The present, past and future of e-commerce in 2020

Looking at how radically e-commerce changed over the last 20-25 years, it is difficult not to become enthusiastic about its promising future. But let’s take a step back and look at some of the landmark events in its rich history. We will go through the history of e-commerce dating from the 1970s, cover major technological trends that define the industry today, and talk about how COVID-19 and the pandemic have impacted online businesses.

The history and the future of e-commerce

A few know that e-commerce started with selling cannabis over the Internet. Back in 1971, a group of Stanford and MIT students used the early version of the Internet, the ARPAnet, to facilitate the world’s first online trade, the sale of cannabis. It may hardly be seen as a purely online sale, considering that this is an illegal product. The only thing the students used ARPAnet for was arranging the meetings to sell the cannabis offline. Anyway, this transaction laid the groundwork for all future online transactions that would take place decades later.

In the 1980s, CompuServe became the first popular networking service among regular PC users. It provided services like email, chat rooms, and message boards. By the mid-1980s, CompuServe added another service called Electronic Mall, where consumers could purchase products from more than one hundred online retailers. Unfortunately, the mall did not meet the expectations of CompuServe and did not become very popular among consumers, but it was the first example of a marketplace as we know it today.

If you’re a millennial, everything will be more or less familiar from this point on.

Hypertext-based web

In 1990, Tim Berners-Lee at the European Organization for Nuclear Research proposed a hypertext-based web, the WorldWideWeb, using a browser as a navigational tool.

A year later, the National Science Foundation lifted a ban on commercial operations on the web, thus setting things in motion for businesses that could operate online.

In 1993, Marc Andreessen from the National Center for Supercomputing Applications introduced the first widely distributed browser called Mosaic.

In 1994, Netscape announced the release of a security protocol called Secure Socket Layer (SSL) that encrypted the transmission of messages (like names, credit card information, emails, addresses, and so forth). That was a crucial achievement that ensured the secure transmission of personal information over the Internet, paving the way for the future of e-commerce.

Online credit sales

Thanks to this technological achievement, the years of 94 and 95 saw the first third-party services for processing online credit card sales, First Virtual and CyberCash. Around the same time, Verisign developed the digital IDs/certificates that verified the legitimacy of online businesses; later though, the company switched its business model to verifying the proper encryption of website’s e-commerce servers.

Amazon and eBay as lead for other e-commerce businesses

However, it was not until the mid-1990s that e-commerce was transformed thanks to Amazon and eBay, who took the lead for all other e-commerce businesses.

In 1995, Jeff Bezos sold his first book on Amazon.com, which was to become the biggest marketplace ever. Bezos was quite ambitious – he wanted to turn Amazon into the "largest bookstore on earth." For the first 30 days, he achieved even more than he expected – Bezos sold books online to consumers in all 50 states and in more than 40 countries. The reason behind choosing books as opposed to anything else was not accidental but rather a careful and well-thought plan of action – books were cheap to ship, easy to store, and ordered directly from the publishers. Moreover, by 95, publishers had created vast amounts of data on books they held in possession on CD-ROMs, so it was easy for Bezos to upload that information on the website.

Soon, Amazon became the standard for a customer-oriented e-commerce site. Users could search for available titles by keyword, author, or subject, browse books by category and review products, and later – receive personalized recommendations and buy books with the patented ‘one-click” check-out system.

In 1997, Amazon went public and by the time of the dot com bubble, the company had become an established business.

Soon Amazon expanded its offerings beyond books and included music, movies, electronics, toys, home and garden equipment, and so forth.

However, despite such a huge success, Amazon only became profitable in 2001. In 2008, Amazon announced a profit increase of 33 percent, an impressive achievement during the financial crisis, when most of the companies rather lost than gained.

In 1995, when Bezos was shipping books from his garage, another self-made entrepreneur slash software engineer, Pierre Omidyar, was coding a simple website AuctionWeb, where he tested a hypothesis of users selling and bidding on each others’ items. As a first bid, Omidyar uploaded a picture of his broken laser pointer, which was sold the next day for $14.83. When Omidyar reached out for the buyer to ensure he knew that the laser was broken, the buyer replied that he was, in fact, a “collector of broken laser pointers.” AuctionWeb was the prototype of eBay, the website that changed the marketplace and democratized e-commerce: users didn’t have to be an entrepreneur to sell their stuff online. With only two employees, eBay sold products worth $7.2 million in 1996. By 2007, eBay sold $53 billion worth of goods, had more than 220 million users and more than 13,000 employees.

Dell as another important contributor

Another company that contributed to the e-commerce development process was Dell. This American electronics company located in Texas, which now stands as the third in computer sales after Hewlett-Packard and Acer. Back in 1994, Dell.com was launched as a static page; however, by 1997, it was the first company to book a million dollars in online sales. The company’s business model was quite admirable and has been replicated by many – selling goods online without any retail outlets or middlemen where customers can browse, choose, and assemble PCs piece by piece selecting components based on their preferences or budget.

Security payment requirements

The history of global e-commerce would not be complete without PayPal, which began its services in 1998 and currently operates in more than 200 markets. Paypal is an acquired bank that processes payments from online vendors. With more businesses switching online, the need for secure communication and transactions became apparent. But it was not until 2004, that the Payment Card Industry Security Standards Council (PCI) was formed to ensure businesses were compliant with the security requirements.

