What is E-Commerce? [E-Commerce Guide Series]

What is E-Commerce?

Definition of E-Commerce

E-Commerce – noun – commercial transactions conducted electronically on the internet.

E-commerce Definition: E-Commerce (Also written as ecommerce, e commerce & electronic commerce) is the activity of buying or selling of any products and/or services online or over the internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems and automated data collection systems.

Mobile Commerce; also known as M-Commerce and m commerce, was coined in 1997 by Kevin Duffey to mean “the delivery of electronic commerce capabilities directly into the consumer hand, anywhere, via wireless technology”. Mobile commerce has grown to be worth $230 billion, with Asia representing almost half of the market. M-Commerce made up 11.6% of total e-commerce spending back in 2014, estimated to reach around 45% by 2020.
 
Electronic Funds Transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or even across multiple institutions, via computer-based systems, without the direct intervention of bank stuff.
 
In commerce, supply chain management (SCM), the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption. Supply-chain management is defined as the “design, planning execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally”.
 
Internet Marketing is known by many different names, such as; Online advertising, online marketing, internet advertising or web advertising. Internet marketing is a from of marketing and advertising through the internet to deliver promotional marketing messages to your potential consumers. 
 
Online Transaction Processing (OLTP) is information system that facilitate and manage transactions-orientated applications, typically for data entry and retrieval transaction processing.
 
Electronic data interchange (EDI) is the concept of businesses communicating electronically certain information that was traditionally communicated on paper. The two classic examples of such information are purchase orders and invoices. Standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements.
 
Inventory management software is a software system for tracking inventory levels, orders, sales and deliveries. It can also be used in the manufacturing industry to create a work order, bill of materials and other production-related documents. Inventory management software is usually used by business to avoid overstocking and outages.
 
Data collection is the process of gathering and measuring information on targeted variables in an established systematic fashion, which then enables one to answer relevant questions and evaluate outcomes. 
 

History of E-Commerce

E-Commerce During the 1960's

E-Commerce history goes back almost 60 years, having started out in the 1960’s, when electronic data interchange allowed companies to carry out electronic transactions – This was just a small precursor of what was to come in the near future. The late 60’s saw the founding of CompuServe (Also know as “CompuServe Information Service” or “CIS”), who would become majorly influential in the world of e-commerce by the 90’s.

E-Commerce During the 1970's

In 1979, English inventor Michael Aldrich connected a TV set to a computer using a phone line, and thus “teleshopping” was born – meaning shopping at a distance. This was seen as the main predecessor to online shopping, he came up with the idea while out with his wife, where he complained about their weekly shopping expedition. 

E-Commerce During the 1980's

The 1980’s saw e-commerce taken to a new level than ever before – It was in 1981 that the first business-to-business (Also known as B2B) transaction was performed by Thomson Holidays. During this period B2B online shopping would become more profitable than anyone had anticipated, while business to consumer (Also known as B2C) wouldn’t be quite as successful until the much later use of PC’s and the World Wide Web, once these became affordable for most people, B2C sales would rocket too. By 1984 the “Electronic Mail” was launched by CompuServe – It allowed users to purchase items from 110 online merchants. 

E-Commerce During the 1990's

In 1990, Tim Berners Less published a proposal to build a “Hypertext Project” called “WorldWideWeb”. This was the first ever example of a web browser, and granted millions of people access to the internet, which in turn allowed them to browse e-commerce platforms with ease – Not only did this give millions of people access to the internet but also gave birth to URL, HTML & HTTP. 1991, was also the year that The National Science Foundation allowed the internet to be used for commercial purposes – it had only previously been allowed for academic purpose – this saw phenomenal growth in online shopping. In 1994, online retailer “NetMarket” made the first ever secure retail transaction on the web, selling a copy of Sting’s album: “Ten Summoner’s Tales”. 

Within the same year, Joe McCambley ran the first ever online banner advert, setting it live on HotWired.com and promoted 7 art museums. The year 1995 was a great year for e-commerce as a whole, with Jeff Bezos launching Amazon.com, and Pierre Omidyar launching eBay.com – The two business went on to become two of the biggest online marketplaces to ever exist, and this is still true to this day. Another breakthrough in 1995, was the registering of domains, when the National Science Foundation began charging a fee for people to register their own domain name. 120,000 registered domain names were present online at that time; fast forward 3 years, to 1998, and there were over 2 million registered domain names. Netflix wasn’t far behind Amazon and eBay, launching in 1997, offering a DVD delivery service.

CompuServe, the company responsible for the “Electronic Mail” in the 80’s, was acquired by AOL in 1998, the same year that PayPal was launched. It was in 1999, that Amazon truly started its journey to becoming the biggest e-commerce store the world has ever seen, patenting their 1-click service, which allows users to make faster purchases online.

E-Commerce During the 2000's

In late 2000, Google launched AdWords; an advertising service that allows users to show an advertisement in Google search results that is related to the viewer’s search. In the same year, Walmart launched their own website, allowing their customers to shop online – Walmart would go on to become one of the biggest retailers in the US. In 2001, Costco officially launched their own business-to-business online shopping system, and Skrill; a prominent online payment platform was launched.

