2004 will be ‘The Year of the Internet Wars’ as Congress and Terrorists Enter the Fray

E-commerce is reported by the U.S. Department of Commerce to have ballooned to about $55 billion in 2003 — accounting for nearly 1.5 percent of all retail sales in the United States — but 2004 will be a difficult year for Internet retailers, says Dr. Robert Robicheaux, Bruno Professor of Retailing at The University of Alabama’s Culverhouse College of Commerce.

Robicheaux says 2004 will be “the year of the Internet wars” on two fronts, one initiated by the U.S. Congress and another by international terrorists.

“On the congressional front,” Robicheaux says, “the brick and mortar retailers, the old fashioned retailers who sell merchandise out of real stores, have had just about enough of the significant competitive advantage afforded to the upstart e-commerce industry — no sales tax.” Robicheaux says pressure will be put on Congress in 2004 to finally impose a national sales tax on all Internet retail sales.

In most states, on-line buyers are supposed to pay state sales taxes, although almost no one does. Retail trade lobbyists continue to demand that their legislators and congressmen level the playing field and require Internet buyers to pay their fair taxes like everyone else.

As bad as a national tax on Internet sales sounds, that front will be a minor skirmish in comparison to the really nasty battle that will rage by mid-2004, according to Robicheaux. “On the second front, crazed international terrorists remain hell-bent on attacking anything ‘western’ that brings satisfaction. E-commerce looms as a beautiful target,” he says.

He predicts that information technology “sweatshops” across the Middle East will launch vicious attacks on a broad assortment of Internet retailers. “Fanatics in India and Pakistan with space-age computer skills will launch massive attacks designed to disrupt the financial and logistics flows upon which all of e-commerce really rides,” Robicheaux says.

International terrorists know they can deploy skilled computer programmers to steal or create millions of identities and then launch massive simulation programs to place millions of orders with Internet-based retailers, he says.

“By spreading their orders across many sellers from millions of artificial identities, weeks will pass before the financial institutions and the logistics field personnel realize what is happening. The end result will be chaos. Billions of dollars will be lost. Hundreds of Internet retailers will fail — unable to sustain the shocking losses given their already shaky financial conditions,” he says.

In the end, the attack will not cause the end of the Internet or its role in retailing. “The industry will be scarred but it will survive and grow stronger,” Robicheaux says.