There was $327 billion worth of eCommerce sales in North America in 2011. Five years later, by 2016 that figure had grown to $580 billion. Worldwide, eCommerce sales grew by about 25% in 2016. If you’re doing business in the retail world and your firm is not in the eCommerce marketplace you may have missed the boat. How did this happen? Where did eCommerce come from?
The Origins of Trade and Commerce
Let’s start at the very beginning. Several thousand years ago, as far back as 6000 BC, trade and commerce was very limited in scope. If your neighbour, or the fellow in the next village couldn’t, or wouldn’t, trade your pig for his wheat, or your amber for his wine then it wasn’t going to happen. The transportation infrastructure of the day was almost nonexistent and currency as we know it did not exist. About that time the barter system grew out of Mesopotamia and was adopted by those great traders of the Mediterranean basin, the Phoenicians.
Many people think that is was the Lydians, who lived in what is now western Turkey, who invented one of the earliest currencies about 700 BC. Herodotus, that famous Greek historian, tells us that: “The Lydians were the first men we know who coined and used silver and gold currency.”
But over the centuries trade routes developed around the needs or desires of the various communities of the day. In fact, many of the cities and empires we know from the history books are known because of their success as traders or their existence along trade routes. Towns and civilizations which failed to engage in this early commerce were often dominated by those who did or else they were relegated to the backwaters of history and disappeared.
The Early Days of Trade Routes
Historians suggest to us that one of the earliest long distance trade routes was between Mesopotamia in the modern Middle East and the Indus valley in today’s Pakistan. These trading ventures took place on long and dangerous routes. The means of travel was on foot, camel, or mule, trade items for the most part were expensive goods such as precious metals, textiles and spices. Who doesn’t remember the stories from along the enchanted Silk Road that ran from Europe through the Middle East onto the Indian subcontinent and finally into China and back again carrying all the luxury goods of the day. The power and influence of many cities rose and fell based on their relationship to, and success with, these early trade routes.
These avenues of commerce grew more numerous and successful throughout the Middle Ages and on throughout the Industrial Revolution. With the advent of larger and more reliable ships, and then the extensive canal system to ship goods inexpensively and finally the development of the railroads in the19th century, trade and commerce was the key factor in the success or failure of many cities and countries throughout this period. If you couldn’t get your goods to market for a reasonable price someone else was going to close the deal without you.
In the twentieth century the development of extensive networks of well paved highways allowed trucks to move goods freely across the country and around the globe. The advent of modern commercial aircraft with great lifting capacity allowed North Americans to enjoy kiwi fruit from Greece, onions from Peru and Clementines from Morocco all at a reasonable price.
And with these traditional trade and commercial methods in the background, technology was evolving dramatically with the fax machine, high speed photo copiers, computers and the Internet. All of these developments were to play a significant role and break the ground necessary for the advent of eCommerce that has shaken the commercial world in the last 25 years.
The Early Years of eCommerce
While exact start dates for eCommerce may be hard to pin down there are some significant historical markers along the way. Some would suggest a respectable start day for online commerce would be 1991 when the Internet was first opened to commercial use. Some would trace eCommerce roots even further back to the electronic transfer of data. As early as the 1960s business could transfer orders, invoices and other business transactions using the Electronic Data Interchange that preceded the fax machine with the ability to transfer data from one computer to another.
In 1982, France launched the forerunner of the Internet with a system called Minitel. This system used telephone lines to transmit data free of charge and was connected to about 25 million users through a computer network. This system met its demise in the early 1990s as access to Internet began to grow. To this point most transactions involved the transfer of data or documents. But it wasn’t long before creative thinkers wanted to monetize the retail and eCommerce possibilities offered by that new and revolutionary tool, the World Wide Web (WWW) and the Internet.
So…How did We All End Up Shopping Online?
In 1991 the National Science Foundation lifted its restrictions on the commercial use of the Internet so that online shopping could take off. For our purposes let’s agree that online shopping or eCommerce arrived in North America in the early 1990s. This required the coming together of a few elements. First we needed enough people with home computers who wanted to shop online. To this point in its history the Internet had been seen mostly as a place for business to exchange ideas and information. Next, we needed secure methods for payment. For any new technology to be successful people have to trust it. In this case online shoppers were giving retailers, in most cases people they had not met or seen, access to a fair bit of personal data such as their name, address, email address, phone number and most importantly their credit card numbers. Peoples’ concern about Internet security for their financial transactions may seem somewhat unimportant now as the Internet, for the most part, has secured trust on the part of consumers. Most people don’t think twice now about their financial security when filling in an online order form to buy a book, or medication, or a new appliance and sometimes the purchase is coming from an offshore provider whose brand name the consumer may not recognize.
