Riding the Internet wave.

Will e-commerce widen or narrow the gap in African American entrepreneurship?

In an increasingly electronic age, the question is a rather simple one: will electronic commerce narrow or widen the gap in black business ownership?

There are two schools of thought. The first believes the new technologies associated with electronic commerce will reduce racial barriers encountered by black entrepreneurs, facilitate small business start-ups and improve the market access, profitability and success of black-owned businesses.

The second: these same new technologies are accelerating the pace of business innovation so rapidly that these inventions will leave the business "have nots" further behind.

In 1998, there were between 60 million to 75 million adults connected to the Internet worldwide. Arguably, the Internet is one of the most important communications innovations in history.

A 1997 survey of 6,487 households conducted by Nielsen Media Research indicates some interesting racial trends about business usage of the Internet. It's noted that blacks and whites have about the same access to the Internet, 40.4% and 38.8%, respectively. While 35.2% of whites have used the Internet, 29.8% of blacks have done so. As expected, Internet usage is more equal at work than at home: 15.1% of whites and 12.6% of blacks use it at the office while 18.1% of whites and 11.4% of blacks use it at home. At school, however, blacks are greater users than whites, 12.5% vs. 11.7%. Furthermore, the survey indicates that while blacks are much less likely to own a personal computer (30.5% of blacks vs. 44.5% of whites), a higher percentage of blacks plan to purchase a personal computer in the next six months than any other ethnic or racial group.

But as a growing number of entrepreneurs turn to the Web to start and grow their businesses, is e-commerce a plus or a minus in closing the racial gap in business ownership? Despite some potential obstacles, on the whole it's a safe bet that African American entrepreneurs will need to embrace this new technology to keep pace with the rapidly changing business environment.

Some indication that we're already doing this may be drawn from the fact that as far back as 1992, black-owned businesses were already heavily concentrated in industries that lend themselves to electronic commerce. For example, the largest number of black-owned businesses (80,330) are in business services. This industry accounts for 12.9% of all black-owned businesses. Black-owned businesses are also heavily concentrated in the retail (14%), real estate (3.9%) and insurance (2%) industries.

But, there is a downside. The impersonal nature of the Internet means that some customers may still want brand names they can identify with. In addition, small businesses thrive when personal relationships are established between them and their clientele. Some surveys have documented that many blacks patronize start-up companies that are owned by other blacks, thus making it easier for African American business owners to gain market entree. Without these personal relationships and ethnic identification, black business owners may find it difficult to distinguish themselves and their products from other businesses, thus making it harder to compete with larger, well-known companies.

On the flipside the Internet appeals to entrepreneurs for a variety of reasons. Reduced advertising and start-up costs and greater market accessibility are the advantages most often associated with e-commerce. The Internet reaches millions compared with local newspaper ads, radio and television commercials. And because the medium is available around the world, the customer base is potentially boundless. The Web allows small firms to eliminate the middleman and go directly from production to retail. Most significant for minority-owned businesses, the ethnicity of the owner need not be disclosed to potential customers. As such, products and services are judged on their price and quality, not on the basis of race.

So despite some potential obstacles, it appears that with business startup costs and the "race factor" largely eliminated by the emergence of e-commerce, the only limits that exist on a small business now are the limits of the imagination.