In the past three decades, the approaches and issues on E-commerce have been radically changed, not only because of the technology disruption in the way to do business but for the new challenges for companies, governments, and international organizations to meet the consumer’s habits and necessities. This essay aims to compare and contrast four articles, two of them, E-Commerce: Impacts and Policy Challenges  (Coppel, 2000) and The Global Course of the Information Revolution: Recurring Themes and Regional Variations (Hundley, R. Anderson, R., Bikson T., and C. Neu, R., 2003) written in the E-Commerce’s early stages, and the other two, The Role of Digital Platforms in the collection of VAT/GST on Online Sales. (OECD, 2019) and

Unpacking E-Commerce: Business Models, Trends, and Policies. (OECD, 2019) recently published; the similarities and differences founded in the articles provide elements to determine how big the change is in E-Commerce challenges and perspectives.

E-Commerce challenges

After three decades of existence still, no uniform definition of E-commerce, many authors and international agencies have their own designation, characteristics, and elements; in 2011 the Organization for Economic Cooperation and Development (OECD) defined E-commerce as the sale of purchase of goods or services, conducted over computer networks by methods specifically designed to the purpose of receiving or placing orders (OECD, Unpacking E-Commerce, 2019, p.14), this definition gives more weight to the way to order the merchandise instead of the purchased product’s characteristics, the parties, the method of payment or the delivery means. 

The U.S. Census Bureau complements the elements to be accounted for, like the price and terms of sale negotiated by electronic means as of Internet, email, or website.  Once the definition is proposed, the following issue for researchers is the measuring methods, since the majority of statistics does not include the manner of sale, many online transactions are treated as domestic and customers or never reported; the tendency is to underestimate amounts especially in cross-country dealings.

In the 1990s, the Internet has less than 3 million users worldwide, and e-commerce wasn’t even a thought for thriving businesses. In the late 1990s, approximately 250 million users accessed the Internet, about one-quarter of them made purchases online from e-commerce sites worth $110 billion. According to Hundley (2003), the economy and social developments of the U.S. and Canada are in favorable positions to do well in the “information age.” This position is due to their physical infrastructure, highly educated populations, trained I.T. professionals, supportive of risk-taking, with deeply rooted entrepreneurial cultures. These countries are countries of immigrants, and they are talented, intellectual, and highly competitive individuals from around the world. North America will exploit these advantages to continue the rise of success in the information revolution era. “Creative Destruction” will increase the developments with the addition of electronic commerce by the continued formation of I.T. business.

In the early 2000s, the Dot Com Crash and Telecom Implosion slowed E-Commerce in North America. History has shown that a crash in this information age has slowed investments in New IT-related businesses. While working their way up the ladder again, it would have to be a time of growth for new technology-driven industries. September 11, 2001, lead to increased government of North America. Terrorist attacks caused awareness of cyberspace security issues, which includes a broader range of attack mechanisms and targets, including cyberspace mediates attacks on businesses and financial goals and critical infrastructures. There is more attention to improving the design, implementation, and operation of I.T. systems and networks. (Hudley, 2003, p.73)

Hudley (2003) highlights some stressors for North America that will generate challenges generated by the information revolution. The strains include high economic and social disparities due to the digital divide between information rich and information poor. There will be an end to old companies producing old products and services. Also, challenges to individual privacy that transfer personal information into data basses, accessible to the Internet, and human activity surveilling. The ways the stress and challenge can be successful is according to the culture. If the culture is open to change and viewing the digital era as an opportunity instead of a threat. The labor market will create jobs at faster rates than the disappearing of employment, being open to the constant change of jobs, as well as differences in income, seeing things like equality of opportunity rather than equality of outcome. Finally, allowing the loss of privacy to benefit the personalized products and services of the individual.

