Will E-Business Change the Traditional Marketplace?

The virtual-reality marketplace of the Internet is booming with sales. Transactions between businesses are in the tens of billions a year. And retail revenues are also in the billions already. Economic forecasters are predicting that the first annual trillion dollars of sales will be reached in two or three years. If more and more people and businesses start buying off the Web instead of going to stores and offices, what will happen to the value of commercial real estate?
This question came to me most recently near Oakland when I saw a truck (labeled something Van.Com) drive up to a house. Two energetic young men jumped out, went to the rear of the truck and carried two crates of groceries to the front door. I found out that if you order more than $50 worth, they’ll deliver to your residence. No need to get into your car, drive to the supermarket, and fight the crowds, lines, and parking. This new Internet company is undercutting prices at Safeway in some cases.

Turn to the other side of the country 42nd Street in New York City. According to The New York Times, the Hotalings News Agency, whose store sold newspapers and magazines from around the world since 1926, is closing shop. The main culprit, according to the family, is the Internet. Newspapers across the country have put their news and worse, their help-wanted and real-estate ads on the World Wide Web. Foreign papers and magazines are also available online.

Susan A. Carey, who owns the business with her brother, told the Times: “We never had any competition; now the Internet is our competition.” There are already 3,744 newspapers with Web sites, including 1,500 overseas papers.

Hotalings did not close down easy. The store survived the Depression, wars, blackouts, and the longtime decay of the Times Square area. The owners of Hotalings cut expenses, shortened hours (closing at 6 p.m. instead of 9 p.m.), upgraded its premises, and expanded its selections. But the Internet won.

Marvin Cohn, an employee, saw the “beginning of the end,” when people looking for jobs in Silicon Valley stopped coming in to buy The San Jose Mercury News right after the paper started its site.

The switching of customers to the Web sites seems so unstoppable that real-marketplace companies are opening Web sites of their own. This is good news for warehouses and express-delivery companies. But it has to be bad news for malls and Main Street, USA.

Still, few commentators are pointing to this zero-sum situation between real stores and Internet stores. The country is being fed a euphoria bred of these bustling economic times. For example, Internet companies lose money and see their stock skyrocket. Why? Because investors believe that down the line, the Internet is the place to be for commercial supremacy.

Will there be fewer real stores and offices when people and businesses make banking, insurance, real estate, food, clothing, furniture, toys, medicine, and other tranactions from the computer? Will there be less traffic and pollution and time away from the children when people shop on the Web? Will the physical interactions between businesses and individuals decline similarly and reduce the value of their premises and the number of their employees?

I remember when television was supposed to empty the movie houses of America. It did not. But the motor vehicle did empty the sidewalks and the stores next to residential areas. Cars got people to distant shopping centers or cities.

Shifts in physical space are not the same as shifts from physical space to Internet space. The difference may be seen in two-year-old comments by executives at American Airlines and the Bank of America, who called Microsoft their main future competition.

Still, few commentators are pointing to this zero-sum situation between real stores and Internet stores. The country is being fed a euphoria bred of these bustling economic times. For example, Internet companies lose money and see their stock skyrocket. Why? Because investors believe that down the line, the Internet is the place to be for commercial supremacy.

Will there be fewer real stores and offices when people and businesses make banking, insurance, real estate, food, clothing, furniture, toys, medicine, and other tranactions from the computer? Will there be less traffic and pollution and time away from the children when people shop on the Web? Will the physical interactions between businesses and individuals decline similarly and reduce the value of their premises and the number of their employees?

I remember when television was supposed to empty the movie houses of America. It did not. But the motor vehicle did empty the sidewalks and the stores next to residential areas. Cars got people to distant shopping centers or cities.

Shifts in physical space are not the same as shifts from physical space to Internet space. The difference may be seen in two-year-old comments by executives at American Airlines and the Bank of America, who called Microsoft their main future competition.

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