E-commerce
E-commerce (electronic commerce) refers to the buying and selling of goods and services over the Internet or other electronic networks[1]. The term encompasses online retail transactions, electronic funds transfers, supply chain management, Internet marketing, and automated data collection systems. Global e-commerce sales reached $5.78 trillion in 2023, according to eMarketer, with projections suggesting growth to $8 trillion by 2027.
The roots of e-commerce trace back further than most people realize. Electronic Data Interchange (EDI) systems emerged in the 1960s, allowing businesses to exchange standardized documents electronically. These early systems replaced paper-based ordering processes between suppliers and buyers.
Historical development
The history of e-commerce spans several decades of technological and commercial innovation.
Early foundations (1960s-1970s)
Electronic funds transfer (EFT) systems appeared in the early 1970s, enabling banks to exchange financial information electronically. The ARPANET, precursor to the modern Internet, facilitated early experiments in networked commerce. CompuServe launched in 1969 as a computer time-sharing service, later evolving into an early online service provider.
Pre-Internet era (1979-1990)
Michael Aldrich invented online shopping in 1979 by connecting a modified television to a transaction-processing computer via telephone line. This system enabled real-time transaction processing. The Boston Computer Exchange launched in 1982 as the world's first electronic marketplace, facilitating computer parts sales. CompuServe introduced its Electronic Mall in 1984, hosting products from approximately 100 merchants.
World Wide Web emergence (1991-1995)
Tim Berners-Lee's World Wide Web opened to the public in 1991, creating the foundation for modern e-commerce. The first recorded online purchase occurred on August 11, 1994, when Phil Brandenberger bought a Sting CD for $12.48 through NetMarket, using encryption to protect his credit card information.
Amazon.com launched in July 1995 as an online bookstore from Jeff Bezos's garage in Bellevue, Washington. Pierre Omidyar founded eBay the same year as AuctionWeb, selling a broken laser pointer as his first item. These platforms would grow to dominate their respective markets[2].
Dot-com era (1996-2001)
Internet adoption accelerated rapidly. AOL connected millions of American households to the web. Venture capital flooded into e-commerce startups. Pets.com, Webvan, and eToys became symbols of both the era's optimism and its excesses.
The dot-com bubble peaked in March 2000. NASDAQ reached 5,048 points before collapsing. Many prominent e-commerce companies failed. Pets.com shut down after just 268 days of operation. However, surviving companies emerged stronger with improved business models.
Maturation period (2002-2010)
PayPal's merger of Confinity and X.com created the dominant online payment platform. Google AdWords revolutionized e-commerce marketing through pay-per-click advertising in 2000. The Payment Card Industry Security Standards Council formed in 2004, establishing security protocols for online transactions.
Amazon expanded beyond books into electronics, clothing, and nearly every retail category. eBay acquired PayPal in 2002 for $1.5 billion. Alibaba grew to dominate Chinese e-commerce under Jack Ma's leadership.
Mobile and social era (2010-present)
Smartphone proliferation enabled mobile commerce growth. Shopify, founded in 2006, democratized e-commerce by providing accessible store-building tools. Social commerce emerged through platforms like Instagram and Pinterest. The COVID-19 pandemic accelerated e-commerce adoption by approximately five years, according to IBM's U.S. Retail Index[3].
Types of e-commerce
E-commerce encompasses several distinct business models.
Business-to-Consumer (B2C) involves companies selling directly to end consumers. Amazon, Walmart.com, and Target.com exemplify this model. B2C transactions typically involve smaller order values but higher transaction volumes.
Business-to-Business (B2B) encompasses transactions between businesses. Alibaba.com connects manufacturers with wholesale buyers. B2B e-commerce often involves larger order values, negotiated pricing, and longer sales cycles.
Consumer-to-Consumer (C2C) platforms facilitate transactions between individuals. eBay pioneered this model through auctions. Etsy connects crafters with buyers. Facebook Marketplace enables local peer-to-peer sales.
