Order Code RL31293
CRS Report for Congress
Received through the CRS Web
E-Commerce Statistics: Explanation and Sources
February 22, 2002
Rita Tehan
Information Research Specialist
Information Research Division
Congressional Research Service ˜ The Library of Congress

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E-Commerce Statistics: Explanation and Sources
Summary
The value of e-commerce transactions, while still small relative to the size of the
U.S. economy, continues to show strong growth despite a recent economic downturn.
Congress will play a vital role in many e-commerce policy issues, including Internet
taxation, encryption and electronic authentication (i.e., digital signatures), intellectual
property protection (i.e., patent or copyright infringement), computer network
security, and privacy safeguards for individuals and organizations, as well as
consideration of how European Union (EU) and World Trade Organization (WTO)
policies may affect U.S. e-commerce activities
Although e-commerce growth is widely discussed, until recently it had remained
largely undefined and unrecognized in official economic statistics. Establishing
relevant and consistent working definitions is a critical first step in developing useful
measures for e-commerce. The Bureau of the Census initiated an aggressive program
in 2000 to begin filling the e-commerce data gap. In addition, the Bureau of
Economic Analysis (BEA) is involved in measuring the new economy. BEA is
studying the impact of the digital economy, to determine whether these changes
should be captured in gross domestic product (GDP) and other economic accounts
estimates.
Nonetheless, the Census Bureau and BEA face a number of obstacles to
providing accurate forecasts of electronic commerce. These include categorizing
retailers who appear, disappear, or change products with dizzying regularity. There
are hurdles in collecting data from e-commerce companies, and in projecting data
from survey respondents so that it represents the entire universe of e-commerce
spending.
Private consulting firms and research and polling firms that provide estimates of
the impact of the Internet on consumers and business, such as Nielsen and Gallup
have also entered the field, along with new types of companies, such as Forrester
Research, Gartner Group, Jupiter Communications, International Data Corporation
(IDC), and Nielsen/Net Ratings. There is much debate over which Web measurement
company’s methods are more accurate. The research firms disagree among
themselves about sampling methods, panel selection, and differing methods of
identifying and soliciting the survey participants result in different data interpretations.
This report addresses the complexities of measuring e-commerce growth, and
provides background information on government and private firms’ methods for
estimating it.

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Contents
What Is E-Commerce? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Complexities of Measuring E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Difficult to Define . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Other Measurement Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Government Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bureau of the Census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bureau of Economic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consulting and Research Firm Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Recent E-Commerce Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Selected Web Addresses for E-Commerce Statistics . . . . . . . . . . . . . . . . . . . . . 9

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E-Commerce Statistics: Explanation and
Sources
What Is E-Commerce?
Electronic commerce (or e-commerce)—i.e., business processes which shift
transactions to the Internet (or some other nonproprietary, Web-based system)—is
growing at a rapid rate. The value of e-commerce transactions, although still small
relative to the size of the U.S. economy, continues to show strong growth despite a
recent economic downturn. More significant than the dollar amount of these
transactions, however, are the new business processes e-commerce makes possible
and the new business models it is generating. Many new Internet-based companies
and traditional producers of goods and services are working to transform their
business processes into e-commerce processes in an effort to lower costs, improve
customer service, and increase productivity, with varying degrees of success.
Congress will play a vital role in many e-commerce policy issues, including
Internet taxation, encryption and electronic authentication (i.e., digital signatures),
intellectual property protection (i.e., patent or copyright infringement), computer
network security, and privacy safeguards for individuals and organizations, as well as
consideration of how European Union (EU) and World Trade Organization (WTO)
policies may affect U.S. e-commerce activities.
Complexities of Measuring E-Commerce
Difficult to Define
Although e-commerce growth is widely discussed, it remains largely undefined
and unrecognized in official economic statistics. Establishing relevant and consistent
working definitions is a critical first step in developing useful measures for e-
commerce. Policymakers, industry, and the media use a variety of methods to capture
digital or electronic economic activity. Moreover, these terms often are used
interchangeably and with no common understanding of their scope or relationships.1
1 Barbara Fraumeni, Marilyn Manser, and Thomas Mesenbourg, “Government Statistics:
E-Commerce and the Electronic Economy,” U.S. Census Bureau, June 15, 2000, available
at [http://www.census.gov/econ/www/ecomm2.htm].

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It is difficult to determine if all the dimensions of what is occurring in
e-commerce can be identified. For example:
! How is business-to-business (B2B) and business-to-consumer (B2C)
e-commerce impacting on the accuracy of labor surveys?
! What are the goods and services choices, characteristics, and prices offered?

