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E-commerce

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E-commerce includes a wide range of business activities such as online retail sales, supplier purchases, online bill paying, and Web-based auctions. These activities can be categorized into three main types of e-commerce: Consumer to Consumer (C2C), Business to Business (B2B), and Business to Consumer (B2C).[1]

A popular form of e-commerce is online shopping, allowing sellers to provide goods or services to consumers over the internet. E-commerce has allowed companies to expand their consumer base and global reach[2]. Even small companies, such as hair and nail salons, have benefited from e-commerce by providing a website for the sale of related health and beauty products that generally are available only to their local customers[3].

History

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E-Commerce was first introduced 50 years ago.[4] Since then, e-commerce has helped many businesses grow with the help of new technologies, improvements in internet connectivity, added security with payment gateways, and widespread consumer and business adoption[2].

1970s–1980s

Introduction of new technologies such as the Electronic Data Interchange and Teleshopping. Allowed transfer of orders, invoices, and other economic transactions[5]

1980s–1990s

Emergence of new technologies and ecommerce platforms. The credit card and ATM set a foundation for the world of e-commerce. The Boston Computer Exchange and Minitel are the first most global e-commerce platforms[1]

1990s–2000s

Tim Berners-Lee and Robert Cailliau created the World Wide Web. The first web browser and server was created. In addition, HTML, HTTP, and URL were developed. During the mid-nineties, many e-commerce websites like eBay and Amazon.com were first developed[6]

2000s–2010s

Hundreds of e-commerce services such as online food ordering, media streaming, online advertising, online marketplace, brick and mortar retailers, e-commerce payment systems, and online storefronts emerge[7]

2010s–2020s

Emergence of smart devices and social media has driven the growth of e-commerce transactions from 4.6% to 10.7%. Increase in market consolidation from large corporations such as Alibaba, Amazon, and Walmart[8]