It’s not easy to measure how widespread e-commerce is, two factors that can be measured at an international level include internet hosts and secure servers. The largest share of e-commerce is between Business to Business (B2B), because it is expected to experience faster progression than a business to consumer (B2C) for the next two years.  The progression in B2B sales is correlated to the fast migration of supply chain management from expensive networks toward the Internet. This is also maintained by the potential for businesses to capitalize and deal directly with suppliers and lower purchasing and inventory costs all by promoting efficient and effective online customer service. In certain territories e-commerce sales have accomplished a significant level of infiltration with the internet accounting for over one-quarter of share trades in the United States. According to Coppel (2000, p. 4) has shown that B2C e-commerce in the U.S. and Europe accounts for two percent of equity brokerage services and sales of computer hardware and software, books, music, and videos. Therefore, goods and services that can be digitized and delivered through the Internet are increasing at a faster rate and have a large potential to gain a sizable share of the overall market. (Coppel, 2000, p.8)

Another difference is, the main territories for B2B transaction are motor vehicles, shipping, chemicals, industrial and high technology machinery, with a rising number of businesses that are integrating their supply chain through the Internet. Revenue, education, age are important factors influencing profile of internet users and B2C e-commerce buyers. There are broad patterns of usage, but two differences are the age profile of the internet users and the number of users which make online purchases. Business use of the Internet shows the differences with usage are higher with larger firms than smaller ones and are differing widely depending on the sector in which firms they belong to. Technological innovations have triggered the swift increase in population of internet users and commercial application. With the addition of regulatory reforms and the broad, the competition in telecommunications has decreased the cost and enhance the quality of internet access. There are differences worldwide in the number of internet users relative to the population linked to phone access costs. (Coppel, 2000, p. 9).

The pricing internet access will likely change in order to access the Internet in faster devices. One of the main challenges is cheaper access to telecommunication networks. The benefit for internet shoppers in developing countries with unmetered local calls is the opportunity to browse and purchase without having to worry about being worried about per-minute charges. The disadvantage is not charging for the length of connection to the network that can create congestion of problems and reduce the profit of e-commerce. B2B commerce depends on high speed leased lines that attract online users. In contrast, for households, the cost of internet access is usually higher in countries where binding telecom firms continue to dominate (Coppel 2000, p. 11).

E-Commerce and Public Policy

Governments and international organizations have an enormous challenge to create policies according to new issues generated by E-commerce; The OECD report, Unpacking E-Commerce (2019) pointed five areas as the most essential defies for policymakers: Consumer protection, taxation, fair competition, international trade, and environmental protection; in all of these areas is imperative to have global agreements, in order to reach a consensus about definitions, approaches, and rules.

The most urgent to resolve in today’s E-commerce is the protection of the consumer’s personal data, especially when hundreds of companies offer “free” apps to gain access to the user personal information like passwords, preferences, and identity; children and seniors are the most vulnerable sectors and needs extra protection; the terms and conditions of service must be transparent and understandable for the average person, and consumers must have protection to their rights, particularly to international transactions, since trust in online services is essential to the e-commerce. (Unpacking E-Commerce, p.19)

Like in the real world, the electronic commerce majority of transactions occurred between merchants and customers, more than two-thirds of all sales are made using marketplaces like Amazon, eBay, Alibaba or AppStore; making difficult to the national governments to collect taxes; that is the main reason why the Organization for Economic Cooperation and Development (OECD) support the idea of collect taxes making the digital platforms liable for the Value Added Taxes (VAT) and Goods and Services Taxes (GST).   The authors of the report The Role of Digital Platforms in the Collection of VAT/GST on Online Sales (2019, p.9) defined digital platform as the business that enable by electronic means the interaction between buyers and sellers using the platform in a meaningful way by a direct communication; facilitating the access to the global market, particularly to small business.

The change of consumer habits, from buying in local stores to digital platforms, has brought new challenges for national governments, anxious to have a share of the USD 4.5 trillion electronic commerce market. The most critical problems related to tax collection are the trade on low-value items managed for parcel services and the trade of services and intangibles (The Role of Digital Platforms in the Collection of VAT/GST on Online Sales. 2019, p.14) The recommend OECD approach is to consider the digital platform as a “store” and therefore, responsible for retaining or collecting the sales tax and paying it to the correspondent government.

