According to a University of Texas study funded by Cisco Systems, Inc., e-commerce in the U.S. skyrocketed 127 percent from the first quarter of 1998 to the first quarter of 1999.
The study, which was released today, also concluded that this unprecedented growth will have a profound effect upon the future of brick-and-mortar businesses.
“It should be evident that a large part of the growth in the emerging Internet economy will come at the expense of the physical economy through a substitution effect,” the study said. “For example, as busy professionals or individuals, who do not enjoy visits to the grocery store, start buying groceries and prescription medication online, there may be a negative impact on the growth of physical grocery and drug stores and as well as significant changes in inventory and distribution systems in these industries.”
Conversely, e-commerce is also creating many new jobs. “Nearly 400,000 e-commerce jobs alone were added in the last year, a 78 percent increase from the first quarter of 1998,” the study said. “That tremendous growth dwarfed other layers (Internet economy). Infrastructure jobs increased by 184,000, or 39 percent. Application layer jobs increased 156,000, or 38 percent, and Intermediary job growth was 89,000, or 25 percent.”
Growth From Mom-And-Pops
Nonetheless, the study pointed out that the Internet has proven to be strikingly similar to the rest of the economy when it comes to the relationship between corporate players and smaller “mom-and-pop” companies. The top ten companies in the study only account for 27 percent of all the Internet revenue.
“This indicates that just like the rest of the economy, major corporations are important — but the bulk of the economic growth and job creation is driven by small businesses,” the report said.
The study also documented that revenue for Internet-related businesses overall rose 68 percent from the first quarter of 1998 to the first quarter of 1999.
This hefty increase will pump an estimated $507 billion (US$) into the U.S. economy, helping to employ about 2.3 million Americans. Comparatively, $108 billion was generated during the same time last year.
Segment Beating Telecommunications
The study also found that the skyrocketing growth of the Internet-related segment of the U.S. economy has generated more annual revenue than such entrenched American industries as telecommunications at $300 billion and airlines at $355 billion.
Additionally, of 3,400 businesses surveyed to measure the size of the Internet economy, more than one-third did not exist before 1996. Those new businesses now employ 305,000 people.
“The fact that the Internet Economy rose so much in just one year underscores that companies are embracing the Internet and that an Internet Revolution is reshaping the economic landscape,” said John Chambers, president and CEO of Cisco Systems.
Dr. Anitesh Barua and Dr. Andrew Whinston headed the University of Texas research team that performed the study.