! How difficult is it to track international transactions; and business costs and
productivity?2
Other Measurement Challenges
E-commerce businesses pose additional measurement challenges. These
businesses can quickly expand their product line, adding new goods and services, even
entering into entirely new kinds of activities, much faster than their retail and
wholesale brick-and-mortar counterparts.
Additionally, the characteristics and prices of e-commerce products may not be
the same as those sold in retail brick-and-mortar outlets or through wholesalers. For
example, the Consumer Price Index (CPI) and resulting real personal consumption
measures do not capture all aspects of consumer benefits from business-to-consumer
transactions. E-commerce retail purchases may involve particular amenities for the
consumer (such as convenience of shopping from home, added information that is
available on the product, or lower prices) or deterrence (such as frustration at lengthy
downloads, not being able to examine an item, or service deterioration).
These are the types of factors that are not captured in general in measures of
prices and real gross domestic product (GDP). It is not clear that these sorts of
problems are greater for e-commerce than for other activities, nor even that they do
not in general balance out. In the area of business-to-business e-commerce, improved
speed and convenience may result in lower costs and higher productivity, but may not
be reflected in the measured characteristics or effective prices of the goods and
services exchanged or in measures of real output.3
Another controversy is the ability to measure Web use in the workplace.
Approximately 66% of U.S. workers have access to the Internet at work;4 and,
according to a December study by the Nielsen/NetRatings research firm, half of all
online purchases in the United States in November 2001 were done from the
workplace. (Despite the fact that there are three times more Internet users who have
Web access at home, the percent of shopping activity at work matches the percentage
2 Ibid. Government Statistics, section IIB.
3 Ibid.
4 Xylo, “The Xylo Report August 2001: Internet Usage in the Workplace (benchmark study),”
press release, August 21, 2001, available at [http://www.xylo.com/press/pr082101.htm].

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of shopping from home.)5 Companies are notoriously reluctant to place Web
measurement software on their workers’ computers.6 Privacy and the protection of
proprietary business information would most likely have to be resolved before this
could become a common measurement tool.
Government Estimates
Bureau of the Census
The Bureau of the Census initiated an aggressive program in 2000 to begin filling
the e-commerce data gap. During the summer of 1999, the Census Bureau developed
definitions and concepts to describe the digital economy, identifying three
components: electronic business, electronic commerce, and e-business infrastructure.
In order to begin measuring e-commerce, data were collected in four Census Bureau
surveys: the Annual Survey of Manufacturers, the Annual Trade Survey, the Service
Annual Survey, and the Annual Retail Trade Survey. In the fall 1999, the Bureau
added two questions to its monthly retail trade survey of 8,000 retail firms: whether
the firms were selling online, and if they reported affirmatively, what was the dollar
volume of their e-commerce sales. The Bureau developed a new Internet site—E-
Stats [http://www.census.gov/eos/www/ebusiness614.htm], devoted to “measuring
the electronic economy” with data reports, information on statistical methodology,
related data program links, and e-commerce contacts.
Statistics. In March 2001, E-Commerce 1999 was posted to the E-Stats site,
providing the first official data on e-commerce activity for key sectors of the U.S.
economy.7 In June 2000, an E-Stats analytic report, Manufacturing 1999 and Mid-
2000,8 provided a comparison of 1999 online purchases and e-commerce shipments
at U.S. manufacturing plants and presented the first data on e-business processes in
those plants.
The first official retail e-commerce estimates were released on March 2, 2000,
covering the fourth quarter 1999. This retail sales report provides a tally of retail
sales of goods and services where an order is placed by the buyer or where price and
terms of sale are negotiated over an Internet, extranet, Electronic Data Interchange
(EDI) network, electronic mail, or other online system. The data is collected monthly
5 Nielsen/NetRatings, “Nielsen/NetRatings Announces Top E-Tailers, Led by Amazon.com,”
press release, December 19, 2001, available at
[http://www.nielsen-netratings.com/2001_Holiday/holiday_release.jsp].
6 Mike O’Leary, “Web Measurers Wrestle with Methodologies, Each Other.” Online, May/
June 1999, p. 106.
7 U.S. Bureau of the Census, E-Commerce 1999, March 7 2001,
see [http://www.census.gov/eos/www/papers/estatstext.pdf].
8 U.S. Bureau of the Census, Manufacturing 1999 and Mid-2000, June 8, 2001,
see [http://www.census.gov/eos/www/papers/MCDTEXT1.pdf].

