By definition, ecommerce or electronic commerce, is the buying and selling of products or services via the Internet. For many Americans, ecommerce is something we participate in on a daily basis, like online bill payment or purchasing from an e-tailer.
Nowadays the thought of living without ecommerce seems unfathomable, complicated and an inconvenience to many. It wasn’t until only a few decades ago that the idea of ecommerce had even appeared.
Ecommerce was introduced 40 years ago and, to this day, continues to grow with new technologies, innovations, and thousands of businesses entering the online market each year. The convenience, safety, and user experience of ecommerce has improved exponentially since its inception in the 1970’s. This article will address some of the key players and milestones of ecommerce.
Paving the way for electric commerce was the development of the Electronic Data Interchange (EDI). EDI replaced traditional mailing and faxing of documents with a digital transfer of data from one computer to another.
Trading partners could transfer orders, invoices and other business transactions using a data format that met the ANSI ASC X12, the predominant set of standards in North America.
Once an order is sent, it is then examined by a VAN (Value-Added Network) and finally directed to the recipient’s order processing system. EDI allowed the transfer of data seamlessly without any human intervention.
Michael Aldrich, an English inventor, innovator and entrepreneur is credited with developing the predecessor to online shopping. The idea came about during a stroll with his wife and Labrador when Aldrich lamented about their weekly supermarket shopping expedition. This conversation sparked an idea to hook a television to their supermarket to deliver the groceries. Immediately after the discussion Aldrich quickly planned and implemented his idea.
In 1979 Aldrich connected a television set to a transaction processing computer with a telephone line and created what he coined, “teleshopping,” meaning shopping at a distance.
It was apparent from the beginning that B2B online shopping would be commercially lucrative but B2C would not be successful until the later widespread use of PC’s and the World Wide Web, also known as, the Internet. In 1982, France launched the precursor to the Internet called, Minitel.
The online service used a Videotex terminal machine that was accessed through telephone lines. The Minitel was free to telephone subscribers and connected millions of users to a computing network.
By 1999, over 9 million Minitel terminals had been distributed and were connecting approximately 25 million users in this interconnected network of machines. The Minitel system peaked in 1991 and slowly met its demise after the success of the Internet 3 years later. Eventually, in 2011, France Telecom announced its shutdown of the Minitel service system. Sadly, it had not become what it had hoped to be, the Internet.
90’s To Present
In 1990 Tim Berners Lee, along with his friend Robert Cailliau, published a proposal to build a “Hypertext project” called, “WorldWideWeb.” The inspiration for this project was modeled after the Dynatex SGML reader licensed by CERN.
That same year, Lee, using a NeXTcomputer created the first web server and wrote the first web browser. Shortly thereafter, he went on to debut the web on Aug. 6, 1991 as a publicly available service on the Internet. When Berner’s Lee decided he would take on the task of marrying hypertext to the Internet, in doing that, the process led to him developing URL, HTML and HTTP.
When the National Science Foundation lifted its restrictions on commercial use of the NET in 1991, the Internet and online shopping saw remarkable growth. In September 1995, the NSF began charging a fee for registering domain names. 120,000 registered domain names were present at that time and within 3 years that number grew to beyond 2 million. By this time, NSF’s role in the Internet came to an end and a lot of the oversight shifted to the commercial sector.
The 1992 book, Future Shop: How Technologies Will Change The Way We Shop And What We Buy, provided insight and predictions on the future of consumerism. An overview of the book explains:
For hundreds of years the marketplace has been growing more complex and more confusing for consumers to navigate. Published in 1992, long before the Internet became a household word. Future Shop argued that new information technologies, combined with innovative public policies, could help consumers overcome that confusion. A prescient manifesto of the coming revolution in e-commerce, Future Shop’s vision of consumer empowerment still resonates today.
From the beginning, there were many hesitations and concerns with online shopping but the development of a security protocol – the Secure Socket Layers (SSL) – encryption certificate by Netscape in 1994 provided a safe means to transmit data over the Internet. Web browsers were able to check and identify whether a site had an authenticated SSL certificate and based on that, could determine whether or not a site could be trusted.
Now, SSL encryption protocol is a vital part of web security and version 3.0 has become the standard for most web servers today.
Online Ecommerce Megastores
The mid-nineties to 2000’s saw major advancements in the commercial use of the Internet. The largest online retailer in the world Amazon, launched in 1995 as an online bookstore. Brick-and-mortar bookstores were limited to about 200,000 titles and Amazon, being an online only store, without physical limitations was able to offer exponentially more products to the shopper.
Currently, Amazon offers not only books but DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. A unique characteristic of Amazon’s website is the user review feature that includes a rating scale to rate a product. Customer reviews are now considered the most effective social media tactic for driving sales. The company attracts approximately 65 million customers to its U.S. website per month and earned revenue of 34.204 billion in 2010. In 2001, Amazon.com launched its first mobile commerce site.
Another major success story of the dot com bubble was Ebay, an online auction site that debuted in 1995. Other retailers like Zappos and Victoria Secret followed suit with online shopping sites; Zappos being a web only operation.
Also in 1995, was the inception of Yahoo followed by Google in 1998, two leading search engines in the US. These successful web directories began their own ecommerce subsidiaries with Google Shopping and Yahoo! Auction, in following years.
Global ecommerce company, PayPal, began its services in 1998 and currently operates in 190 markets. The company is an acquired bank that performs payment processing for online vendors, auction sites, and other commercial users. They allow their customers to send, receive and hold funds in 24 currencies worldwide. Currently, PayPal manages more than 232 million accounts, more than 100 million of them active.
As more and more people began doing business online, a need for secure communication and transactions became apparent. In 2004, the Payment Card Industry Security Standards Council (PCI) was formed to ensure businesses were meeting compliance with various security requirements.
The organization was created for the development, enhancement, storage, dissemination and implementation of security standards for account data protection.
The growing use of the Internet, tablet devices, and smart phones coupled with larger consumer confidence will see that ecommerce will continue to evolve and expand.
With social media growing exponentially in recent years, the conversation between businesses and consumers has become more engaging, making it easier for transactional exchanges to happen online. Internet retailers continue to strive to create better content and a realistic shopping experience with technologies like augmented reality.
With mobile commerce gaining speed, more users are purchasing from the palm of their hand. The market for mobile payments is expected to quadruple by 2014, reaching $630 billion in value. Total sales in ecommerce have grown from $27.6 billion in 2000 to $143.4 billion in 2009 and are expected to continue its growth for the foreseeable future.