Participating in e-commerce can be as simple as selling your artwork on Etsy or buying a new coffee maker on Amazon. Not to mention, you don’t have to do anything but tap your phone screen a few times to make either of these things happen. E-commerce is accessible, convenient, and a seemingly unflappable industry, but how did it get to this point?
Whether your interest in e-commerce is professional or personal, having a full understanding of the subject requires a deep dive into the origins of e-commerce and exploring its progress through the years. Luckily, you’ve come to the right place to guide you through the humble beginnings of e-commerce to its future.
This piece will take a deep dive into the story of e-commerce by assessing and retelling its history, evaluating the status of e-commerce in the present, and making informed predictions regarding its future.
The History of E-Commerce
The story of e-commerce is, of course, one of exponential expansion and exceptional popularity. However, despite its current position as a multibillion-dollar industry, e-commerce faced relatively humble beginnings.
Our tale begins, not in the early 1990s, as many are led to believe, but several decades earlier in the 1960s with the prominence of Electronic Data Interchange (EDI). From this unimpressive start rose the foundations of e-commerce, which wouldn’t see notable growth for another thirty years.
Thus, by the mid-1990s, with the founding of giants eBay (then called The AuctionWeb) and Amazon, e-commerce was born and booming. Now, for the full story.
E-Commerce Early Beginnings: EDI and Beyond
As the basis and function of e-commerce begins with the internet, it’s essential to start with the internet’s humble beginnings to paint a full picture of the growth of e-commerce. It’s not surprising that the foundations of the internet were built on exchange. In fact, it foreshadows the creation of the e-commerce industry.
In the 1960s, computer science became an emerging area of study in which scientists began to explore the ways in which it was possible to expand computer networks and share information over wider areas. The idea caught on and was wildly popular as government entities in both the U.K. and the U.S. government agencies provided financial backing for the venture. More specifically, the U.S’s Advanced Research Projects Agency (ARPA) worked to create the ARPANET, which enabled data transfer.
EDI was a separate venture, which came to fruition by the early 1970s. However, the goal was the same — sharing and transferring data via digital means. Businesses, especially those related to logistics, utilized EDI to transfer and share data. Together, EDI and the expansion of computer networks created the basis of the internet.
Internet Beginnings: 1980s Onward
Fortunately, the next decade began the shift toward e-commerce that we know and love today. Though the Eighties and Nineties were known for their turbulent global political landscape and major culture shifts, the technological innovations during the decade also deserve the spotlight.
During this decade and into the early Nineties, two major obstacles to the success of e-commerce were overcome: security and a ban on commercial internet use.
Today, basic cybersecurity best practices mean that you ensure that any website in which you enter sensitive information such as your credit card information or personal address is protected by a Security Socket Layer (SSL) certificate.
This is a decades-old security protocol released in 1994 by Netscape. SSL made it possible for personal information on the internet to be encrypted, and therefore, safely shared by a modern consumer. This introduction, paired with several third-party credit card processing companies’ founding, made online shopping a much more attractive option.
The National Science Foundation (NSF) had worked developed several national computer networks. These networks were only able to be accessed by universities and U.S. government agencies. Precious few had access to the networks that would change the world. In 1991, everything changed. The NSF removed access restrictions, and these networks became available for commercial use. Thus, e-commerce was born.
The First E-Commerce Services
Coming right on the heels of the failed CompuServe Electronic Mall venture in 1984, e-commerce was given a new life in the early Nineties with the founding of Amazon and eBay. Today, these titans of the industry are responsible for the bulk of e-commerce transactions across the world and are still growing.
eBay, then known as AuctionWeb, was founded in September 1995 by Pierre Omidyar. The idea was to create a marketplace where buyers and sellers could interact and exchange goods over the internet. It was a successful venture, as Canadian Mark Fraser then made the first-ever eBay purchase — a broken laser pointer. Less than a year later, in June 1996, eBay merchandise sold totals exceeded $7.2 million. That same year, the company then found they needed a headquarters, which they set up in a small office in California.