Timeline

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  • 1969: CompuServe, the first major American e-commerce company, is founded.[1]
  • 1979: Michael Aldrich invents electronic shopping.[1]
  • 1982: The Boston Computer Exchange, a bulletin board system-based (BBS) marketplace for selling used computers, launches. This is one of the first, if not the first, ever platform for e-commerce.[9]
  • 1982: Minitel, a pre-Internet Videotex online service, launches. This service could only be used in France.[10]
  • 1984: Electronic Mall by CompuServe, an online marketplace, launches. It offered pictures of products in full color.[11]
  • 1986: The United States (US) National Science Foundation (NSF) limits the use of the National Science Foundation Network (NSFNET) for academic purposes only[12]
  • 1990: Tim Berners-Lee releases the first-ever web browser called WorldWideWeb. Millions who have access to the internet can now browse e-commerce platforms with greater ease.[13]
  • 1992: Book Stacks Unlimited, an online marketplace for selling books, launches. Initially, it launched on BBS, then moved to the internet in 1994
  • 1994: Netscape launches Netscape Navigator, a web browser[14]
  • 1994: Ipswitch IMail Server became the first software to be sold online and then be available for immediate download[15]
  • 1995: The NSF lifts its ban of internet commerce on NSFNET[16]
  • 1995: Amazon.com, an online marketplace, is launched by Jeff Bezos.[17]
  • 1995: eBay.com, an online marketplace, launches. Initially, eBay.com was called AuctionWeb.[18]
  • 1995: DoubleClick, an advertising company, launches. This is one of the first services to serve ads on the internet.[13]
  • 1997: Netflix, a subscription video-on-demand service, launches. Netflix also offers a DVD delivery service. Netflix only began offering online video streaming in 2007.[19]
  • 1998: AOL acquires CompuServe[20]
  • 1998: PayPal, an online payment system, launches.[21]
  • 1999: Alibaba.com, a Chinese online marketplace, launches.[22]
  • 2000: Google launches AdWords, an advertising service that allows users to show an advertisement in Google search results that is related to the viewer's search.[1]
  • 2000: Walmart launches its website, allowing customers to shop online.[23]
  • 2001: Costco launches its own business-to-business online shopping system.[24]
  • 2002: eBay.com acquires PayPal for $1.5 billion in stocks.[13]
  • 2005: Amazon launches its Amazon Prime service, which allows users to expedite shipping on any purchases for a flat annual fee[1]
  • 2005: Shopify, a storefront service, launches.[1]
  • 2007: Facebook launches its Facebook Beacon service to display more relevant information to users by collecting data on their web browsing outside of Facebook. With this, Facebook can also promote products based on whatever is appropriate.[25]
  • 2007: Flipkart, an Indian online marketplace, launches.[26]
  • 2007: AmazonFresh, an online food ordering service, launches in Seattle. It has since spread to dozens of cities across the US.[27]
  • 2008: eBay.com acquires PayPal Credit (formerly known as Bill Me Later).[28]
  • 2009: BigCommerce, an online storefront service, launches.[1]
  • 2009: Bitcoin cryptocurrency launches, changing how consumers can pay for online purchases or even in restaurants.[13]
  • 2011: Google Wallet, an online payment system similar to PayPal, launches.[1]
  • 2011: Facebook Beacon is shut down due to privacy concerns.[1]
  • 2012: Instacart, an online food ordering and delivery, launches.[29]
  • 2013: Facebook begins letting users sponsor posts, which helps give their posts or products more publicity among their friends, followers, and those to whom the post is relevant.[13]
  • 2013: China becomes the largest e-commerce market in the world.[30]
  • 2014: Apple Pay, a payment system in the form of a mobile app that mimics a credit or debit card, launches.[1]
  • 2014: Jet.com, an online marketplace, launches.[1]
  • 2015: Google launches Android Pay, a payment system similar to Apple Pay[1]
  • 2014: Singles' Day sales on Alibaba sites reach US$9.3 billion.[13]
  • 2015: Cyber Monday sales set a new record of $3 billion.[13]
  • 2016: Walmart announces it will be acquiring Jet.com for $3 billion.[31]
  • 2016: Alibaba announces it will be acquiring a controlling stake in Lazada Group for around US$1 billion.[32]
  • 2016: Singles' Day sales on Alibaba sites reach US$17.7 billion.[33]
  • 2017: Instagram enters the eCommerce game with shoppable posts[34]
  • 2018: Walmart acquires Flipkart
  • 2019: ECommerce sales reach$3.5 trillion[1]
  • 2020: Record high global transaction of $82.5 billion driven by the COVID-19 pandemic[1]

Business Application

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Pros and cons

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Pros

  • Lower costs - companies avoid high overhead cost, rent, utilities, and do not have to own a physical store [35]
  • Global market place - customers are not limited by geography [2]
  • Access for 24 hours - e-commerce stores can operate at any time of the day [2]
  • Flexibility and speed to change product - products can be changed quicker compared to rearranging a physical space [2]
  • Collecting consumer data - allows companies to create customized user experience and retargeting marketing efforts [2]
  • Scalability - e-commerce sites can handle a high volume of orders [2]
  • Faster buying/selling procedure - consumer avoid waiting in a line a visiting a physical store [2]
  • Ease of Communication - e-commerce platforms connect consumer information that allows direct contact with consumers for future inquiries [2]

Cons

  • Reliance on technology - consumer base is limited to those who have internet access device and sufficient internet service [2]
  • Competition - competition is a global scale, and competitors have access to a company's prices and products [2]
  • Security and cybercrime - increased risk of phishing attacks, fraudulent orders, and identity theft [2]
  • Lack of personal interaction - lack of face-to-face connections make it more challenging for companies to create relationships with consumers [2]
  • Logistic issues - efficient logistics is need to guarantee consumer receive product or service in a timely manner [2]
[edit]

The global market size for B2B transactions is expected to reach $63 billion by 2026 at a compound annual growth rate of 6% from 2019. [36]

