From Storefronts to Search Engines: A History of E-Commerce

Posted July 28, 2016 | By csponline

Various icons representing the history of ecommerce.

The internet has revolutionized the way people buy and sell goods. E-commerce is on the rise, with innovations in networking and computer technology occurring at a rapid pace. In fact, more than 10 percent of all retail transactions in the United States were attributed to e-commerce in 2015, with sales totaling more than $300 billion. That’s a growth rate of 14.6 percent from the previous year.

E-commerce has a rich history, starting with primitive electronic data transactions in the 1960s and the first online retail transaction in 1994 all the way up to the present-day popularity of e-commerce giants such as Amazon and eBay. By looking at some of the landmark events in e-commerce’s history, it’s easy to see why the time is ripe for business leaders to take advantage of the myriad opportunities online retail provides.

The Origins of E-Commerce

Even during the 1960s, businesses conducted electronic transactions via primitive computer networks. Through Electronic Data Interchange (EDI), they were able to share business documents with other companies’ machines. During the same time period, the military created ARPAnet, which enabled important information to be circulated in the event of a nuclear attack. These innovations laid the groundwork for e-commerce as it is known today. In fact, when ARPAnet switched to Transmission Control Protocol and Internet Protocol (TCP/IP) in 1982, it utilized the same type of technology that powers the internet of today.

In the early 1980s, research universities were still the primary owners of computers. However, those who had access to computers could send emails and share documents through networks like BITNET and USENET. For home PC users, CompuServe was the major service provider of message boards, chat rooms and more. CompuServe introduced the Electronic Mall in 1984, which allowed users to purchase from more than 100 online retailers. The service wasn’t a big success, but it was one of the first examples of online retail. Then in 1991, the National Science Foundation lifted its ban on commercial internet use. This historic move made e-commerce possible.

Security was the next big issue, and the release of Netscape 1.0 in 1994 featured a protocol called Secure Socket Layer (SSL) that kept both the sending and receiving side of an online transaction secure. SSL made sure that personal information could be encrypted on the web. The first third-party credit card processing companies were launched shortly after. This made the first ever secure online retail transaction possible. On August 11, 1994, The New York Times reported that a man named Phil Brandenberger from Philadelphia purchased a Sting album from his computer. This opened up a staggering opportunity for innovative entrepreneurs to capitalize on this emerging trend. With the advent of Amazon and eBay the following year, it’s an understatement to say that the pace of e-commerce sped up soon after.

A Tale of Two Titans: Amazon, eBay and Modern E-Commerce

Amazon and eBay are the two companies responsible for revolutionizing e-commerce. Amazon in particular created one of the first full-scale business models for online retail. Jim Bezos, Amazon’s founder and CEO, sold the company’s first ever book in July 1995. Within its first month of business, Amazon had sold books to shoppers in every state and 45 countries. Though there are many reasons for Amazon’s success, one of the most significant was timing: Bezos got into e-commerce when the time was right. He had virtually no competition and was able to tap into a booming market. Amazon was also able to create a customer-oriented e-commerce site with searchable titles, browsing by category and user-generated reviews. After going public in 1997, Amazon continued to expand its inventory beyond books and now sells almost anything users can think of, from electronics to clothing, movies and more.

During the same year that Bezos launched Amazon, eBay got its start. Pierre Omidyar started a site called AuctionWeb that allowed users to bid on each other’s used items. It was innovative in its own way, leveling the playing field so that the average person, rather than just entrepreneurs and tech experts, could sell things online. And the idea really caught on: By 2007, eBay was earning $52.5 billion in auctions and had more than 220 million users.

Thanks in large part to these two companies, today’s e-commerce merchants enjoy a highly developed and specialized market, and users can buy almost anything online. E-commerce is also a smart choice for entrepreneurs, especially because launching an online store no longer requires high overhead and extensive technical expertise. According to BigCommerce, the average cost to build an online store in 1999 was about $100,000 — and that didn’t include purchasing inventory, a warehouse space or shipping logistics. Today, startup costs can be as low as $30 and stores can launch in a weekend, the same article notes.

Because e-commerce is the fastest-growing segment within retail and it’s easier than ever to get involved, now is an ideal time for entrepreneurs to invest in e-commerce. As Amazon and eBay make clear, “online retailers who get in early will have a larger share of the pie,” BigCommerce says.

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