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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.
The history of ecommerce started 40 years ago and, to this day, continues to grow with new technologies, innovations, and thousands of businesses entering the online market each year. Electronic Data Interchanges and teleshopping in the 1970s paved the way for the modern day ecommerce store. The history of ecommerce is closely intertwined with the history of the internet. Online shopping only became possible when the internet was opened to the public in 1991. Amazon.com was one of the first ecommerce sites in the US to start selling products online and thousands of businesses have followed since. The convenience, safety, and user experience of ecommerce have improved exponentially since its inception. This article will address some of the key players and milestones of ecommerce.
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When was online shopping invented?
Online shopping was invented and pioneered in 1979 by Michael Aldrich in the United Kingdom. He connected a modified domestic television via a telephone line to a real-time multi-user transaction processing computer. The system was marketed beginning in 1980 and offered mainly business-to-business systems that were sold in the UK, Ireland, and Spain. One the earliest consumer shopping experiences was Book Stacks Unlimited, an online bookstore created by Charles M. Stack in 1992. Stack’s store began as a dial-up bulletin board two years before Amazon was founded by Jeff Bezos. In 1994, Book Stacks Unlimited moved to the Internet as Books.com and was eventually acquired by Barnes & Noble.
When was the first online transaction?
The first online transaction was, by some reports, marijuana sold by Stanford students to MIT students via the Arpanet account at their artificial intelligence lab in 1972. However, the first online shopping transaction on the Internet took place some 22 years later. With the headline “The Internet is Open”, the August 12, 1994, issue of New York Times chronicled the sale between two friends of a Sting CD. The Times said, “The team of young cyberspace entrepreneurs celebrated what was apparently the first retail transaction on the Internet using a readily available version of powerful data encryption software designed to guarantee privacy.”
1960 – 1982
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.
1982 – 1990
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.
The World Wide Web Arrives, the early 90’s
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.
Marketplaces, Payments and Mobile, Mid ‘90s to Present
From the mid-nineties there were major advancements in the commercial use of the Internet. One of the first ecommerce sites was Amazon which launched in 1995 as an online bookstore and has grown to be the largest online retailer in the world. 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.
Amazon’s range now includes not only books but music and video downloads, electronics, apparel, furniture, food, and toys.
Amazon was one of the first online retailers to add user reviews with a rating scale to for products. Customer reviews are now considered the most effective social media tactic for driving sales.
Other ecommerce marketplace success stories include Ebay, an online auction site that debuted in 1995 and Etsy, which launched in 2005 and by Q2 2018 saw gross merchandise sales total $901.7 million globally.
The late 1990s also saw new ecommerce platform options for merchants. Miva’s first catalogue-based ecommerce product was launched in 1997, achieving wide distribution in the late 1990s.
In 2005, Amazon announces the creation of Amazon Prime, a membership offering free two-day shipping within the contiguous United States on all eligible purchases for a flat annual fee. The membership quickly became popular, putting pressure on other merchants to offer fast and inexpensive shipping options. In 2016, Stamps.com acquires ShippingEasy for $50 million, after previously purchasing ShipStation and ShipWorks in 2014.
Online Payments Evolve
Global ecommerce company, PayPal, began its services in 1998 and currently operates in 202 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 244 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.
In 2010, payments platform Square allowed small businesses to accept debit and credit cards on mobile devices. By Q4 2017, Square’s gross payment volume was $17.9 billion.
In 2001, Amazon.com launched its first mobile commerce site. Mobile commerce gained speed over the next two decades, as more users purchase from the palm of their hand. More than a third of U.S. e-commerce sales were made on a mobile device in 2017, according to eMarketer Inc. The research firm expects mobile sales to increase by a third in 2018 – reaching more than $200 billion – and estimates that by 2020 mobile sales will top 50%. Both consumers and business buyers turn to mobile devices for product research and coupons, with engagement through social media becoming increasingly popular. While business buyers expect consumer features such as a responsive design that travels from desktop to laptop to tablet to phone with consistent features, B2B shoppers demand an even stronger focus on finding products details, pricing, and help fast.
Step Into the Future of Ecommerce
From the ’60s until today, the Internet, ecommerce, and consumer trends continue to evolve. By Q1 2018, total ecommerce retails sales in the US were $123.7 billion, according to the U.S. Commerce Department.
How to Compete – And Thrive – In the Modern Marketplaces
Yes, merchants can thrive alongside Amazon. After looking the giant squarely in the face, independent merchants found there were many things they could do that Amazon couldn’t, including building a memorable brand experience and gaining customers for life. But Amazon has led by example in many ways, including customer experience and innovation.
Buyer Preferences Driving Rapid Disruption
What will shoppers want next? That’s what merchants online and off are trying to figure out. For online merchants, the Holy Grail is to find where they have a genuine advantage over brick-and-mortar stores. For example, new online product visualizers can showcase products in a variety of real-life situations, at home and in offices.
And then there are Millennials. In the digital age, there are not many places left to hide. A site that lags or struggles to load loses Millennial visitors faster than you can say ‘avocado toast’. As part of the self-directed buying process, Millennials will typically shop around a bit and read reviews before making a purchase decision. To be successful, sellers need to monitor comments and listen to what shoppers say about their products and customer service. A site with an outdated design communicates outdated processes, products, and prices to Millennial buyers.
So, what’s next? The only thing that is certain is that more change is on the horizon. Your online store needs to be flexible enough to adapt to the changes.