The growth of e-commerce is driven by an increase in global trade, initiatives from developed countries for a cashless economy, and consumer preference and trust in online payments. Going forward, the convenience of 24/7 shopping, the ability to buy hard-to-find or specialty items, and the ease of comparison shopping are all expected to add to the continued growth of e-commerce. [37]

United States

E-commerce spending in the US is expected to reach $375 billion. Statista estimates that by 2024, e-commerce spending will reach $476 billion, with retail e-commerce being 153.6 billion. [38] COVID-19 has accelerated the transition of transactions to e-commerce. Large brick and mortar companies were forced to transfer their business online to adjust to new consumer preferences due to the pandemic. Since April 21, e-commerce sales have increased by 129% in the US and Canada. Online retails have seen the highest growth in orders at a 146% growth since April. As a result, e-commerce in the US is expected to be $709.78 billion at the end of 2020.[39]

United Kingdom

The United Kingdom reaches a record high of retail sales from February to May 2020, which equates to online retail sales in the past ten years. [40]

Impacts

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Impact on supply chain management

The growth of e-commerce has led to an increase in demand for shorter product life cycles, higher inventory turnover, and more efficient logistic services. As a result, warehouse facilities are seeing many products go in and out of stock. To avoid price erosion, producers are increasing their inventory and broadening their assortment. Warehouses are now separating their inventory by stock vs storage and online vs retail sales. In addition, warehouse facilities are increasing their technology expenditures to oversee their logistics and use a larger variety of packing services. [41]

Impact on employment

The growth of e-commerce has increased the demand for e-commerce related jobs by twice the number over the past five years. In addition, the number of e-commerce jobs is up 334% (178,000 jobs) since 2002. In exchange, the number of traditional retail jobs available has significantly decreased. [42]

Impact on customers

Customer preference has shifted from in-person purchases to online transactions. This year, 51% of Americans now prefer to shop online compared to in-store. [43] Consumers are also increasing the number of transactions they are making online. In a survey from Forbes, "96% of Americans with access to the internet have made a purchase online at some point in their lives and 80% have made a purchase online in the past month." [44] Today, the largest demographic of online shoppers are millennials at 67%, followed by Gen X at 56% and baby boomers at 41%.

The increase in demand for online transactions has also influenced the marketing efforts of companies. Social media have allowed consumers to share and buy products online easily. As a result, e-commerce shoppers are now more influenced to purchase a product based on peers' recommendations or trusted sources such as influencers. Because of this, companies are focusing on influencer marketing through sponsored content partnerships with both large and small influencers. This trend is expected to grow by 65% in 2020 and 2021. [45]

Impact on traditional retail

E-commerce has forced many large retailers such as Walmart, Macy's, and Bebe, to adapt to the digital economy. Retail stores that have adopted e-commerce platforms have expanded their consumer reach and improved their bottom line. On the other side, companies like Forever 21, which have been slow to adapt to the digital economy, have struggled and even declared bankruptcy. [46][47][48]

In addition, the number of online transactions passed the number of general merchandise transactions in February 2019. This includes stores like department stores, warehouse clubs, and supercenters. The main driving factor has been e-commerce platforms like Amazon taking away the shipping price and consumers becoming more comfortable with e-commerce platforms. [49]

For small businesses, e-commerce helps companies reach a larger audience, sell directly to consumers, and diversify the product offerings. According to 23% of small business owners, e-commerce has allowed them to survive after the COVID-19 pandemic. [50]

Future of Ecommerce

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In 2022, the US's e-commerce revenue is expected to be $479 billion, driven by the toys, hobby, and DIY segments. As technology development in AI and smart devices enhances, e-commerce is expected to allow transactions across these different platforms seamlessly. Companies that use multiple go to market strategies for e-commerce are expected to outperform those who do not by 30%. By 2023, five countries are expected to eliminate cash and launch a digital currency. [51][52]

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