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. But do you wonder how it started? What is the History of Ecommerce?
In celebration of Black Friday and Cyber Monday, we decided to play detective to find the truth behind the history of ecommerce. We wanted to uncover the first product to ever be sold online.
Our findings were pretty surprising.
What is Ecommerce? What is the History of Ecommerce?
We found that one of the first things ever purchased online was a large pizza from Pizza Hut in 1994. Just recently, Pizza Hut celebrated the 20th anniversary of that online transaction by giving all medium and large pizza orders 50 percent off when purchased online.
While it’s true that pizza was one of the first things purchased on the internet—there were actually other transactions made online before the inception of the Internet (as we know it) even existed.
In the 1970s, Stanford students used Arpanet (an early packet switching network and the first network to implement the protocol suite TCP/IP) accounts to engage in a transaction with students at MIT. They used the network to quietly arrange the sale, and purchase, of the first product ever sold through telecommunications—marijuana.
The key ecommerce pioneer, however, wasn’t Pizza Hut or Stanford students—no, it was actually someone purchasing a Sting CD on the 11th of August 1994. It was the first-ever ‘secure online purchase’, or ecommerce transaction when it was sold by US retail platform NetMarket.
Since that seminal transaction, commerce changed forever. Little did that Sting fan know, his transaction paved the way for ecommerce as we know it and it became the History of Ecommerce Today.
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 of 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.
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 PCs 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 on 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
Marketplaces Emerge – History of Ecommerce
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 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 catalog-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 – History of Ecommerce
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.
Mobile Expands – History of Ecommerce
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.
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