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but published in quarterly estimates. (The most recent retail e-commerce sales figures
are at [http://www.census.gov/mrts/www/current.html].)9
In November 2001, the Census Bureau released U.S. retail e-commerce sales
figures for the third quarter of 2001.10 The Bureau estimated that U.S. retail
e-commerce sales for the third quarter of 2001, not adjusted for seasonal, holiday, and
trading-day differences, was $7.47 billion, an increase of 8.3 % from the third quarter
2000. Total retail sales for third quarter 2001 were estimated at $786 billion, an
increase of 1.8% from the same period a year ago. The third quarter 2001
e-commerce estimate increased 0.2% from the second quarter of 2001, while total
retail sales decreased 2.6% from the prior quarter. E-commerce sales in the third
quarter of 2001 accounted for 0.9% of total sales, unchanged from the second quarter
of 2001. E-commerce sales were 0.9% of total sales in the third quarter of 2000.
This retail e-commerce sales report provides a simple tally of retail sales of goods and
services where an order is placed by the buyer or where price and terms of sale are
negotiated over an Internet, extranet, Electronic Data Interchange (EDI) network,
electronic mail, or other online system.
One analyst concludes, “That is a far cry from the monthly retail reports released
by the Census Bureau, which break down [conventional] sales totals of traditional
retailers by categories like shoes, liquor, and furniture.”11 Census Bureau officials
hope to achieve a similar level of detail with e-commerce reports, but they must
overcome obstacles which have slowed the effort.
First is the issue of how to categorize retailers who appear, disappear, or change
their products with dizzying regularity. For instance, Lee Price, chief economist for
the Economics and Statistics Administration, was quoted as saying, “It’s not just a
question of taxonomy. It’s one of evolving taxonomy. Amazon used to just sell
books. Now they sell a much more varied selection. You have to figure out how to
capture that.”12 Also, businesses are still developing interactions between brick-and-
mortar establishments and their e-commerce equivalents (for example, Wal-Mart’s
physical stores compete with its Internet presence).
9 Thomas Mesenbourg, Measuring Electronic Business, U.S. Bureau of the Census, 2001,
see [http://www.census.gov/eos/www/papers/ebusasa.pdf].
10 Retail E-Commerce Sales in Third Quarter 2001 Were $7.5 Billion, Up 8.3 Percent from
Third Quarter 2000, Census Bureau Reports. Bureau of the Census press release, November
28, 2001. See [http://www.census.gov/mrts/www/current.html].
Note: The retail e-commerce data in this report are based on a new sample of retailers that
uses the North American Industry Classification System (NAICS) in place of the Standard
Industry Classification (SIC) system. The retail e-commerce sales prior to first quarter 2001
were restated on a NAICS basis beginning with fourth quarter 1999.
11 Bob Tedeschi, “Government Figures Will Shed Little Light on Holiday Online Sales,” New
York Times Cybertimes, Jan. 10, 2000.
See [http://www.nytimes.com/library/tech/00/01/cyber/commerce/10commerce.html].
12 Ibid.

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Second, participation in the Monthly Retail Trade Survey is voluntary for e-
businesses. The Census Bureau derived the initial fourth quarter 1999 e-commerce
data from questions asked in its monthly retailing survey, which was sent to
approximately 11,000 retail firms. Of that total, 7,500 companies responded—2,000
of which indicated they were involved with Internet retailing. As in all sampling
surveys, analysts must weigh the data from those who did not respond, just as they
weigh the results of those who responded. In contrast, the Annual Retail Trade
(ART) survey requires participation by businesses. The 2001 ART, which will be
mailed out in February 2002, will provide the first comparable annual survey and will
become the baseline for future quarterly data, according to the Bureau. It is
anticipated that this data will be available in March 2003.
(It is important to note that the Census Bureau is measuring the overall
“electronic economy” with its E-Stats program, not simply retail sales.)
Industry analysts and executives are hopeful that Census Bureau figures will
provide more reliable information than is now available. This will be important for
seeing long-term trends, but the data will not provide immediate data on Internet
sales. Jack Staff, chief economist with Zona Research, has stated “It’ll take at least
three years for the government data to be highly usable. But there’s a whole segment
of the Internet industry that’s devoted to the numbers, and it’ll be fundamentally
changed once better numbers come along. And that’s as it should be.”13
Bureau of Economic Analysis
The Bureau of Economic Analysis (BEA), within the U.S. Department of
Commerce, is also involved with measuring the “new economy,” which it defines as
the impact of technological innovation over the last several decades, including
electronic commerce. Among the questions BEA is considering are:
! Is it real, or is it an illusion of measurement?
! Does it represent a fundamental and lasting change in the structure of the
economy, or is it the result of a number of temporary phenomena?
! Can it be accurately measured?14
The answers to these questions are important because if it is real, structural, and
likely to last, then there are major implications for tax and spending projections,
technology policy, and understanding of long-term growth and productivity.
Conversely, if the new economy is not real and is not likely to last, there are major
implications for federal budget projections.
13 Ibid.
14 J. Steven Landefeld and Barbara M. Fraumeni, “Measuring the New Economy,” Survey
of Current Business, Mar. 2001, p. 23-40.
See [http://www.bea.doc.gov/bea/articles/beawide/2001/0301mne.pdf].