It was in 2002, that eBay started to make their presence known in the world of e-commerce, acquiring PayPal for a whopping $1.5 billion in stocks. Later on, in 2008, they also acquired PayPal Credit (formerly known as “Bill Me Later”), as well as acquiring Tradera, StubHub and Magento in 2006, 2007 and 2011 respectively. Social commerce – people using social media in their buying decision – was born during 2005, thanks to the rise of Facebook, with Amazon launching their Amazon Prime service during the same year.

E-Commerce Now

In the last 8 years, e-commerce has come a long way. In 2011, Google launched Google Wallet; a payment system similar to PayPal. Then, in 2015, they launched Android Pay; a payment system similar to Apple Pay, which was launched a year earlier. In 2013, China reached an incredible milestone, becoming the largest e-commerce market in the world, surpassing all other markets in the world; they now remain the single largest e-commerce market in the world.

Two years later, in 2015, Cyber Monday set new records, with sales reported to be worth around $3 billion, more than had ever been taken before. In the same year, Singles’ Day sales from Alibaba.com were reported to have reached $14.3 billion, to then go on and break this record a year later, with sales reported at $17.7 billion. In 2017, e-commerce reached an mind-boggling $2.3 trillion with predictions saying it could hit as much as $4.5 trillion by 2020.

Check out this complete timeline of e-commerce: https://en.wikipedia.org/wiki/Timeline_of_e-commerce

Examples of E-Commerce

There are millions of successful e-commerce examples, many of which have never and likely will never reach the heights of e-commerce giants like Amazon & eBay, but that doesn’t make them any less successful. Here are 5 examples of incredible e-commerce success stories:

MixedMade (Now known as Bushwick Kitchen)  is the combined efforts of Casey & Morgen. Their aim was to create a hot sauce using just two ingredients: honey and chilli peppers. Well, they did this, and have since grown their business into a successful online store, having even expanded into retail locations. In their first year of operating, they’d managed to create a revenue of around $170,000. seeing a 2200% growth in December, of which $100,000 of their $170,000 revenue came from that month alone.

Check out this case-study to find out more.

Pixie Faire is a business set-up by two full-time parents: Jason & Cinnamon, the business was established when they realised they could compete in a larger market by selling doll clothing patterns. Since then, their patterns have been selling nicely, earning them around $50,000 per month in sales. Showing you don’t always have to have a physical product to do well online.

Check out this case-study to find out more.

Jessica, the founder of Raw Generation; a fresh juice company, figured out how to generate sales by experimenting with deal sites like groupon and managed to grow her business from there. She’s now running a business that’s pulling in around $96,000 per month, compared to the $8,000 per month pull she had before these changes.

Check out this case-study to find out more.

National Parks Depot is run by Robert Nava, who was in and out of correctional facilities from the age of 11 until around the age of 27, but even this didn’t stop him from achieving success. He focused his time on building a dropship business as he didn’t have any of his own products to sell. He’s generating around $80,000 per month in sales.

Check out this case-study to find out more.

Luxy Hair is another incredible example of e-commerce growth. Many people think you’ve got to stick with traditional advertisement in order to generate sales. Luxyhair took a different approach: Using YouTube advertising  to sell hair extension products. They managed this by creating useful, valuable content and offering free video tutorials on how to create new styles in your own time. The business is now generating a seven-figure income, showing that newer advertising techniques work just as well – if not better – than those from 10 years ago.

Check out this case-study to find out more.

Amazon is already known as the e-commerce giant of the world. Amazon was founded by Jeff Bezos back in 1994, and started it’s life as an online bookstore until moving beyond books in 1998. amazon was one of the first attempts to sell products (Especially books) online, but by 1997, they had over 2.5 million titles and managed to generate an incredible $148 million worth of sales in that year. The business slowly started growing and is now the fourth most valuable public company to exist, generating sales of around $177 billion in 2017.

eBay is another example of a global e-commerce giant, founded by Pierre Omidyar in 1995. eBay started out it’s life as a side hobby for Omidyar until he was one day contacted by his internet provider to inform him that he would be required to upgrade his account due to such high volumes of traffic to his site – this forced him to start charging people to use the service. In January 1997, the site hosted 2,000,000 auctions, compared with the 250,000 they hosted during the whole of 1996. In 2017, the company recorded revenue of around $9.7 billion, once again showing that e-commerce and online sales ARE big business.

E-Commerce Classifications/Models

We’ve spoken a lot about e-commerce and the general idea seems to portray that it is an online commercial or sales transaction only taking place between a business and a consumer. This is only one example of an e-commerce business classification, typically e-commerce business classifications are actually divided into various major types.

– Business to Business (Also known as B2B)
– Business to Consumer (Also known as B2C)
– Consumer to Consumer (Also known as C2C)
– Consumer to Business (Also known as C2B)
– Business to Government (Also known as B2G)

If you’d like to find out more about e-commerce models, check out the next post in our “E-Commerce Guide Series”.

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