Will e-commerce and e-tailing Prevail?
Bill:There is a revolution taking place in American commerce.
Samantha:More and more consumers are choosing to do their shopping with their computers.
Bill:Whether it's books, CDs, wine, or airplane tickets, whatever you want, you can find it being sold online.
Samantha:But many people are worried about the effect that e-commerce will have on traditional "ricks-and-mortar"<注1> companies.
Bill:And then there are the security and privacy risks associated with shopping online.
Samantha:In this month's Dateline USA, we hear a report on the phenomenal<注2> growth of e-commerce, and what average Americans think about doing their shopping online.
EJ:Hello! Welcome to Dateline USA! America has the largest number of dot com companies<注3> in the world. Wall Street<注4> proclaims<注5> that e-commerce is killing old companies, old economics, and old rules. To help explain this American phenomena<注6>, we'll meet Dr. Kotha, an e-commerce professor. Then we'll visit Amazon.com<注7>, America's largest e-commerce company. Listen to find out more about this brave<注8> new world.
EJ:We'e speaking with Dr. Surash Kotha. He's an associate professor<注9> of e-commerce at the University of Washington in Seattle. Dr. Kotha, is this new e-commerce killing traditional companies?
Kotha:That's a very difficult question to answer. It's yes and no. In some businesses, yes, they are at least affecting<注10> the traditional businesses, and they'e not really killing traditional businesses. When I say they'e affecting, they'e affecting in a negative way. One example would be the travel industry. The margins<注11> in travel industry are already very thin, and here you have a bunch of<注12> e-commerce companies coming in and trying to mediate<注13> between the airlines and the consumers, and airlines themselves are also selling these tickets online. So what's happening there, it's putting tremendous5 pressure on small travel agent<注14>, and many of them are likely to go out of business<注15>.
And the other example would be the financial services industry, and companies like E-Trade<注16> and Charles Schwab<注17> have now become really pure Internet plays. And they'e trying to mediate between the consumer and financial markets, and well-established<注18> companies, like Merrill Lynch<注19>, they'e going to have a lot of problem<注20>; because they have a major channel<注21> conflict, because, uh, for example, Merrill Lynch has 10,000 brokers<注22> and given that many other people are willing to trade themselves, they have to add a lot of value in that value chain<注23> insgroupsto be successful.
So that's what's happening. And obviously the traditional retailers<注24> are also, some of the traditional retailers are also doing well. Examples will be companies that don't have a channel conflict. The Web<注25> is a natural extension of what they already do. These are the direct merchants like L.L. Bean<注26>, Land's End<注27>, who are able to successfully take their direct model and transfer<注28> it to the Web.
The Growth of e-commerce
EJ:Now, how can e-commerce companies be successful even if I hear that they'e losing money?
Kotha:The reason why they'e not successful in the traditional matrix<注29> is, a lot of them are investing<注30> lots of their money, one, in acquiring<注31> customers, and two, in terms of<注32> getting the delivery systems in place<注33>—logistics<注34> and the distribution systems in place. But at some point you have to start making money.
EJ:Is the concern<注35> over privacy and security valid<注36> when shopping online?
Kotha:It is a very valid argument, because what they can do online is, not only they can collect information about you when you give that information, they can also see your behavior online. They can see every move that you make, and some sites, obviously they want you to register<注37> and give an e-mail and they know who you are.
Now, that itself is not very frightening<注38>, but now if you take the information that's available off line<注39> and combine it with your online behavior<注40> —now not only you have all the demographic<注41> statistics about yourself, and now you have the online behavior—when you combine these two, you have very powerful information about what this person does—he or she does online as well as offline, so that's the scary<注42> part.<注43>
EJ:Dr. Kotha, how fast is e-commerce growing?
Kotha:E-commerce, I gave you the numbers—in the last four years—in December alone we had about 20 billion dollars. It was zero four years ago, so it's growing very rapidly—more than 30, 40 percent each year. And that's expected to grow even further in the year 2003; they'e expecting about 200 billion in e-commerce sales in another three or four years.
A Profound Impact
EJ:We'e with Bill Curry. He's the director of public relations<注44> for Amazon.com. How did Jeff Bezos<注45>, the founder<注46>, get the idea to even start Amazon?