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The BEA concludes that the Census Bureau’s estimates provide important
insight into various aspects of the new economy, but a comprehensive examination
of the major issues requires further information on the overall volume of e-business,
as well as its impact on GDP, across products, industries, and regions, and on
incomes and prices.15 BEA is proposing a comprehensive measure of e-business and
high-tech that would measure the new economy in a comprehensive and consistent
fashion. However, without such measures, researchers have attempted to measure
the impact of the new economy using existing BEA estimates—mainly information
from BEA’s national income and product account (NIPA) estimates, its wealth
accounts, its international transactions accounts, and its input-output data I-O and
GDP-by-industry accounts.
Consulting and Research Firm Estimates
More and more businesses have decided that the Internet is the key to success
and are aware of their acute need for e-commerce guidance. With increasing
frequency, e-commerce research firms declare that they have all the answers for e-
commerce strategies. As a 1999 Fortune article states, “No one knows how much
real insight online consulting firms provide, but what would-be Internet player can
afford not to subscribe? Planning for the future is hard in a mature industry; it’s
nearly impossible in one still teething.”16
Web traffic measurement may seem tedious, but with the number of dollars at
stake, it is very important to businesses. For instance, advertisers, who are spending
a lot of money, are very interested in knowing how many eyes, and whose, are
viewing their ads. (A recent survey from the Association of National Advertisers
[ANA] estimated that 79% of major U.S. companies advertised online last year, up
from 67% in 1999. The average online ad allocation per company was $2.4 million.)17
Thus, new business activity has emerged to fill the need to gather e-commerce
statistics: gathering and selling strategic and statistical information about the Internet.
Internet organizations, such as the Internet Society and the International
Telecommunications Union, have begun to compile information on the size and
growth of the Internet. Ideally, e-commerce growth and demographics can be
calculated from these organizations’ estimates of the total Internet “universe.” Private
consulting firms and research and polling firms such as Nielsen and Gallup also
entered the field, along with new types of companies, such as Forrester Research,
Gartner Group, Jupiter Communications, International Data Corporation (IDC), and
Nielsen/NetRatings, which provide estimates of the impact of the Internet on
consumers and business.
15 Ibid. p. 26.
16 Daniel Roth, “My, What Big Internet Numbers You Have!” Fortune, Mar. 15, 1999.
p. 114-20.
17 Nua Internet Surveys, Most Large Firms Advertise Online, Oct. 18, 2001, available at
[http://www.nua.ie/surveys/?f=VS&art_id=905357310&rel=true].

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There is much debate over which Web measurement company’s methods are
more accurate. The research firms disagree among themselves about sampling
methods and panel selection, since differing methods of identifying and soliciting the
survey participants result in different data interpretations.
Forrester Research in Cambridge, MA, and Jupiter Communications in New
York City are two of the largest Internet research firms. They are so-called
syndicated research firms, which means that they publish a wide range of reports with
high subscription fees to a small, targeted audience of corporate executives. For
example, for approximately $20,000, a company can buy a subscription for one of
eight industry sector guides from Jupiter Communications. Then every month for a
year, it receives a 32-page report filled with analysis and advice, survey data, and
industry forecasts, all on the impact of e-commerce in a particular field.
To compile their information, these firms’ analysts interview advertisers and
executives at top Web sites, review annual reports, adjust overly-optimistic figures,
assemble historical research comparing ad spending with consumer research, and
estimate spending for online advertising. As Forrester’s chief Internet advertising
analyst says, “The interesting thing about projections is that they come out looking
very exact. But really, it’s just your opinion expressed numerically.”18 Although
research firms such as Forrester and Jupiter attempt to make methodical projections,
the results are often imprecise.
One observer says the models used by Forrester or Jupiter “have little
resemblance to statistical techniques, like regression analysis or time-series analysis,
used by traditional market researchers or industrial forecasters to determine next
year’s worldwide consumption of, say, gasoline or Coca-Cola. That, of course, is
because enterprises that forecast the consumption of resources or consumer items can
draw on decades of historical data.”19 Using such techniques would not now work
for companies like Forrester or Jupiter because the Internet e-commerce environment
has existed for only 3 to 4 years for most businesses.
In the business of assessing the Internet’s future, there seems to be little
accountability for incorrect forecasts. Many industry executives “admit that they view
the companies and the media froth they generate as necessary evils ....”20 But
businesses need the Internet research consultants’ estimates to write business plans
and attract investors, although, at this time, the estimates are not based on historically
valid measurement models.