A couple of years earlier and many miles north, Jeff Bezos was working on his own innovative marketplace. Amazon was founded in 1994 in Seattle, Washington. From humble but wildly successful beginnings, the online bookseller transformed into a multibillion-dollar company in less than ten years, reaching $3.1 billion in profit by just 2001.
eBay and Amazon: 2000 and Beyond
Both Amazon and eBay expanded beyond belief, and by the mid-2010s had made a name for themselves as two of the biggest companies in the world. In that time, eBay acquired PayPal, Etsy, and a host of other businesses and brands. Its success was underscored by reaching $2 billion in merchandise sold in 2011.
Amazon wasn’t slacking during this time, either. By 2018, the company was recording over $234 billion in total online sales a year. Beyond insane sales numbers, the company began expanding into its own brand of items, including a clothing brand, acquiring Whole Foods, AmazonFresh, Prime Pantry, and more. Not to mention the fleet of Amazon delivery drivers and new warehouses that make it all but certain you’ll receive a package in just two days, every time.
The reasons for the success of these two companies aren’t difficult to define. In fact, they’re quite simple to determine. It would be a mistake to say that the success of Amazon and eBay was due to luck. What it really was is something so much more interesting: timing and execution.
It’s not difficult to come in first place when you aren’t facing any competition. Amazon and eBay were able to expand unchecked because they didn’t get in each others’ way, and they chose the right time to get their foot in the door. As they were, and still are, two distinct companies that offer distinct services, Amazon and eBay weren’t ever in real competition, nor could any other company keep up with their growth. Beyond that, they were able to get up and running as soon as the tide turned for e-commerce. In short, it all comes down to shrewd business sense.
E-commerce is having a moment or, rather, another moment. The explosion of e-commerce has largely been attributed to its accessibility and convenience, but there’s a deeper story there. The innovative technologies that have put the internet and, by extension, e-commerce at the general population’s fingers are much to blame.
Certainly, the ability to streamline almost anything through the use of widely available technology (think: smartphones) has had an effect on the popularity of e-commerce. At minimum, it has allowed e-commerce to become more accessible and increase the pool of prospective buyers across the world.
Today, even commercial services and products that have traditionally been analog are getting a boost from e-commerce innovation. This includes anything from ordering groceries (Instacart) to catching a ride somewhere (Uber).
The current pandemic has also brought about a major demand for e-commerce services, so much so that supply lines and shipping have experienced significant issues culminating in massive delays. That said, e-commerce alongside digital transformation has played a pivotal role in reshaping multiple industries. Let’s dive in.
E-commerce and Digital Transformation Today
It’s easier to think of the things we can’t do with technology than it is to create an extensive list of the things we can do. In fact, technology and its application to various things has been an omnipresent and, some would say, insidious force in today’s society. While innovation has been able to find its way into different industries without a helping hand, the process of digital transformation has certainly made the job easier.
Not to be confused with digitization or digitalization, digital transformation is the unique process in which digital technology is used to create or transform business processes to meet the current expectations and standards in the industry. It’s a combination of multiple processes, including bringing new technology in and using technology to drive innovation within an industry. It’s easy to see the process of digital transformation in e-commerce, specifically when it comes to meeting customer expectations.
Take the smartphone. For example, with this new technology in their hands, customers began to realize the power and the limitations of their devices. In its early stages, it didn’t take long for consumers to realize that while their smartphone was powerful, there were many things that it simply couldn’t do. Smartphone manufacturers, especially Apple and Android, began to expand the power and range of their devices.
Mobile browsers were made to function similarly to their desktop counterparts. However, for customers, the experience of buying something online via a mobile website just wasn’t as good as doing so on a desktop. That’s when e-commerce had to innovate on the business end.
Now, if you enter the Apple App Store or the Google Play Store, you won’t have to look far to see the eBay or the Amazon app. To meet the growing expectations of customers and remain competitive, both e-commerce giants underwent the process of digital transformation by developing applications to mimic the experience of desktop online shopping. However, the innovation didn’t stop there. These applications don’t just mimic. They enhance the experience by customizing it down to how many items are displayed on a page.
Digital Transformation and E-commerce in Other Industries
Going back to customer expectation, in an increasingly digital world, customers began to expect increasingly digital options. Conveniently, getting things done on-the-go whenever the fancy struck was now the standard rather than the excellent exception. This notion crept into other industries, as innovative thinkers began to apply e-commerce logic and structures to new avenues.
