Macroeconomics Aspects of E-Commerce

Background

E-commerce predates the Internet by decades. Firms began investing in electronic data interchange (EDI) systems in the 1960s. Designed to improve business-to-commerce (B2B) transactions, these systems allowed for better inventory management, reduced transactions costs, and improved communication between suppliers and purchasers (Banerjee & Gohlar, 1994). The propagation of EDI technology was relatively slow. National initiatives in the U.S. and Europe to standardize EDI systems did not begin in earnest until the mid-1970s. An international standard, the Electronic Data Interchange for Administration of Commerce and Trade (EDIFACT), was adopted by the United Nations in 1987 (Graham, Spinardi, Williams, & Webster, 1995).² By 1990, transactions by EDI accounted for only five percent of U.S. business transactions with the majority of users representing large manufacturing firms (Banerjee & Gohlar, 1994).

The development of the Internet provided additional opportunities for firms to invest in ICT to improve B2B transactions. By 2002, e-commerce composed 16 percent of B2B transactions in the U.S. (U.S. Census, 2004). More recently, U.S. B2B e-commerce activity totaled $4.8 trillion and accounted for 38 percent of all U.S. B2B transactions and more than half the B2B in the manufacturing industry in 2012 (U.S. Census, 2014). Although large in the public’s eye, business-to-consumer (B2C) transactions traditionally represent a small (albeit growing) share of e-commerce activity. As a percent of total e-commerce activity, B2C sales increased from 7.4 percent in 2002 to 11 percent in 2012. In the latter year, retail B2C e-commerce sales totaled $593 billion dollars or 3.6 percent of total B2C sales (U.S. Census, 2004, 2014).