While buying books and music on the Web may be a great convenience for consumers, the biggest impact of electronic commerce will be on business-to-business trade, where the Internet is already revolutionizing the way companies deal with one another, industry experts say.
Forrester Research estimates that business-to-business Internet commerce will rocket to $1.3 trillion by 2003 from just $43 billion last year, accounting for 90% of all commerce conducted over the Internet.
"In the past, companies have focused on improving productivity internally," says Steve Bell, researcher at Forrester. "Electronic commerce is a way of organizing external relationships. There will be huge productivity gains."
Not surprisingly, technology companies have been the first to embrace e-commerce. Santa Clara, Calif.-based networking company 3Com says it plans to conduct 80% of its transactions over the Internet by the end of the year, up from just 30% last year.
Under its new Web-based "supply chain" system linking 3Com to its suppliers, production increases at its factories will automatically trigger expanded orders for cardboard boxes and other supplies, says Eric Sternberg, recently appointed e-business vice president for 3Com. Customers who buy networking products will automatically be sent marketing materials about related products.
The savings to customers from e-commerce can be substantial. RS Components, Britain's largest distributor of electronic components, says one customer cut the cost of obtaining parts to $16 from $90 per transaction by ordering online.
It's not just high-tech companies that are exploiting the Web to buy and sell. Manheim Auctions, which auctions used cars to dealers around the country over the Net, handled $1 billion worth of sales last year. Stock-market-like exchanges have popped up to handle worldwide trade in paper products, chemicals, steel and even food.
E-commerce enthusiasts even suggest that Internet-based commerce could eventually help tame the wild swings between shortage and oversupply, the bane of every economy. Manufacturers, tightly linked with suppliers, will increasingly build products to order, as Dell Computer has learned to do, avoiding the buildups in inventory that typically precede a recession.
While still a novelty to consumers, electronic commerce is hardly a new notion in the business world. For decades large corporations have been connected to many of their suppliers over electronic networks using a system called EDI (electronic data interchange).