18 Roth, p. 120.
19 Jim Frederick, “$6 Billion on Online Holiday Sales by the End of This Month! $24 billion
in Internet Ads by 2003! 2.3 Trillion E-biz Predictions by 2010!” New York Times Magazine,
Dec. 19, 1999. p. 70-73.
20 Ibid., p. 73.

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Recent E-Commerce Statistics
With all the caveats discussed above, following is a sampling of estimates of the
size and growth of e-commerce. (For a selected list of Web sites for e-commerce
statistics, see the Selected Web Addresses for Internet and E-Commerce Statistics,
below.)
! As discussed above, the Bureau of the Census Internet site—E-Stats
[http://www.census.gov/eos/www/ebusiness614.htm]—provides official
federal data and estimates to measure the electronic economy.
! The number of Americans buying online will nearly double from 64.1 million
as of 2000 to 130 million by 2005, according to a report by the research firm
eMarketer. The report has varying e-commerce estimates for the year 2001
in the United States, with numbers ranging from $37.1 billion by Direct
Marketing Association to $117 billion by Keenan Vision. eMarketer’s own
estimate is that U.S. business-to-consumer revenues, which totaled $38.3
billion in 2000, will quadruple to $156 billion by 2005. These numbers vary
significantly from the estimates provided by the U.S. Census Bureau (see
above).21
! Global spending on e-business infrastructure is set to fall to $31 billion this
year, down from $36 billion last year, according to Strategy Analytics. The
drop in spending can be attributed to “last year’s dot-com implosion and this
year’s global economic downturn,” according to the firm.22
! Nielsen/NetRatings released its First Quarter 2001 Global Internet Trends
report, which surveyed 27 countries in North America (but not the United
States), Europe, the Middle East and Africa, Asia-Pacific, and Latin America.23
One in 11 European adults used the Internet to make an online purchase in the
first quarter of 2001, according to this report.
! A report from McConnell International discusses the “e-readiness” of 53
countries. E-readiness is defined as “the capacity of nations to participate in
the global economy,” and the report measures e-readiness by examining each
country’s progress in five key sectors: connectivity, e-leadership, information
security, human capital, and e-business climate. These 53 countries together
contain over two-thirds of the world’s population.24
21 Paul Krill, “E-Commerce Grows, Despite Slumping Economy,” PC World.com, Sept. 25,
2001, see [http://www.pcworld.com/resource/printable/article/0,aid,63206,00.asp].
22 Nua Internet Surveys, Spending on Ebusiness Initiatives to Drop, Sept. 25, 2001, see
[http://www.nua.com/surveys/index.cgi?f=VS&art_id=905357226&rel=true].
23 Nielsen/Net Media, “429 Million People Worldwide Have Internet Access,” press release,
June 11, 2001.
[http://209.249.142.22/press_releases.asp?country=north+america&range=365&submit=GO]
24 McConnell International, Ready? Net. Go! Partnerships Leading the Global Economy, May
(continued...)

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Selected Web Addresses for E-Commerce Statistics
Center for Research in Electronic Commerce (University of Texas, Austin)
[http://cism.bus.utexas.edu/]
Digital Economy 2000 (report from the U.S. Department of Commerce, June 2000)
[http://www.esa.doc.gov/de2k.htm]
eMarketer
[http://www.emarketer.com/estatnews/]]
E-Stats, March 2001 (results of the 1999 e-commerce survey by the U.S. Bureau of
the Census )
[http://www.census.gov/econ/estats/papers/estatstext.pdf]
Internet Economy Indicators
[http://www.internetindicators.com/facts.html]
Measuring the Internet Economy, January 2001 (University of Texas and Cisco
Systems)
[http://www.internetindicators.com/]
University of California E-conomy Project
[http://e-conomy.berkeley.edu/]
U.S. Government Electronic Commerce Policy
[http://www.ecommerce.gov/]
24 (...continued)
2001, see [http://www.mcconnellinternational.com/ereadiness/ereadinessreport2.htm].

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