eCommerce
The Evolution of eCommerce: What Changed?
January 19, 2023
In 2011, eCommerce sales constituted 7.8% of global retail sales. Fast forward to 2022 it more than quadrupled to 32.8%.
Just 2 decades ago, ordering online was impossible. Long lines at the convenience store were a common feature. Even logistics was a nightmare.
These days, you can order from the convenience of your sofa. You’d browse through a product directory, point, and click, and then wait for delivery. But it wasn’t always this easy.
In this article, we’re going back in time to trace the evolution of eCommerce and compare it with what it currently is.
I will explore the role advancements in technology have played in shaping eCommerce, and how it has affected consumer behavior and the economy.
Brief history of eCommerce and the challenges it faced
The evolution of eCommerce is traced to the work of British entrepreneur, Michael Aldrich in 1979. He connected a modified television to a computer that processes transactions, using a telephone line. At first, it was known as teleshopping. Then later, the name changed to eCommerce — with many challenges.
For one, there was no system to process payments — yet. Secondly, the network couldn’t handle the traffic characteristic of online shopping.
And lastly, accessibility was limited. Only businesses used the system for business-business transactions.
The next step was the launch of the Boston Computer Exchange in 1982. It was an online computer bulletin board system, for buying and selling used computers.
Unlike the system of Michael Aldrich, BCE was a computer-based system. But accessibility was still limited to only individuals with a modem, and those interested in second-hand computers. And scams were quite common.
In the 1990s, the rise of usage of the internet and computer devices, as well as the launch of the internet paved the way for the emergence of dedicated eCommerce platforms.
The first eCommerce platform to launch was Book Stacks Unlimited, an online bookstore, in 1992. Followed by Netscape Navigator, a web browser, in 1994.
But eCommerce fully took off with three big inventions:
The launch of Amazon and eBay by Jeff Bezos and Pierre Omidyar respectively in 1995.
Amazon was primarily an online bookstore, before branching into other commodities in 1998.
Paypal, the first online payment system for handheld devices, was in 1998.
Before now, there was no way for retailers to process payments online.
They instead relied on pay-on-delivery. Or buyers mailed checks to the retailers. And as you’d imagine, there was a lot of back and forth.
Buyers would mail the check, and the seller deposits it into the bank, and waits for at least 10 days for it to clear, before sending the item. That’s a lot of waiting. But Paypal solved it.
Alibaba, an online shopping platform in 1999
Total eCommerce sales grew to 27.61 billion dollars in 2000 before jumping to 34.26 billion dollars — a 24% increase— in 2001. Since then, the numbers continue to go up and up.
Evolution of online shopping: Growth and expansion (2004– the 2010s)
The evolution of eCommerce took a new turn between 2004 and the 2010s. Many other eCommerce platforms were launched between 2004 and 2010.
First was BigCommerce and Etsy in 2005. Followed by Shopify in 2006. And Magento in 2008.
We also saw massive improvements in logistics. Shipping times became shorter.
Amazon, for instance, launched its Amazon Prime service, which provided free two-day shipping for an annual fee. And many logistics providers took advantage of automation.
Additionally, mobile commerce and social commerce picked up in the years between 2004-2008, for two major reasons.
Firstly, Facebook launched in 2005, while the marketplace came 2 years later (2007).
Secondly, mobile devices became commonplace. As proof, only 27.4% (almost 2 billion) of the world’s population used a mobile cellular device in 2004. By 2010, it jumped to 76.5% (almost 5.4 billion) — a 170% increase in just 6 years.
These two events are responsible for the face of e-commerce today.
Current State of eCommerce (the 2020s)
eCommerce has changed. And it’s majorly due to changes in customer behavior, spurred by the growth of technology.
People prefer the convenience of shopping on their mobile phones. Customers prefer to buy based on suggestions from social media influencers. Social media has morphed into a product search engine. And many more.
Each of these changes in customer behavior will be explored below, along with how they’ve shaped the eCommerce industry as we know it.
Explosion of mobile commerce (M-commerce)
The evolution of eCommerce cannot be told without mentioning the birth of smartphones.
Just 5 years ago, only 3.7 billion people had a smartphone. Currently, 6.8 billion people have access to smartphones — over 80% of the earth’s population. That’s 86.5% more than in 2016, and more than the percentage of the earth covered by water (75%).
Little wonder these devices have become a major eCommerce tool. A recent report by Datareportal shows that over half of the world’s online shoppers purchase from their mobile phones at least once a week.
And 6 out of 10 people will not patronize a brand that doesn’t support mobile shopping, per Google.
This should come as no surprise, considering how convenient mobile shopping is:
Search for a product. Find one you love. Click to buy. Then wait for a delivery.
It’s fast and consumes less energy.
