Peter G. Miller
OurBroker®

At first online retail sales might not seem especially related to real estate, but there is a parallel that ought to interest the real estate community, especially those with property to move and services to sell.

The results are in and now we know that online retailers had a record-breaking holiday season. Well, some retailers had stronger sales than others, and that leads to the question: How is the Internet impacting the marketplace?

Holiday spending on the Internet rose 191 percent, says Zona Research, from an average of $216 in 1997 to $629 in 1998. Equally interesting, 58 percent of 1998's buyers spent nothing online in 1997.

AOL, which represents perhaps one of every five online users, reports that goods and services worth an estimated $1.2 billion were purchased by members between November 26th and December 27th last year.

But online sales are just a small part of the national economy -- at least for now. Census Bureau figures show that national retail sales amount to nearly $1.9 trillion. In contrast, online sales may total $3 to $5 billion -- about two to three percent of the retail marketplace.

It's plain that more and more business will be done online, but it is not clear whether such business represents a net addition to the gross domestic product. It is also not clear whether all online sales are, in fact, made online. Let's consider these issues one at a time.

Suppose a widget store opens an online site. Suppose the site does well and accounts for 5 percent of retail sales. One then has to ask: Have company sales increased, or were sales merely transferred from the retail store to the online site? (This is a somewhat complex question because sales will vary from year to year.)

One also has to ask if the online site was a business necessity, that is, if the store owner was not on the Web would he or she lose sales to a competing widget retailer with an online presence?

Lastly, one needs to recognize that it may be difficult to track sale sources. For instance, maybe someone bought online because they saw a newspaper ad but could not get to the store. Or, maybe someone checked prices online but then stopped by the store to actually handle the item before buying.

In terms of real estate there is no evidence that online sites increase the number of homes which are bought or sold. But what it happening is that introductions to brokers are being made online, homes are being viewed, comparisons are being made, information is being gathered, and e-mail is being exchanged.

Relationships are being forged online and as they are forged, business opportunities are being created -- opportunities unavailable to those lacking web sites. In effect, what we are seeing it is not so much that market size is changing, but rather that market share is shifting. To be competitive, brokers and their clients need to reach the entire marketplace, a marketplace which now includes the Internet.

Question Of The Week

Q Must I still use IRS Form 2119 to report home sale profits?

A If you sold a principal residence in 1998 you will not need IRS Form 2119 -- it's been eradicated (only 5,000 more forms to go...). You may you need to provide information on Schedule D, however.

For details, speak with your tax professional. Also, take a look at the newly updated IRS Publication 523.

Weekly Resource

Looking for a long and narrow home, say 12 by 117 feet and made of aircraft-grade aluminum? Perhaps you'd like to convert a Boeing 747 into something more residential. To see how it's done, visit Bruce Campell's site and watch as Campbell recycles an old plane into a new home.

Published: January 12, 1999

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Editor's Note: This article reflects the opinions of Peter Miller only and not necessarily the views of this or any other publication, organization or Website owner.