The History and Evolution of E-commerce

E-commerce

Electronic commerce, commonly known as e-commerce, refers to the trading of products and services electronically. In other words, e-commerce allows people to buy and sell over the Internet. It covers a wide range of different types of businesses, from household products to machines used in corporations. You name it, they have it!

History and Evolution of E-commerce

• 1970s

The emergence of e-commerce started in the 1970s when Electronic Fund Transfer (EFT) and Electronic Data Interchange (EDI) were introduced. Dated back in the early 1970s, EFT had two functions: enabling banks and financial institutions to do electronic transactions among themselves or with associated businesses, as well as, payment of salaries to employees by employers. When it came to the late 1970s, EDI helped producers and distributors in cutting costs by allowing exchanges of information and documents between companies electronically.

• 1990s
During the 1990s, the Internet has been opened for commercial use. The development of Mosaic, the first point-and-click web browser, and Netscape, the first downloadable browser, had made a remarkable growth to the global Internet community technology. This was when the Internet became popular and users started to participate in the World Wide Web (WWW). This in turn resulted in the rapid growth of the use of personal computers (PCs).

Below is the summary of the evolution of e-commerce:

• 1984 – EDI was standardized so that companies could complete transactions with one another reliably.
• 1990 – The first web browser, WWW, was written by Tim Berners-Lee.
• 1992 – People first bought things over the Internet when CompuServe offered online retail products to its customers.
• 1994 – Netscape, a simple browser to surf the Internet and a protected online transaction technology called Secure Sockets Layer was introduced.
• 1995 – Amazon.com and eBay.com were launched.
• 1998 – Fast and always-on Internet service was provided to subscribers across California by using DSL, or Digital Subscriber Line.
• 1999 – Business.com published that retail spending over the Internet has reached $20 billion.
• 2000 – The dot-com bust.
• 2003 – Amazon.com posted first yearly profit.
• 2008 – US eCommerce and Online Retail sales projected to reach $204 billion, an increase of 17 percent over 2007.

In our opinion, the emergence of e-commerce indicates a significant advancement of mankind. It benefits all parties along the supply chain management from manufacturers to customers, in various ways. As the e-commerce continues to be improved, we believe that it is possible that there will be a day where everything will be just a click away and all we need to do is just sit back and click. It may not overtake the traditional method of commerce entirely, considering some limitations of the Internet; however, it would surely affect the concept of commerce significantly.

Revenue Model for Google, Amazon.com & eBay

Google is known to be one of the most informative, user friendly, fastest and most trafficked website in the world of internet. In fact, Google has become one of the global technology leaders which is widely recognized.

Google generates most of its revenue (more than 90%) through online advertising. With the volume of their site traffic, they focus on delivering relevant and cost effective advertising. They offer targeted advertising solutions and global Internet search solutions.

One of Google’s advertising program is Google AdWords which is a pay-per-click (PPC) advertising tool. Ads are displayed as sponsored link with regards to the information searched for. For every ad clicked, Google earned a fee from their advertisers. Google recognizes most of their advertising fee from Google AdWords.

Another advertising program run by Google is AdSense. AdSense allows the display of ads on websites and blogs which can be on a per-click or a per-thousand-ads-displayed basis. Google generates affiliate fees from the site owners whenever user clicks on the ads displayed on the websites.

Amazon.com is an e-commerce company and is known as one of the world’s leading online retailers.

Starting off as an online bookstore, it expanded into a variety of products categories online store. With the various wide range of products sold, it is obvious that Amazon generates most of its revenue through sales. Amazon attracts millions of customers worldwide.

Also, Amazon generates around 40% of its sales from affiliates from their “associates affiliate program”. Associates receive a commission for referring customers to Amazon through links. Amazon then generates revenue from the sales of these customers.




eBay is one of the world’s largest online marketplace. It engages in online auction and shopping of a variety of goods and services globally. eBay generates most of their revenue through sales of their products and also through transactions fees. For every successful transaction, eBay earns a transaction fee made by the bidders.

Besides that, eBay also earns part of their revenue through PayPal (online payment) and Skype (communications) which are owned by eBay too.