Services that seemed untouchable by technology started transforming. By 2020, it became unnecessary to take a trip to the grocery store in-person. Not when you could have them hand-delivered to your door via Amazon, Instacart, or the service of your choice. Hailing a cab didn’t require phoning in your request, sitting in a yellow taxi, and watching the meter go up. Not when you could order an Uber or Lyft with a few taps of your phone screen.
These are examples of digital transformation’s effect on e-commerce. By using innovative technologies and a traditional e-commerce foundation, new services have become available via a digital source. Although, when we think of the term e-commerce, we traditionally think of products, we are seeing a rapid increase in e-commerce services becoming available.
The Tech Side of E-Commerce
The ubiquitous nature of e-commerce and online shopping on the consumer’s end has touched many different industries and given rise to new niche technology. There is an entire sector of businesses that are focused on making the online and in-person shopping experience more convenient, streamlined, and functional, even indirectly.
Beyond the evolution of smartphone applications, mobile technology has introduced a more robust offering for e-commerce transactions, including stronger security features, new ways to pay, and increased accessibility.
Buying online has never been easier or safer. By leveraging built-in security and software systems on your mobile device, platforms like Apple Pay and Google Pay enable you to create a digital wallet and authorize purchases from your smartphone or smartwatch. For example, Etsy offers Apple Pay as a way to purchase products, simply use facial recognition to confirm the purchase, your card is charged, and your goods are on their way to you.
That said, facial recognition and 2-factor authentication make mobile shopping an even more secure process. By increasing the barriers to making a purchase balanced with convenience of use for consumers, fraudulent purchases using mobile payment methods are less likely.
Today, it doesn’t take much to found your own e-commerce store. Really all you need is an internet connection, a Wi-Fi enabled device, and, of course, goods or services to sell. Services offered by platforms like Wix, Shopify, and WooCommerce make it easy to build your own e-commerce shop, even if you’re not particularly internet savvy. T
his has been especially useful when it comes to leveling the playing field for small businesses to compete with larger ones. Smaller business can list their products online, making it more convenient for customers to shop for their products.
E-Commerce and the Consumer Today
The pandemic has had a major effect on e-commerce, and despite many assumptions, not all of them have been positive. Many consumers have readily accepted the logic of it being better to be safe than it is to be sorry. This has resulted in an avoidance of stores, where it’s easy to come in contact with large crowds. However, consumers still need products and goods, so they’ve turned to the contactless solution that e-commerce offers.
Research clearly shows a massive increase in e-commerce sales starting in April when many stay-at-home orders and store closures took effect. Over 16% of all retail sales occurred online from April 2020 to June of the same year. This accounted for over $212 billion dollars.
This boost is in addition to the increasing reliance on e-commerce sales, which has seen a steady increase from 2011 to today. Unfortunately, this boost, while financially advantageous, caused negative effects on the operations side of things.
Supply lines were strained, orders went unfulfilled, and, worst of all, workers faced uncompromising demands from their employers. While the e-commerce industry has since started recovering from these major problems, the fact remains that the industry was wildly unprepared for growth on that scale.
The Future of E-commerce
Let’s get out our crystal balls and gaze into the future. Or not.
However, it is essential that we consider the future of e-commerce, especially considering the flaws in the system that the pandemic exposed. That said, the future of e-commerce depends on two things: whether the industry can maintain itself and, from there, whether it can grow.
Though the pandemic accelerated the growth of e-commerce, it had already been growing steadily and gained a reputation as a stable industry. Like any stable industry, e-commerce will have to continuously innovate to stay competitive and always have something new to offer customers.
Not to mention, it will have to rely on the expansion or transformation of older processes that brought it success. For e-commerce, this means expansion into new industries and the implementation of new technological advances.
Though it’s challenging to determine the future of e-commerce, we can predict certain things based on current trends. Keep reading to learn more about what you can expect to see in e-commerce in the coming years.
More Machine Workers
The expectation that digital transformation will continue to drive innovation within e-commerce is not an unfounded one. Even today, the industry is witnessing the humble beginnings of new technology that will influence the operation and function of e-commerce for years to come. This advanced technology will likely enhance the effectiveness of certain services and have a significant influence on the production and delivery of certain goods.
Currently, certain businesses are rolling out new methods to deliver goods to consumers. For example, DoorDash, a food delivery e-commerce service, is looking into automated food delivery by utilizing remote-controlled delivery vehicles and robots. This could be a solution that becomes increasingly popular as consumers grow weary of poor interactions with delivery drivers and look for food delivery options that avoid contact with another person.
