ST. LOUIS — The rise of E-Bay and the increase in consumers who opted to go online to do their holiday shopping have made headlines, but an analysis by the Federal Reserve Bank of St. Louis indicates that the volume of business-to-business e-commerce transactions far exceeds that of business-to-consumer sales.
The analysis was conducted by Emin M. Dinlersoz, an assistant professor at the University of Houston, and Rubn Hernndez-Murillo, an economist at the St. Louis Fed. Their comments appear in the January/February issue of Review, the Reserve Bank's bimonthly journal of economic and business topics. The publication is also available on the Reserve Bank's web site.
Working from the U.S. Census Bureau's "E-Stats Program" (available online at www.census.gov/estats), Dinlersoz and Hernndez-Murillo looked at the diffusion of electronic business in the nation's economy. They documented the extent of that diffusion in three main sectors of the economy: retail, services and manufacturing.
To analyze the evolution of e-commerce, the economists put it in the context of the industry life-cycle, which suggests that industries are like living organisms in that they are born, they grow and they reach maturity. "An initial period during which only a few firms are active is followed by an episode of an escalating, and then peaking, number of firms that leads to a period of mass exit, called the 'shakeout.'," said Dinlersoz and Hernndez-Murillo.
In the case of Internet-based retailers, they found that there has been a rapid development of the two initial phases of the e-commerce life-cycle: an initial increase in the number of firms, followed by a subsequent shakeout. "Although the current share of retail sales from e-commerce is still low," said the economists, "the sector has had high growth rates recently."
In addition, they found that Internet retailers that dominate the market in a certain category of products seem "more capable of expanding operations into other categories, and a vast array of product varieties has proliferated in Internet markets."
Dinlersoz and Hernndez-Murillo's analysis revealed that:
Dinlersoz and Hernndez-Murillo said the data on e-commerce developed by the U.S. Census Bureau so far was encouraging, but they hoped that additional research would provide more insight into the relationship between the Internet and the U.S. economy.
"For instance, new survey questions could be added to the Census of Manufacturers to gather detailed information on plants' use of the Internet," they said. "This practice would allow researchers to better understand the importance of digital inputs in the production processes and how the intensity of usage of such inputs compares to traditional inputs of labor and capital."
With branches in Little Rock, Louisville and Memphis, the Federal Reserve Bank of St. Louis serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. The St. Louis Fed is one of 12 regional Reserve banks that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. As the nation's central bank, the Federal Reserve System formulates U.S. monetary policy, regulates state-chartered member banks and bank holding companies, and provides payment services to financial institutions and the U.S. government.
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