PayPall earns their revenue through online payments. Using the world’s most advanced fraud prevention system and with their safe payment solution, PayPall has gained users trust worldwide and has become a global leader in online payment solutions.
PayPall’s payment volume accounted for nearly 9% of the worldwide e-commerce.

Skype engages in internet communication whereby it allows users worldwide to talk online unlimitedly. Skype earns their revenue through calls made to and from landline and mobile phones, voicemails, call forwarding and ringtones.

Other acquisitions by eBay include shopping.com, Kijiji, Stubhub, rent.com and StumbleUpon

An E-Commerce Success: Amazon.com

With the advancement of information technology, the use of e-commerce has improved tremendously in the past few years and has in fact become very popular nowadays. Many businesses have successfully gained an awesome profit by selling their products online. The examples of these businesses are Amazon.com, Ebay.com, Lelong.com, Dell, and so on.
Among those examples, the company I want to highlight here is Amazon.com. Amazon.com was founded by Jeff Bezos in 1994, and launched in 1995. It is a pure dot-com company whereby they only operate their business through the internet. Amazon.com started out with selling books online and then quickly diversified by adding other items. It has become the first best known online retailer in the internet world.

Causes of Success

• Customer Orientation

Amazon.com is a customer oriented based company. The customer-centricity has been part of its mission since the day of its operation. They start with the customer and work backwards in considering matters such as whether the boxes are easy to open, what packaging material they use, how much packing material is in the box, and etc. Due to the efficiency in dealing with the customer and continuous focus on their needs, Amazon.com has successfully become the top among other entire online retailers.

• Continuous Innovation

As we know, if a company does not listen to their customers, they will fail. But if the company only listens to their customers, they will also fail. The ideas to investigate might come from customers who are a really important source of information. However, it is also important for the company to innovate and create something new or improved through research and development. Amazon.com runs a lot of test in its usability lab almost continuously. The project teams of the company can request usability testing, and the usability team also goes out and tests stuff of interest for the purpose of coming out with new products.

• Customer Loyalty Enhancing

Amazon.com maintains its customer loyalty by providing user friendly interface with convenience and easy to use features. For example, easy to search, useful information related to product, customize options, e-mail confirmation, and also convenient and reliable payment system to their customers. In addition, Amazon.com also provides guarantees and adopts return policy.

• Variety of Products

In the beginning, Amazon.com did not sell other things but books online. Due to the changing environment and meeting with the customer needs, it started to offer a variety of products which are suitable for different groups of people. The range of products includes videos, music, cell phones, hardware, software, video games, electronics, health care products, clothing, furniture, toys and even food items.

An E-Commerce Failure: Pets.com

In this era of modern technology, many businesses are turning to e-commerce in selling their products and services online. From e-commerce, many companies have successfully achieved a good profit in marketing their products. Among the success companies are Amazon.com, Ebay.com and so on. However, there are also companies which did not do well in selling their products via e-commerce. The examples are Webvan, Kozmo.com, eToys.com and so on.

The company that I am going to illustrate here is Pets.com. Pets.com was engaging in an online business that sold pet accessories and supplies directly to consumers over the World Wide Web. It was launched in February 1999 but unfortunately it folded in November 2000. Pets.com was well-known for its widely popular sock puppet spokesdog.

Causes of Failure

• Excessive Advertising Cost

Pets.com made significant investments in infrastructures such as warehousing which needed critical mass of customers to break even. Acquiring customers in volume they needed to break even requires a period of time which was not an easy task. In addition, Pets.com did not have independent market research preceded the launch of their website. Pets.com only offered products that could be more easily obtained at a nearby mall. There wasn’t much distinctiveness in the products sold which therefore reduced the intention of customers buying from them through online.

• Excessive Advertising Cost

Despite its success in building brand recognition, it is uncertain whether a substantial market niche existed for Pets.com. Pets.com earned revenues of $619,000, yet they spent $11.8 million on advertising. This excessive advertising did not benefit Pets.com, rather it helped the entire online pet industry to increase sales. Hence, making their products even more competitive.

• Lack of Workable Business Plan

Pets.com also decided to compete with low prices just like its competitors. This led to the selling of merchandise at prices below cost for the duration of its operations. Pets.com also built a customer base by offering discounts and free shipping, but it was impossible to turn these sales into a profit because the shipment cost has ate to its profits.