Statement by William Daley.
Re: Online commerce, Dept. of Commerce data, and privacy.

Date: February 5, 1999.
Source: U.S. Department of Commerce.

Remarks by
Secretary of Commerce William M. Daley
Press Conference on E-Commerce
Washington, D.C.
February 5, 1999
[As Prepared For Delivery]

This past year, we saw e-shopping come of age. So, today, I want to place what happened over the holidays in context and forecast where we see things headed. And I want to outline some very important policy concerns to keep the Internet revolution on track.

Let me start with some numbers. From your news reporting, you know that many private firms have been releasing on-line retail sales estimates. On-line retail sales in 1997 ranged from $2.2 billion to $4.3 billion. That comes to a $3 billion average for 1997.

When I issued the Commerce Department's e-commerce report last year, it projected sales would double for the next several years. Some believed that was outlandish. Now the results are in. And it turns out, last year's projections were conservative.

In 1998, on-line sales ranged from $7.4 billion to a high of $13 billion. The average in 1998 was $9 billion.

So, we have jumped from an average of $3 billion in 1997, to $9 billion last year. That is not a doubling -- but a tripling. Granted this is just a one year increase. And granted, it is a fraction -- less than 1 percent -- of total retail sales. But can you imagine if the rest of the economy tripled every year?

And this sharp upward trend is expected to continue. Between 1998 and 2000, sales are projected to triple again. So by the year 2000, retailing on the Internet will be a $30 billion business.

Last year, the sole projection that sales would reach the $30 billion range seemed to be in the stratosphere. Now, it has become a consensus.

We are seeing the early companies being joined by major retailers expanding . And small businesses are flocking to the web. In fact, since 1997, the percentage of retailers with websites has more than tripled -- from 12 percent to 39 percent.

For any business, large or small, not to have an e-commerce strategy is a big mistake. Transaction costs are lower; companies can reach a wider audience; they can better manage their inventory; and let's face it: consumers are hungry for it.

As e-tailing takes off, retailers, manufacturers, and investors will have a need for ever more accurate statistics. We in government, and you as journalists, obviously have that need, also. So do the private sector people who have been putting out these estimates.

So, I am pleased to announce that our Census Bureau will begin to track e-commerce separately in our annual retail survey. Until now, it has been lumped together with catalog sales. The new on-line shopping numbers for 1998 and 1999 will be available in mid-2000.

Of course, sales will not keep going up if businesses fail to act responsibly. Consumers have to feel as comfortable doing business in cyberspace as they do on Main Street. Right now, they do not -- for two main reasons.

First, many are concerned about privacy. Eighty-six percent of Net users who buy products and services are concerned about threats to their personal privacy -- with more than half very concerned. If 86 percent of Americans can agree on something, you know this is a serious matter.

And they will stop shopping if their private data is abused. Chairman Pitofsky and I have asked businesses to step up to the plate on this issue and to regulate themselves. It has taken some prodding.

But I can report today that we are seeing some positive developments. The OnLine Privacy Alliance has signed up more than 80 companies and associations. These companies have adopted strong privacy protection principles, and are committed to enforcing them through an independent third party.

TRUSTe now has 450 companies. It requires them to adhere to established privacy principles. It backs up its trust mark with independent audits and a complaint resolution process for consumers. The Better Business Bureau OnLine is developing a similar program and hopes to have it up and running by March. And America Online has a certified merchants program. It requires all of its merchants to adhere to fair information practices.

I view this as the beginning, not the end. This year, I want to see more progress, especially among smaller companies. I will be working with the industry and privacy groups on this.

The second worry people have is consumer protection. Consumers want to know they are dealing with a reputable company. Never having heard of it, or buying from it before -- they are skeptical.

And this past holiday season, not every consumer had a positive experience shopping on-line. One survey showed 74 percent of customers were satisfied, but that was down from 88 percent last summer. There were many problems. Sites were too slow. Selection was thin. Orders were not filled properly.

If you order a book, but are sent a tape, and then you find out you cannot return the tape, I know what will happen: you will shop at the mall next time.

The fact is, people want to shop on-line. It saves time. They can compare prices better. They can shop day or night -- they can do it in their pajamas. And it is fun.

But people want to get what they bargained for. President Clinton asked Chairman Pitofsky and me to reach out to consumer and industry groups to see what more can be done. We want to see more consumer education. We want to see creative and effective ways to resolve disputes.

Now, some things are being done. The Better Business Bureau has brought its well-known dispute resolution system on line. And others are beginning to experiment with creative programs. But there is more to do.

We will have strong enforcement of our existing consumer protection laws. But to be frank with you, the laws should be the last line of defense. The first line should be that businesses deal with the issues themselves.

They need to focus on retaining and protecting the customers they already have, not just growing market share. When a company decides to go on-line it has to hire a good web master. It should be just as routine to sign up with a privacy enforcement program and follow good, strong consumer protection principles.

As we all know, e-commerce is global. These messages are important here at home, but they are just as important for the rest of the world.

We will be working with our trading partners and their private sectors to make sure consumers are protected when using sites around the globe. And I will be working with Ambassador Barshefsky to ensure other countries do not erect trade barriers in the guise of consumer protection.

Before I turn the program over, let me just say, we at Commerce believe in practicing what we preach. The next big on-line shopping holiday, of course, is Valentine's Day. For those who think I am heartless, I have some e-hearts, we bought on the Internet, just for you.