Business conducted over the Internet is booming, despite the gloom that descended on the sector with the crash in dot-com stock values, according to research released separately Wednesday by International Data Corp (IDC) and America Online Inc (AOL).
Worldwide, users rang up US$354 billion in electronic-commerce transactions last year, a number expected to skyrocket to more than $5 trillion by 2005, said IDC analyst David Emberley.
"The big thing to remember about this number is that it's not driven entirely by B-to-C (business-to-consumer); the majority of this is actually B-to-B (business-to-business)," he said. Some 80 percent of online transactions conducted in 2000 were between businesses, he added, a proportion that IDC estimates will rise to about 86 percent in 2005.
"It's tried-and-true, brick-and-mortar companies going out there and creating marketplaces; it's the big dollars from the large corporations that are driving this," Emberley said.
But even retail spending is continuing apace, at least among AOL users. Subscribers spent an all-time record of $6.7 billion shopping online in the first quarter of 2001, up more than 70 percent over the same period last year, the company said in a statement. Nearly three quarters of AOL's 17 million U.S. users now shop online.
In the coming years, a rapid rise in the number of users outside the U.S. will fuel continued growth in online sales, Emberley said. By 2005, nearly a billion people will be using the Internet, with much of the growth coming in populous countries that have so far had relatively few Net surfers, according to IDC projections.
"There are a lot of areas out there that have always been traditionally slow to get on board -- India, China, other parts of the Asia-Pacific region," Emberley said. "A lot of that has to do with infrastructure problems, technical problems, but it is also due to those societies and their fear of credit-card type transactions. But as that fear breaks down, you've got powerhouses that can drive growth."
While the U.S. today leads the globe in Internet use, accounting for 34 percent of surfers worldwide in 2000, Europe and the Asia-Pacific region will rapidly pull ahead, leaving the U.S. in third place, he said. The U.S. share of the world's e-commerce, 46 percent in 2000, will drop to 36 percent in 2005, more in line with its position in the offline economy.
In a similar report released last month, Forrester Research Inc. estimated world e-commerce trade at $657 billion, projecting a growth to $6.8 trillion in 2005. Emberley said his company's more conservative figure is due to a stricter definition of e-commerce.
E-commerce, according to Emberley, is defined as "the process by which an order is placed or accepted via the Internet ... therefore representing a commitment for a transfer of funds in exchange for goods or services." The term does not include orders placed by fax or e-mail, even if the e-mail system uses the Internet, he said -- though e-mail transactions sealed with a digital signature would count as e-commerce.
IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.