Mobile devices

The era of e-commerce on mobile devices started way back in 2001 when Amazon launched its first mobile website. However, it took a couple of decades for the mobile realm to become a full-fledged multibillion-dollar industry. By 2017, more than a third of online sales had been made on a mobile device. Both consumers and companies turn to mobile devices for product research and engagement through social media. The shift to mobile devices was a significant development that shaped e-commerce in the 2010s. Not only online retailers had to consider user experience for mobile shoppers, but also giants as Google had to reconsider their search algorithms back in April 2015 to incorporate sudden changes in user behavior, a phenomenon later dubbed as Mobilegeddon. The update was designed to give a boost in visibility to responsive and mobile-friendly websites and penalize those who did not meet the expectations of the mobile users. But it was not simply the sites’ visibility that mattered, it was also a major shift in consumer behavior with shoppers spending more time researching products before committing to a purchase. With the Internet almost at the tip of their fingers, consumers turn to the Internet reviews, browse products wherever they happen to be – on the bus, at work, during lunch, right before joining a queue at the store.

Social media

Right around the same time, social media changed the e-commerce landscape in its own regard. Moreover, social media has made brands more accessible to people and has changed the way businesses communicate with end-users. A brand’s social presence has become highly influential in how shoppers perceive the brand – users have started to expect companies to go digital and have a profile on social networks that, in their eyes, adds more credibility. Besides transparency and fierce competition, brands have become more open to new opportunities to sell their products online through their own commercial website or social media platform. Instead of asking users to go back to their site and look for the desired product, online retailers could appeal to users with the “buy” button directly from social media platforms.

Current development trends in e-commerce

Acing e-commerce website is about getting your website mobile-friendly and being aware of the forthcoming challenges that industry brings. Let’s briefly outline the development trends that shape the world of online shopping today.

Artificial intelligence (AI) is undoubtedly revolutionizing the world of e-commerce. According to Adobe, in 2018, 47% of digitally mature companies said they defined AI strategy in place. AI is leveraged for identifying market patterns, establishing dynamic pricing, segmenting customers based on their browsing history, offering personalized shopping experience, or recommending products.

Shopping has also become much more convenient with augmented reality: lifelike simulation of a product gives customers a better if not complete, picture of how something looks and feels in real life.

Loop Ventures forecasts that 75% of US households will own a smart speaker by 2025. There’s definitely a growing trend of people relying on voice assistants like Google Assistant or Alexa for anything from checking the weather to buying products online.

One of the responses to the ever-increasing mobile users is Progressive Web Applications (PWAs) that give mobile shoppers a native-app like an experience to work offline and allow push notifications.

E-commerce and COVID-19: present & future

COVID and the ensuing pandemic have had a significantly impact on all businesses, including e-commerce. Shifting consumer behavior, spikes in online sales, as opposed to store-based sales, and surges in web traffic have made online retailers adapt their operations to coronavirus challenges. Let’s briefly explore how a pandemic transforms the tech priorities and changes the e-commerce landscape.

E-commerce survey results

According to a Digital Commerce 360/Bizrate Insights survey of more than 1,000 online consumers during a week inApril 2020, almost 7% of shoppers have placed more orders online, 22% placed significantly more orders online, and 58% of online users expect to order even more online in the next few months, which means retailers need to adjust and prepare for the increase in traffic.

According to the same survey, shoppers have ramped up the following categories: food and drugs (55%), health and beauty (45%), cleaning products (30%), apparel (30%), pets (28%), home improvement (24%) – showing a clear and prominent tendency with shoppers trying to set up comfortable surroundings while they are stuck at home.

Because of such a shift in priorities and as more consumers get comfortable shopping online, retailers need to change their own behaviors, adopt new technologies, and roll out tools to help users make better and faster choices online.

However, as consumers are aware of the imminent recession that is more than likely going to follow the quarantine, they also start to search for better or cheaper deals. House-bound consumers now need extra motivation to spend – an important trend not to be overlooked. Businesses need to establish partnerships to incentivize buying with deals, loyalty perks and discounts. Partnerships may include strategic B2B partnerships, cooperations with mobile apps, affiliates, social influencers, publishers, and sponsors. For example, content partners, how-to or review websites, can promote online retailers’ coded discounts, free shipping, flash sales, and coupons, providing consumers with more reasons to spend. Also, stagnating inventory housed offline can be turned agile and into cash fast with deep-discount partners and deal websites.

The pandemic has definitely affected the warehouse procedures with more offline stores forgoing in-store foot traffic entirely and switching to home deliveries or curbside pickup – turning themselves into pickup points for online orders. Enhancing omnichannel fulfillment is another operational pivot that is happening with e-retailers at the moment.

According to the survey of 99 Narvar’s retailer clients prepared by the research consultancy Forrester Research Inc., 50% of retailers expect e-commerce to fare better than the rest of their business and 20% expect it to fare much better.

Adapting to the new reality has become a key priority for online retailers. Things like simplicity in navigation, product filters, website responsiveness, interactive and media features, the use of artificial intelligence for better product recommendations and personalized shopping experience – have all become crucial parts of business strategy to improve shoppers’ likelihood to purchase.

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About the author of this article

Evgeny Grigul
Co-founder Virto Commerce

Evgeny has more than 14 years of product & team development. Before joining Virto Commerce, he was responsible for successfully creating and delivering project management products to the marketplace by managing technical risks and opportunities. Evgeny holds a degree in physics from Emmanuel Kant State University.