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Sundari Josyula

A better mousetrap

In a previous article I had written about how the Internet was fast becoming the new middleman. By providing a direct window of communication between supplier and consumer, it has simplified traditional hierarchies and helped bring about a mini-revolution in the way business is conducted. Yet, this is only the beginning.

We all know about the phenomenal rate of growth of the Internet since 1995. Conservative estimates place it at 10 per cent every month since. Recently the Internet passed a landmark milestone. The penetration of Web access in developed countries reached critical mass and is still increasing.

The Net has penetrated nearly 50 per cent of the households in the US alone. Experts estimate that there are currently at least 20 million people using the Internet on a routine basis. This magic point passed virtually unmarked and unnoticed by the general public, but has created a buzz in the world of commerce. We will feel the repercussions for some time.

Why is this important?

In marketing jargon, it can be said that the Internet has developed beyond the stage of the 'early adopters'. It means that for the first time, sheer weight of numbers has caused the Internet to become a viable market force, to be taken into account in its own right. This is important because this is the point at which the Net ceased to be a group of computers networked together and became a 'market'. A 'market' unlike any that has existed before. Not even the colonial powers embarking on global conquest as a means to controlling market share could have envisaged this kind of potential. This is a "market' extending across geographical boundaries. A market with buying power.

A few companies have already recognised and are exploiting this unique feature of the Internet. 'We think Global' has become a favorite catchphrase these days. Almost every business being launched now styles itself as the 'Global Headquarters of xxx' even though it may have yet to have a profitable quarter.

Despite the hype surrounding the Internet boom, running a global-scale company is not easy. Many of these companies are coming up against issues their traditional forebears never had to deal with.

For instance, recently hundreds of Nazi or neo-Nazi and Ku Klux Klan objects were put up for auction at a Yahoo! auctions site. This action was greatly resented by the French who historically suffered a great deal under Nazi occupation. The International League against Racism and Anti-Semitism and the Union of French Jewish Students took California-based Yahoo! to court in April in protest. Under French law, it is illegal to exhibit or sell objects with racist overtones.

Yahoo's defence had tried to argue that the company had placed the objects on sale in cyberspace, where no countries can be demarcated and where the laws of any one country cannot be held as paramount. But the French court ruled against Yahoo!. Not only did it levy a hefty fine, but also instructed the Internet portal to "make it impossible" for Web surfers in France to gain access to sales of Nazi memorabilia which appear on one of the Web sites it hosts. After the verdict, while Yahoo! complied by immediately removing all Nazi memorabilia from the site of its French subsidiary, it has appealed against the order to block its auction sites in other countries from French surfers pleading that such an order is unprecedented and technically impossible. At the time of writing, the two parties were still negotiating a solution.

Apart from such ethical and moral issues there are other problems as well. For example, the taxation aspect of running an online storefront. If your company is registered in Bombay and you sell an item to somebody in Tokyo using your server in New York, how will the sales tax on your item be determined? According to which country's laws? Then there is the issue of all the different currencies. The buyer in Tokyo may or may not have a ready supply of Indian rupees with which to pay you. And you, the merchant, may have no immediate use for yen or lira. Sooner or later unfavourable rates of exchange between some countries will become an issue for global entrepreneurs wishing to sell their goods there and constitute a limiting factor to trade.

Thus far there has not been a very significant amount of legislation in place for businesses to fall back on. Most countries are drafting laws to cover contingencies on a case-by-case basis. Others are adopting a 'watch-and-wait' policy while they attempt to grapple with the scope of what they are dealing with.

In the absence of systematic solutions people are finding unique and unusual workarounds. For example, a large chunk of the gambling industry in the UK has 'gone digital' and moved offshore to low-tax or no-tax havens. Indeed, this could be the beginning of the end of taxation as we have known it. Experts are predicting that soon most countries will have to begin lowering their domestic tax rates or watch businesses depart to more likely places.

Meanwhile the prevalent confusion and relative laxity regarding permissible legal activity on the Internet has given rise to some interesting practices amongst private individuals. They have fallen back on an ages-old remedy as a way to sidestep knotty issues of taxation and different currencies. In a word, they barter. Barter, ie, exchange of goods and services of equal value, has become an acceptable form of exchange between individuals over the Internet. Many commercial sites cashing on this popular trend have sprung up and are doing brisk business. The runaway success of Yahoo!, eBay and their imitators which permit items to be put up for auction and trade are proof.

Smaller barter-only sites like Webswappers and Tradeaway permit free listings of individuals advertising possessions they want to swap as well as the items they are looking for. Arranging a swap is a simple matter of registering at the Web site and browsing through the listings. Once a swap or auction is agreed upon, the parties ship the items directly to each other. Apparently, the volume of items being bartered and auctioned has been so great since these sites opened that the United Postal Service has started a separate Safe Swap service, probably for cases where trust becomes an issue.

Centuries ago, barter was possible only within a small local area, like a village or a town. But with geographical barriers removed by the Internet, you can now reach across the Atlantic to families in Europe or Russia or even the Far East to find what you are looking for. Whether it happens to be art, collectibles or a rare medicine impossible to obtain in your own country.

How did this come about?

Barter is essentially the natural outcome of the exchange of information that takes place every day in chat-rooms, mailing lists and electronic bulletin boards. Create a space for a group of people with common interests and sooner or later they will move from discussing their mutual hobby to talking about other aspects of their life. Voila! A virtual community is born.

Mailing lists and chat-rooms, in particular, create an illusion of privacy whereby people may unwittingly reveal personal problems in a way they would never do in front of a roomful of people. They may express frustration at finding no answers or may have subscribed to that group looking for solutions. If they are lucky or looking in the right place, there may be a list-member reading, one who has faced similar issues and is able to offer support, advice and sometimes even a solution.

Instances vary from the prosaic to the dramatic. A simple example could be of gardening enthusiasts exchanging rare seed varieties and gardening tips at gardening-related Web sites. Or of food enthusiasts exchanging recipes and hard-to-obtain ingredients for exotic dishes.

One of the more extreme cases illustrating barter is in the field of medicine. Human suffering is something everyone can identify with. And it is moving to read postings from people offering left over cancer and AIDS medication to fellow sufferers.

Even more poignant is the case of infertile couples unable to afford the high cost treatment entails sending out appeals for leftover fertility drugs that could fulfil their dream of having a family. Are there doctors involved at either end? I doubt it. Is this illegal? Probably. But then desperate people take unheard-of steps. And since there is no sale involved, perhaps these individuals are exploiting local legal loopholes.

Commercial success aside, all these electronic Web sites and boards have helped build a number of virtual communities and systems based on common concerns where the valued currency is services, knowledge and skills; not products and economic relationships as is more common in the world of bricks and mortar.

And in the new millennium with its increasing number of migrant workers and diasporic populations, that is not a bad thing at all.

ASSOCIATED LINKS:
www.ebay.com
www.tradeaway.com
www.webswappers.com

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