Direct-to-Consumer (D2C) bypasses traditional retail intermediaries. Brands like Warby Parker, Casper, and Dollar Shave Club sell directly to consumers through their own websites. This model allows greater control over brand experience and higher margins.
Consumer-to-Business (C2B) reverses traditional commerce flows. Freelance platforms like Upwork let individuals sell services to businesses. Stock photography sites enable photographers to license images to corporate buyers[4].
Technology infrastructure
Several technologies enable modern e-commerce operations.
Shopping cart software manages product catalogs, customer sessions, and checkout processes. Popular platforms include Shopify, WooCommerce, Magento, and BigCommerce. Enterprise solutions from Oracle and SAP serve larger retailers.
Payment gateways process transactions securely. Stripe, PayPal, Square, and Braintree handle payment authorization, fraud detection, and settlement. Security standards like PCI-DSS govern cardholder data protection.
Content delivery networks (CDNs) distribute website assets globally. Cloudflare and Akamai reduce page load times by serving content from geographically proximate servers. Speed directly impacts conversion rates.
Warehouse management systems coordinate inventory, picking, packing, and shipping. Fulfillment networks like Amazon FBA and ShipBob handle logistics for sellers lacking warehouse infrastructure.
Impact on traditional retail
E-commerce has fundamentally transformed retail economics.
Physical retailers face what analysts call the "retail apocalypse." Department stores like Sears, JCPenney, and Macy's have closed thousands of locations. Shopping malls struggle with rising vacancy rates. Borders, Circuit City, and Toys "R" Us represent prominent casualties.
Successful traditional retailers have developed omnichannel strategies. Target offers same-day delivery and curbside pickup. Walmart invested heavily in online capabilities and acquired Jet.com in 2016. Best Buy survived by matching online prices and emphasizing service.
Some advantages remain for physical retail. Consumers can touch products before buying. Immediate gratification requires no shipping wait. Complex purchases may benefit from in-person assistance. Experiential retail concepts attract foot traffic through unique environments.
Challenges and considerations
E-commerce presents distinct operational challenges.
Cart abandonment affects most online retailers. Studies consistently show abandonment rates between 65-80%. Unexpected shipping costs represent the leading cause. Checkout complexity and security concerns also contribute.
Returns create logistical and financial burdens. Clothing categories see return rates exceeding 30%. Free return shipping has become a competitive expectation. Processing returns requires reverse logistics infrastructure.
Customer acquisition costs have risen steadily. Google and Facebook advertising prices increase annually. Building organic traffic requires sustained content marketing investment. Customer lifetime value must justify acquisition spending.
Cybersecurity threats require constant vigilance. Data breaches damage brand reputation and incur regulatory penalties. Payment fraud costs billions annually. Maintaining secure systems demands ongoing investment[5].
| Infobox5 — recommended articles |
| Digital marketing
Supply chain management Customer relationship management Online marketing Payment systems Logistics Retail management Consumer behavior |
References
- Laudon, K.C. and Traver, C.G. (2021). E-Commerce 2021: Business, Technology, Society, 16th edition, Pearson
- Chaffey, D. (2019). Digital Business and E-Commerce Management, 7th edition, Pearson
- Turban, E. et al. (2018). Electronic Commerce 2018: A Managerial and Social Networks Perspective, 9th edition, Springer
- U.S. Census Bureau. Quarterly Retail E-Commerce Sales Reports
Footnotes
<references> <ref name="p1">IBM (2024). What is Ecommerce?</ref> <ref name="p2">Britannica Money (2024). E-commerce: Definition, History, Types, Examples, & Facts</ref> <ref name="p3">Miva Blog (2024). The History of Ecommerce: How Did It All Begin?</ref> <ref name="p4">Wikipedia (2024). E-commerce</ref> <ref name="p5">eMarketer (2023). Global E-commerce Sales Statistics</ref> </references>