Our buying habits have dramatically changed over the past several years. From being a nation of cash spenders to becoming a plastic population was merely the first stage of that change. The most significant stage, however, was the shift to electronic payments.
How Old is e-Commerce?
Electronic commerce isn’t a phenomenon that started with Amazon, in case you were wondering. Since as far back as 1960, when Electronic Data Interchange (EDI) technology was born, we’ve had the ability to directly send what are called ‘data streams’. EDI is nothing more than the ability to transfer documents, emails and so on via the internet in a digital format. Along with that ability came the benefit of being able to process transactions over the internet.
But it wasn’t until 1979 when British inventor Michael Aldrich hooked up his TV to a transactional computer and a phone line that the idea of individuals ordering things online was born.
His idea was sound, but it took several more years for e-commerce to become a popular way of shopping because internet access and PCs had to come of age. It was not until those stars came into alignment that e-commerce was born as a viable, convenient and safe method of purchasing products and services online. That only happened when the internet truly came of age in 1994.
The internet did exist before that, but it was under the control of the National Science Foundation. The internet, as I explained in an earlier article, was around way before the 1990’s, but it was in 1991 that the world’s first web page was created. That was later to become the world wide web (the www you see on website addresses), a globally accessible network of web pages numbering in the billions.
Between 1991 and 1994 both the internet witnessed a huge growth phase. But, naturally, there were security concerns about the safety of transmitting payment data over the internet. In stepped Netscape with the first version of Security Socket Layers, or SSL. This encryption technology essentially certified that certain sites could be trusted. Since then it has evolved to become the gold standard in site security. You’ll notice that every e-commerce site today is certified based on these security protocols. That’s what allows us to rest assured that our information doesn’t fall into the wrong hands when we’re shopping online.
What was the first e-commerce transaction on the planet?
There are several myths around the first genuine e-commerce transaction over the internet. Some say that students of Stanford purchased marijuana from MIT students in the 1970s. Most think that the credit goes to Pizza Hut, which started online pizza ordering in late August of 1994. Neither is true.
The world’s first “secure online purchase” was made on August 11, 1994 when 21-year-old entrepreneur David Kohn sold a CD of Sting’s Ten Summoner’s Tales to a friend from the world’s first e-commerce site, NetMarket. The payment of $12.98 plus shipping (yup, shipping was never free apparently!) was made online, and Kohn says this of the security protocol in place at the time:
“Even if the NSA was listening in, they couldn’t get his credit card number.”
The following day, an article appeared about the interview that Kohn did with Peter Lewis of the New York Times, which described NetMarket as “a new venture that is the equivalent of a shopping mall in cyberspace.”
What Happened Since Then?
After 1994 there was a ten-year period during which most of the world’s largest companies came into existence. With Yahoo and eBay making their entrance in 1995, e-commerce suddenly became the buzzword of the decade. Google made its appearance three years later, in 1998, and so did PayPal. The following year Amazon.com was launched, and the rest is history.
Today Amazon makes about $80 billion or so every year from their retail business, and it’s growing fast. The global e-commerce market, however, is much, much bigger than that. Sources estimate that by 2019, the e-commerce industry will touch a mind-numbing 3.5 TRILLION DOLLARS ($3,500,000,000,000).
By then, e-commerce will account for less than 13% of total retail volume around the world. That might not look like much, but it does show the growth potential still ahead of online shopping. By no means has e-commerce stopped growing, as one might assume. As more people get connected to the internet around the world, it will only grow bigger every year.
Who is the Winner of the e-Commerce Game?
In one word, us. The consumer is the biggest beneficiary of rapid e-commerce growth. Today we can buy everything we need online. From electronics and consumer durables to groceries and meat to airplanes and boats, it’s all there.
In fact, in a few years time we’ll be able to buy online tickets on SpaceShipTwo operated by Virgin Galactic, the world’s first commercial “spaceline.” Just last month the U.S. Federal Aviation Administration’s Office of Commercial Space Transportation (acronymized to the really cool-sounding FAA-AST) has awarded Virgin Galactic an operator license for SpaceShipTwo.
There’s also a dark side to e-commerce, however.
How e-Commerce Affects Physical Stores (Brick-and-Mortar Stores)
One of the biggest impacts of e-commerce has been borne by physical stores. Because e-commerce is cheaper – no store cost, fewer overheads, etc. – than selling goods in a physical store, brick-and-mortar shops are increasingly coming under pressure to cut their prices, do innovative marketing and try every trick in the book to keep their businesses going.
Even major retailers like Wal-Mart, Costco, Target and Kroger are seeing sales declines because of the onslaught of e-commerce, and Amazon.com is not their only enemy in this regard. There are millions of online businesses selling everything from used underwear (You don’t believe me? Just go to pantydeal.com and check it out for yourself) to brand new luxury cars. You wouldn’t be swiping your credit card for the Rolls, of course, but you can certainly shop online for one.
The easy availability of goods online is bad business for physical stores, so most shops now understand that they need to have an e-commerce website as well. Some even have stores on Amazon.com or Facebook so they don’t have to invest in e-commerce technology, but most businesses today cannot exist without an additional online presence.
So e-commerce is definitely here to stay, and has now become an indispensable part of our daily lives. We cannot imagine a world without e-commerce – that’s how strongly it has entrenched itself into our lifestyles.
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