Additionally, services like Uber are experimenting with self-driving cars as a means to facilitate driverless pickup and drop-off. This is another measure that could be accelerated by the pandemic as a means of catering to customer needs. Unfortunately, this venture has seen little success but will likely be revisited and expanded in the near future.
There are obvious financial benefits that come with replacing human workers with machines. This is especially true, as it’s predicted that the previously unregulated gig economy will take a huge hit following California’s ruling that means many independent contractors would be elevated to employee status. However, expect a shift toward machine workers to be very slow. The technology just isn’t there yet, especially not for wide-spread use.
AI and AR Take Center Stage
In the intelligent technology sector, expect to see AI used to enhance customer support and AR to enhance the customer experience.
AI-powered chatbots are already in use, and their effectiveness not only helps telephony-based customer service reps, but they also have the potential to make them obsolete. It’s rare to see a company that has completely done away with human customer support staff, but that could be in the near future as more and more companies begin to rely on AI-powered chatbots that can ask and answer questions accurately.
Moving to customer experience, the one thing that in-person shopping has over online shopping is the tangibility factor. A customer can see and feel the product before making a purchase. This isn’t necessary for all products, of course, but it does improve confidence in the purchase.
With AR, customers can view a product so closely they’ll be able to discern the texture on a leather purse or see what a shirt would look like on them, just by using their smartphones. Major companies, like Apple, have already implemented this technology for use during the buying process, but expect to see it spread like wildfire through the e-commerce industry in the near future.
Everyone loves it when an experience or product is catered to their preferences. It’s why we have our own Netflix profiles, Spotify stations, and Amazon accounts. However, these services have taking personalization to new levels.
By using advanced algorithms and tracking, more and more services are not only manually personalized by the consumer, but they are also personalized by the service provider. This can span a multitude of things, including more options such as utilizing dark mode, tracking ad preferences, and even providing relevant recommendations.
E-commerce is expected to leverage algorithms that collect data regarding customer behavior and demographics to create a more personalized experience. It’s a psychological sales tactic, but it’s exceptionally effective.
However, these algorithms are going to be smarter and more accurate. They won’t suggest that a customer should purchase another KitchenAid Stand Mixer in a different color, they’ll suggest that the customer considers mixer attachments or baking cookbooks. The future of e-commerce will bring more accurate and effective algorithms to enhance customer experience on an individual basis.
Expansion Into New Industries
Let’s talk about the movie industry. The theatrical release of many films are still breaking records as millions of movie-goers head to their local theaters to catch films like Avengers: Endgame and Avatar. However, theater attendance has been trending downward since 2002, spurred by the streaming revolution.
The pandemic forced many studios to either delay their planned theatrical releases or simply release on another platform. Disney made history and headlines when it decided to release both Hamilton and the live-action Mulan film on its streaming platform, foregoing theaters altogether.
It’s difficult to say that this move won’t have a lasting effect. With the successful release of both films, customers were handed an accessible, affordable option for viewing new films. If the practice takes hold, expect to see it more frequently and even movie studios creating their own straight-to-streaming movie release platforms.
Though this is just one example, e-commerce is predicted to shift to even more industries, specifically those concerned with services rather than products, in the near future.
E-commerce: The Key Takeaways
As dominant a force as e-commerce has proven itself to be, it’s still fewer than twenty years old. It’s incredible that the industry has expanded from its unremarkable roots to a fully-fledged multibillion-dollar industry. Not to mention that in the U.S., it only accounted for about 16% of retail transactions last year, so there is still a ton of room for growth.
However, though e-commerce is a stable industry in its own right, it’s unlikely to ever replace in-person shopping and brick-and-mortar storefronts completely. It is for this reason that the next stage in business founding and growth is finding new means of seamlessly melding the in-person and online shopping experience to create one incredible experience for all involved. Unfortunately, that’s a big ask.
Though many large brands and businesses, like Walmart or IKEA, have got it covered by offering both online and in-person shopping, it’s hardly scratched the surface of what true innovation can achieve on this end. Far from being impossible, the perfectly combined in-person and online shopping experience is coming, and soon. It’s a wonder what brand will achieve this lofty goal first. Here is a helpful link to a great e-commerce course.