Willingness to Pay for Information Programs about E-Commerce: Results from a Convenience Sample of Rural Louisiana Businesses

The probability of a business paying various amounts of money for an e-commerce presence ultimately depends on demographic features, experiences with e-commerce from a buyer's and seller's perspective, technological expertise, and knowledge of e-commerce opportunities and limitations. Estimating functions to assign probabilities associated with the willingness to pay for an e-commerce presence will assist in forecasting regional likelihood of certain profiles paying various monetary amounts for an e-commerce presence. In addition, if services are provided at no cost by a third party, value to a society will be maximized by selecting profiles with the highest willingness to pay.

Key Words: e-commerce, internet, rural businesses, technology, willingness to pay

JEL Classifications: A14, C25, D21, O13, O14, O33, Q16

An ongoing U.S. Department of Agriculture (USDA) Fund for Rural America, Rural Community Innovation project, called the Delta Ecommerce Connection (DECC), is creating diversified economic opportunities over a 4-year period for small agricultural and other rural businesses in the Lower Mississippi Delta by assisting in e-commerce business development. The project offers seminars featuring a set of three educational training modules that relate e-commerce to rural entrepreneurs in a practical fashion. In addition, technical support in website development, developing an Internet marketing strategy, electronic retailing services, and space on a secure server are provided to selected rural businesses for a period of 1 year. Businesses retaining websites after this time assume responsibility for maintaining and funding their site. During the DECC seminars, the cost structure of e-commerce has always been a topic of great interest for participants. Due to the lack of information and understanding about businesses' willingness to pay for e-commerce products in rural areas, a survey was developed to gauge the value participants placed on the new opportunity. Specific objectives were to determine what representative businesses from rural Louisiana would pay for a seminar offering information about e-commerce, and a bundle of goods, including technical assistance for building an e-commerce website, and tutoring in the technical skills used to develop and maintain their own website. Elasticities and marginal effects associated with respondent's willingness to pay were measured as well.

Background

Increased Internet use has drastically altered the way business is conducted. Current Internet use is 186 million users in the United States and 945 million worldwide. In the year 2007, projections for U.S. and worldwide Internet use are 230 million and 1,466 million people, respectively (eTForecasts.com). The United States once had almost 90% of worldwide users in the mid-1980s; however, the percentage of users has continued to drop through time, with approximately 20% of users in 2004. There are many forces adding to the growth of the Internet in other countries, as well as the United States, including web cellular phones, prepaid Internet access cards, broadband Internet connection, wireless Internet access, e-commerce for mobile devices (M-commerce), Internet cafes in developing countries, declining Internet service provider rates, bundled services, web appliances and interactive web TV, among others (eTForecasts.com).

E-commerce sales are approximately 1.9% of total retail sales (U.S. Department of Commerce), with the greatest revenue stemming from computer hardware, furniture, software, books, music, videos, office supplies, food/ beverages, and airlines tickets (Abate and Moser). According to the Nelsen-Net ratings, who conduct analysis and measurement on Internet audiences, the average American spends 80 minutes on-line at work and 26 minutes online at home daily, both spending approximately 1 minute per web page (NeilsenNetRatings.com). This is not much time for a business to convince a consumer to make a purchase, much less, allow them to conduct the transaction. E-commerce requires a different approach as compared with the traditional brick and mortar business with respect to sales.

E-commerce provides an excellent opportunity for many smaller businesses. Entry costs into the marketplace are lowered, allowing businesses to compete on an international forum (Dutta and Evrard; Poone and Swatman; Webb and Sayer). Many new electronic businesses have developed because of this potential (Motiwall and Khan). Successful businesses have several features in common. They respond to website features that most consumers prefer, such as stock availability, privacy, customer service, order-tracking capabilities, and providing detailed product information (Post et al.). However, three of every four online businesses fail in the first 2 years, indicating a need to develop and administer a strategic business model tailored to an e-commerce platform (Paper et al.)· In rural economies, this failure rate is even higher and it becomes necessary to determine what e-commerce products, educational information, and services are worth to these smaller companies (Small Business Administration [SBA]). Recent studies have explored consumer willingness to pay for Internet services, but not the sellers' willingness to pay for e-commerce services (Blefari-Melazzi et al.; Chellappa and Shivendu; Jiang; Lee et al.; Sultan; Suri et al.). There is a lack of information and understanding about what small businesses, particularly rural businesses, would be willing to pay for this opportunity to overcome geographic handicaps and compete with larger companies.