While there is great growth in e-commerce, there are some legal challenges that hinder its full potential. The digital world makes it tougher to determine the contracting parties. The solution would be to provide an operator that complies with a legal obligation and supervisory routines. There is uncertainty on how to control information to certain individuals and if they follow the laws of international governments. Technological problems may arise when consumers have concerns about privacy, security with credit cards, and even making sure their product is delivered in one piece, consumer protection, taxation compliance, protection of property rights, and protection to minors, honesty about their goods being less expensive than traditional retailers. (Coppel, 2000, P. 14)

Consumption taxes collected on the principle at the place of consumption and depending on the rate standard to that country, state, or nation. E-commerce can erode the application of domestic and national tax rules and will affect (VAT) systems. The Internet could raise aggregate demand and will raise additional macroeconomic policy. Higher share prices and lower cost of capital can also raise investments. There may be a short-term risk from the macro-economic policy, but if it raises the demand, it will outstrip that in supply, which could lead to inflation (Coppel, 2000, p. 20).

Coppel (2000, p. 17) states that start-up businesses will not thrive as much as known businesses due to large marketing costs needed to expand visibility and brand name. E-commerce is predicted to be the death of tax bases; however, on 2015 a critical change in taxation policies was approved by the OECD, since in the recent past, the VAT was paid by the seller to the consumer’s foreign government creating registration and compliance problems to sellers and issues of collection and identification to the governments and now, with the new agreement, radically changed the approach to taxation since the new general policy is to charge the tax to the final consumer, in this way the labor of transaction’s identification and tax payment is easy for the tax authorities.

Twenty years ago, when the e-commerce was in a development stage, many countries except the tax payment for small goods trade online; at the time the percentage of this kind of transactions was minimal; however now online sales exceed in-store sales, according to the Census Bureau’s advance estimates of U.S. retail and food services sales for February 2019, adjusted non-store (meaning online) retail sales totaled $59.77 million, or approximately 11.81 percent of all monthly retail sales, during the same period, adjusted in-store general merchandise sales totaled $59.74 million, or about 11.8 percent of all monthly retail sales.

In contrast of the past tax exception policies, many countries now following the OECD recommendations and have implemented legislation that imposes liability on digital platforms, forcing them to collect and pay sales taxes to national governments; the endorsement is to make the platform fully liable VAT/GST, however, the tax authority must consider limiting the platform responsibility when the company acted by good faith and practicing compliance plan. To be successful in the VAT/GST collection, the international cooperation is indispensable; the Multilateral Convention on Mutual Assistance in Tax Matters, provides assistance and administrative tools for combating tax evasion, especially in markets without in-country presence.

Conclusion

Doing business in today’s world requires presence and understanding of E-Commerce, if twenty years ago only the innovators and risk-takers had online presence and the challenges were how to reach more consumers, increase the consumers trust in electronic transactions and ho to low the internet access and device prices to make more attractive the e-markets,  in contrast, in 2020 the challenges are the protection of private data and how to collect taxes for the multimillion online market effectively.  

The significance of this paper is the use of comparing and contrasting researchers’ articles as an academic tool to approach the E-Commerce issues and challenges with historical perspective and better understand the development of one of the most important matters in today’s business management and public policy.  The limitations of this study are the limited number of sources and the discretional choice of issues to be explored.

References

Coppel, J. (2000), E-Commerce: Impacts and Policy Challenges, OECD Economics Department Working Papers, No. 252, OECD Publishing, Paris. Retrieved from https://doi.org/10.1787/801315684632.

Hundley, R. Anderson, R., Bikson T., and C. Neu, R (2003) The Global Course of the Information Revolution: Recurring Themes and Regional Variations. Santa Monica, CA: RAND Corporation, Retrieved from https://www.rand.org/pubs/monograph_reports/MR1680.html.

The Role of Digital Platforms in the collection of VAT/GST on Online Sales. (2019) OECD Publishing, Paris.  Retrieved from https://read.oecd-ilibrary.org/taxation/the-role-of-digital-platforms-in-the-collection-of-vat-gst-on-online-sales_e0e2dd2d-en#page3

Unpacking E-Commerce: Business Models, Trends, and Policies. (2019) OECD Publishing, Paris.  Retrieved from https://read.oecd-ilibrary.org/science-and-technology/unpacking-e-commerce_23561431-en#page3