacrity.

For example, the large retailing companies remain clueless about how best to exploit the huge potential of this new channel of distribution. The major media companies like Time-Warner and Disney just don't know how to effectively leverage their weight to parallel their print and television success. And despite baby steps by General Motors, you still can't use the Internet to buy an auto straight from the manufacturer's Web site.

But the people who really matter in this debate -- the high-tech executives and venture capitalists building Internet companies -- are confident the future belongs to them.

I recently spent a couple of days with Internet executives attending a conference sponsored by Softbank Technology Ventures (a VC firm owned by the same corporate parent as Ziff-Davis.) Their bottom line, and this was as 'bottom line' a crew as you'd find, is that the e-commerce train was about to pull out of the station and it was time to jump aboard.

Irrational exuberance? I don't think so. This is the hottest market in the computer business and it's no accident that Softbank received 175 business plans in the last month from entrepreneurs looking for a grubstake for their Internet startups.

Even the old guard is starting to get it (witness GM's baby steps announced earlier in the week about e-commerce). My prediction: The big consumer and media companies will become so fed up getting beaten to the punch by the Yahoo!s of the world that they, too, will get it right by 1999. The alternative is to let the competition pass them by.

While the good gentleman at the OECD sip tea and plan big studies on the import of e-commerce, the ground is shifting under their feet. They might do better to consider the warning offered by Disraeli that there are three kinds of lies: lies, damn lies and statistics.

Topics: E-Commerce, Start-Ups

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