Before online shopping the Internet had primarily been used for Business to Business, B2B operations. Internet shopping would change that model to millions of B2C or Business to Consumer transactions. This was a big step but it didn’t take long to cross that business and psychological divide. The world was catching on to the possibilities of eCommerce and Internet shopping. Techies and business gurus started to write about this phenomenon. 1992 saw the publication of “Future Shop: How Technologies Will Change the Way We Shop, and What We Buy”. This book, not about or by the electronics shop of the same name, provided some insights and predictions on the future of online consumerism.
Domain Names….the Places Where Business Lives on the Internet
So, retailers and manufacturers needed a spot to live on the Internet. They needed a website and that required a domain name. In September of 1995 there were 120,000 businesses with domain names. Three short years later there were more than 2,000,000 businesses and individuals with domain names. That number was growing at an amazing rate as people came to understand the power of the Internet for presenting their product or service to the world.
That stunning growth rate has been maintained in the intervening years and will continue. Global Industry Analysts Inc. predict that by 2024 there will be 536,000,000 separate website addresses on the WWW. While the focus in the past has been on business addresses, recent developments include more and more personal web space including blogs and specialized and premium domain names that are short and easy to remember.
Some of the early adopters of this new world of eCommerce are names that you all know because they have learned to capitalized on this new way to merchandise their products …and generally at less expense to them than having a brick and mortar operation. Who hasn’t heard of eBay, or Amazon or Apple? These are three of the leaders in eCommerce. They’ve set the standard for online marketing businesses from around the world. Many other firms are playing a game of catch-up in an attempt to grab their share of the online sales market.
eCommerce Takes Shape and Grows
As with any new development eCommerce evolved over a period of time. And it wasn’t without it glitches or problems. Businesses engaged in online shopping had to develop their brand, establish a user friendly website, create reliable payment methods, have an adequate supply chain for the products they offered and establish systems for the delivery and return of their products. Some businesses faltered along the way due to the failure of any of these important steps.
An early stage of the eCommerce revolution was the ’.com’ phase that ran from the mid to late 1990s and ran through to the early 2000s. This was the phase that launched such entities ad PayPal and eBay. Many others business ventures attempted to offer online shopping about this time but fell by the wayside, victims of poor planning or substandard websites. Models of eCommerce that generated revenue and profits generally made it through.
Once there were a number of successful online shopping stories, many of the well-established brick and mortar businesses saw their sales fall off. An increasing percentage of their business was lost to online traders. A number of astute traditional retailers realized that their previously strong foothold in the retail market was being eroded and to survive and prosper they had to change and run parallel sales operations online.
At present we’re at a stage where the modern consumer is savvy to the commercial world and realizes that there are a number of shopping options available. Both the traditional retail mall or shop approach and the fast growing eCommerce are competing for his or her attention and shopping dollar.
Who are the Big Players?
Amazon, Wal-Mart and Apple, all household names dominate the eCommerce world in North America at present. eMarketer has a presence in 70 countries and lists as clients two thirds of the fortune 500 companies. They report that in a 12 month period in the last year Amazon was the leader of the sales pack with $94.7 billion in online sales. Amazon also had a 19.4% increase in sales growth over the previous year’s sales. This figure represented 70% of the company’s total revenue.
Apple had an amazing increase of 40% in year over year online sales which totalled $16.8 billion but this was only 7.7% of its total sales. Wal-Mart’s online sales represented only 3% of its total annual revenue but its growth in eCommerce was a healthy 9%. Recent business reports tell us that Wal-Mart is aware of this gap on the other big players and is taking steps to increase their eCommerce performance. All the major players in the retail world are focusing on ways to increase and insure their position in the Internet marketplace.
eCommerce is still a relatively new phenomenon. While it may be difficult to maintain the amazing growth rates we’ve seen in online sales over the last decade there is still lots of room to run and to grow this revolutionary way of doing business.
