In Traditional distribution, goods and services are passed on from the manufacturer to a broker, to the wholesaler, and then on to the retailer. Every step of this process adds non-value added costs to the product. Non-value added costs are things such as equipment, warehousing, shipping, employee wages and benefits, etc. that do not add to the value of the product.

There is a growing trend to switch from traditional distribution to direct distribution. Direct distribution cuts out as much of the non-value-added costs as possible. Rather than going through a broker, wholesaler, and retailer, customers may purchase products directly from the manufacturer. Internet commerce, otherwise known as e-commerce allows this marketplace transformation to occur.

E-commerce is the tool that will change the face of business forever. Internet traffic is currently doubling every 100 days. In early 1999, approximately 30 million people were online. That amount is expected to be over 300 million people by the end of 2001. The Internet is growing at a rate of about 700% per year according to the US Department of Commerce. In 1998, about 10% of American households had access to the Internet. Already, that number is closer to 25% in 1999, and is anticipated to increase to over 90% by 2001. Obviously, the Internet is experiencing tremendous growth.

In January of 1999, America Online reported total sales of over $1.3 Billion (online) in December 1998. The upcoming holiday season will be an enormous opportunity for businesses offering e-commerce capabilities. Already, the general perception is that a company that does not have an Internet commerce compatible site, is technologically behind. According to Forrester Research, online sales will grow to over $3.2 TRILLION by 2003. Wow!!!

Why is the online marketplace growing so quickly? People can stay at home rather than fight traffic and crowds, and parking, etc. Rather than depending on stores to be open when they want to shop, people can shop anytime they want in "virtual malls". In short, a virtual mall is a shopping mall online, where you cannot physically touch the product, but a description and picture are usually given. Most e-commerce sites offer a 100% satisfaction guarantee.

These sites are convenient for shoppers, and make sense for sellers. A virtual mall may sell thousands of products without the overhead a traditional business must carry.

The Internet represents a technology that will change the marketplace forever. Every major market transformation typically takes place within a nine-year period. Welcome to year number two. There are roughly seven more years left in the Internet boom, before it reaches its threshold of 90% (of US households online, probably shopping online). Businesses with a keen sense for technological revolutions are currently expanding their Internet capabilities. As I type this document, my word processor keeps underlining the word "internet". Apparently it was not in its dictionary when the software was released. But what is the state of Internet in our lives? Almost everyone I know has access to the Internet. Universities are beginning to host classes online. Businesses are conferencing online. The Internet represents a powerful research tool, which allows us to sort through thousands more documents in less time. Is the Internet just a phase in history? I believe it will cause a shift in our lives, particularly in business.

Without going any further, consider some of the recent and developing technological advancements:

• WebTV by Microsoft
  
• Palm Pilot
  
• Internet Pc's
  
• Internet Cellular Phones (expected to grow by 74% each year until 2002)
  
• i-opener by Netpliance Inc.
  
• iPhone by InfoGear Technology Corp.
  
• MailStation by Cidco Inc.
  
• Sony's PlayStation2 with web access and DVD
  
• NetDisplay by Converging Technologies
  

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