Curry:He learned that the Internet<注47> was growing at a rate of 2,300 percent a year, and that . . . as he says, nothing grows that fast outside of a laboratory dish<注48>. So he began investigating<注49>, what were the opportunities in e-commerce that he could bring to the Internet that would really capture<注50> the power of computers and the reach<注51> of the Internet, and create a shopping experience that you can't even get in the physical world.
And so books became an obvious first target. There are millions of books out there. But if you gosintosthe biggest bookstore, you'll only find a tiny percent of that, maybe 100,000. And so only on the Internet and with the power of computers can you offer everyone around the world access to the complete selection—the complete<注52> selection—not just a big selection, but a complete selection of all the books that are available.
EJ:How can Amazon hemorrhage<注53> cash and still be successful? Clue me in<注54>.
Curry:We'e in the investment<注55> phase of our business right now, and there's so much opportunity in e-commerce right now, it would be foolish for us to be managing our business to turn a profit by such and such a date. We would be leaving so much opportunity behind for others that we want to seize<注56> as many opportunities today, and that means investing in businesses.
So while our U.S. book business is becoming profitable<注57>, we'e also building businesses in Germany and the United Kingdom; we'e adding tools. All of this requires investment, so that we can be a leading destination<注58> for e-commerce in the future. In the long term we care very much about profitability.
EJ:Last question, Mr. Curry. Despite the fact that<注59> after five years Amazon.com has not made a profit, why was Jeff Bezos named man of the year by TIME magazine?
Curry:Because there's no correlation<注60> between the profitability of a company at a given moment and its impact on our lives. And I believe the editors of TIME magazine found that e-commerce in 1999 really startedshavingsa profound<注61> impact on people's lives.
When you look at the last three months of 1999, what in America is the Christmas holiday selling season, we saw extraordinary<注62> numbers of people turning to e-commerce to meet their holiday shopping needs.
And so in many ways, 1999 was a year of the popularization<注63> of the Net among Main Street<注64> Americans, and Jeff Bezos has played an extraordinary role in the popularization of e- commerce. And what TIME magazine did was to recognize<注65> Jeff and through Jeff, the contributions<注66> of everyone at Amazon.com, the thousands of people who have built this company, for their impact on e-commerce. EJ:Thank you very much for your time today.
Curry:Thank you for coming by Amazon.com.
Not Worth the Time
EJ:We'e speaking with Jonathan. He's 28 years old and a VP<注67> of marketing. Do you do personal online shopping?
Jonathan:You know, I don't do very much personal online shopping. I have purchased<注68> things with a credit card before, but fairly infrequently<注69>.
EJ:Why is that?
Jonathan:The price difference is usually not that great of a savings<注70> for buying it locally. And the time that it takes to sometimes find the product and deal with entering the informationsintosthe online form, your address and everything, I think the time costs involved with doing it online at home are not worth it to me.
EJ:We'e talking to Bill Horn. He's 48 and a real estate<注71> investor. Bill, do you do online shopping? Why or why not?
Horn:I've done a fair amount of<注72> online shopping, especially around Christmas time . . . and let's see . . . mainly books and . . . from Amazon.com here in Seattle, and did a fair amount of Christmas shopping of toys, books, some music.
EJ:What do you like about online shopping?
Horn:Well, it's convenient<注73> and basically effortless<注74>. For one who hates to shop, generally, as I do, it's a blessing<注75>. No problems so far.
EJ: We'e speaking with Deanne. She's 42 and a homemaker<注76>. Deanne, do you do online shopping? Why or why not?
Deanne:I don't do very much online shopping, and probably because I don't understand what happens. I'm not sure they have the things I'm looking for there, and so I really don't use it very often.
EJ:Now, is security an issue<注77>, or is this just online shopping maybe too ephemeral<注78> for you, or . . . ?
Deanne:Well, it's a little ephemeral, yes, but it's also, I think we do have concerns about security. We'e not convinced probably that<注79> it is completely secure, and the news seems to prove that out<注80> from time to time, so it's hard to take the risk sometimes.