Retail and eCommerce businesses have changed their strategy to take advantage of the shift to mobile.
In the USA alone, mobile digital ad spend is projected to reach 68% — over two-thirds of the total money spent on advertisements. Because retailers recognize that many shoppers use their mobile devices to purchase, they’re ramping up mobile advertising.
Additionally, eCommerce platforms have been rolling out mobile-friendly features. This includes image and voice search capabilities, mobile apps, and e-wallets.
It’s expected that m-commerce will continue to grow, as the number of smartphone users continues to increase in the coming years.
Greater emphasis on personalized shopping experiences
In the early days of eCommerce, personalization was not feasible. The technology did not exist to monitor and crunch customer data, or to expose customer preferences.
That’s all changed.
Personalization is now possible since the technologies are available. And retailers now understand its value.
For example, a recent study by Squarespace shows 35% of retailers plan to deliver a more personalized digital shopping experience this year.
This includes delivering unique product suggestions based on purchase history, suggesting complementary products, and gifting special offers. This is in line with current customer behaviour.
49% of online shoppers agree that retailers suggesting promotions or deals based on their past purchases improve their shopping experience. This increases customer satisfaction and lowers product returns. In addition, 63% of consumers expect personalized service as a standard. This builds trust in the brand and makes them feel more connected to it.
Boom of social commerce
Social media has always played a role in the evolution of eCommerce, since the launch of a Facebook marketplace in 2005. But social commerce truly took off after the pandemic.
Due to isolation, our time on social media increased. Social media engagement rose to 61% over the normal usage rate. And businesses recognized this opportunity.
They now:
Use social platforms to display products, build brand awareness, and grow a loyal customer base.
Collaborate with social media influencers to drive sales
Optimize their social media content for search.
Let’s take a closer look at each one.
The Proliferation of small businesses on social platforms (majorly Meta platforms and Tiktok)
Social media used to simply be a channel for connecting with loved ones, making new friends, and passing time. It’s become more than that.
Currently, 9 out of 10 retailers use social media to sell their products. They post about special offerings, product launches, and display products.
However, some social media platforms receive more attention from Business owners. Per Listenfirst media, most small businesses stick to Meta platforms — 40% and 27.5% for Facebook and Instagram respectively. In light of the picture-heavy nature and a large number of buyers on the platform, it’s understandable.
Despite TikTok ranking third, businesses use it more than any other social media platform, Spendesk reports.
Influencer marketing (especially on Tiktok and Instagram)
Take a moment. Scroll through your TikTok or Instagram feed.
You’d find several videos of people (mostly young) recommending different products, directly and indirectly. That’s influencer marketing.
Influencer marketing has become a major tool that businesses use to drive sales and cultivate a large social media audience. In fact, 80% of businesses intend to work with influencers in 2023.
That’s expected for two reasons:
Firstly, the ROI is huge. Businesses gain $5.2 for every dollar spent on influencer marketing, according to the influencer marketing hub.
Secondly, customer behaviour values social proof. That’s why we trust product recommendations from an influencer more than one from a retailer.
According to Pew Research, 3 out of 10 social media users have bought something after seeing an influencer or content creator post about it.
And according to Hubspot’s consumer report, 30% of consumers say influencer recommendations are very important to their buying decisions, even more than family (27%).
The power of influencers on buying decisions is felt more among Gen Z-ers.
A study by LTK shows 92% of Gen Z-ers recognize influencers as a major driver of their purchase decisions.
In a few years, these buyers will be the majority, so influencer marketing is just getting started. More brands will invest in it in the coming years.
Social media increasingly used as product search engines
Over a decade ago, Google was the only search engine. Fast forward to today, and people search for, find, and buy products from social media. All thanks to the pandemic.
People alternated between their television sets and social media platforms to drown in the boredom of isolation. According to Datareportal, the average daily social media usage jumped by 21% during the pandemic.
Currently, the number stands at 6 hours 37 minutes, with a large percentage spent surfing for products:
27.3% is spent looking for things to do and products to buy
25.9% is spent looking for things to buy alone.
This trend isn’t going away anytime soon. According to Hubspot‘s recent survey of 1284 social media marketers worldwide, 82% said most brands will sell their products directly through social media.
What is the next evolution of eCommerce?
eCommerce has evolved. Compared to 20 years ago, things have changed dramatically.
Social commerce is booming. Personalization is now the norm. Social media platforms have transformed into verticalized search engines and product display platforms as selling channels. And influencer marketing is exploding.
In the years to come, we predict:
More channels will emerge (such as livecommerce)
Voice search will grow. Currency accounts for $40 billion worth of transactions.
Automation of some eCommerce processes
There will be greater integration of AI into eCommerce websites.
