Tannenbaum Helpern Syracuse & Hirschtritt, LLP
About Us Careers Contact Us Search
Home Practice Areas Industries Case Results Attorneys Publications Events Press Room

Don't Let Your Business Miss The E-commerce Shift

We are right in the midst of what historians will eventually label the "e-commerce revolution." It's bigger than the industrial revolution and every other major economic shift that preceded it. It's changing the way we live, obtain information, buy goods and services and it's shrinking the world.

As Alan Greenspan, Chairman of the Federal Reserve Board recently said, "The newest innovations, which we label information technologies, have begun to alter the manner in which we do business and create value, often in ways not readily foreseeable even five years ago." (I would say really two years ago.)

Some people see it and will profit immensely. Others will miss the boat. The naysayers will look at a recent report by the United States Department of Commerce on the emerging digital economy (the Report) and note that "[a]s a share of the retail portion of the economy, however, e-commerce remains quite small-less than 1 percent."

This is one of those half-full or half-empty perceptions though. The future have-nots of the new electronic economy focus on just how small e-commerce is in 1999. My view is that it's incredible how much e-commerce is a part of our culture considering that 1 percent number. It's a baby and it's taking over. Ignore this trend at your own peril.

The Report also says that information technology-producing industries such as producers of computer and communications hardware, software and services which enable e-commerce, play a strategic role in the growth process. Between 1995 and 1998, these IT-producers, while accounting for only about 8 percent of the U.S. GDP, contributed on average 35 percent of the nation's real economic growth.

Here's some more mind fodder from the Report. In 1996 and 1997 (the last years for which detailed data are available), falling prices in IT-producing industries brought down overall inflation by an average 0.7 percentage points. This contributed to the remarkable ability of the U.S. economy to control inflation and keep interest rates low in a period of historically low unemployment.

This shouldn't come as a surprise to anyone. We've never before seen price drops like we've seen in the world of computers. Fifteen years ago, $3,000 bought a 286 with a fraction of the computing power of today's $3,000 Pentium III. Considering how pervasive computers have become, is it any wonder that this technology has worked wonders on our economy.

Let's put this another way. If we take away computers, the Internet and e-commerce, what we have is the mid to late 1970's.

I can't remember anything spectacular about that period other than going to college. (That was fun, but that's another column.) It was after the glory days of Apollo and NASA. We hadn't won the Cold War yet. Inflation and interest rates were high. The image that sticks in my mind from that era is President Carter sitting in front of a fire, wearing a sweater, talking about national malaise. Oh yes, and let's not forget Ted Koppel counting the days up. "America Held Hostage-Day 235."

Where is the digital economy going? The Report predicts that by 2006, almost half of the U. S. workforce will be employed by industries that are either major producers or intensive users of information technology products and services. It goes on to say that "[i]nnovation has increased demand for high paid, 'core IT workers' (e.g., computer scientists, engineers), created new IT occupations, changed skill requirements for some non-IT occupations, and raised minimum skill requirements for many other jobs. Wage gaps between workers in IT industries and all other workers continue to widen."

What this all means is that if "The Graduate" were made today, Dustin Hoffman, just out of college, wouldn't have been told to think just one word young man-"Plastics." Today, it would be "computers," which you will note contains a lot of plastic. (So, Dustin did get good advice for his era.)

The Proof

If you stubbornly refuse to buy into the idea that e-commerce is big, getting bigger and required for your business, then consider a few examples cited by the Report.

Dell Computer's online sales more than doubled during 1998 rising to more than $14 million per day and accounts for 25 percent of the company's total revenues. During the quarter ended April 30, 1999, online sales rose further to an average of $18 million per day and now account for 30 percent of the company's $5.5 billion first quarter revenues. Dell expects this percentage to increase to 50 percent by 2000.

During the first quarter 1999, Travelocity.com had gross sales of more than $128 million, a 156 percent increase over the same period last year, and registered 1.2 million new members. If you're not familiar with this web service, you should try it. It's my favorite way to make air and car rental reservations. It also does hotels, but the hotel reservation portion isn't as well done as the other parts.

Users of Quicken Mortgage, Intuit's online mortgage provider, arranged for $400 million in loans in the first three months of 1999 compared to $600 million in mortgage loans for all of 1998.

Law Slow to Develop

Unfortunately, a laggard in this e-commerce revolution is the law. It's not unprecedented because the law always develops slower than new technologies.

The problem is that the e-commerce explosion is leaving the law in the dust. The legal questions and ambiguities abound and few lawyers really understand the law that does exist in the area.

The best general advice I can give is since the law is often unclear, make sure that your contracts are that much clearer and better. In other areas, the law can help fill in the ambiguities in your contracts with general commercial terms and precedents. In the world of e-commerce, the law often can't fill-in the blanks for you since the commercial law of e-commerce is still developing. The customs and precedents that future generations will use are being created now.

It's not the Wild West, but the digital world can be a bit unruly. Jump in because it's profitable, but do it well armed with an understanding of the law of e-commerce. While it's new and developing, it does exist and you need to consider it in all your electronic activities..

Click here to download mobile version

Like us on FaceBook Follow us on Twitter Get LinkedIn with us Pin It! Email Us Print this Page

Sitemap | Terms of Use | Privacy | Attorney Advertising

Tannenbaum Helpern Syracuse & Hirschtritt LLP provides legal advice only to individuals or entities with which it has established an attorney-client relationship and such advice is based on the particular facts and circumstances of each matter. Contacting us through this site, or otherwise, will not establish an attorney-client relationship with us. Any e-mail or other communication sent to THSH or its lawyers through this site will not be treated as subject to the attorney-client privilege or as otherwise confidential and you should not include any confidential information in any such communication.