It feels both recent and a long time ago that ecommerce kicked off in the early '90s.
Recent because in the year 2018, some businesses still scoff at ecommerce. For example, a firm I purchase from for my ecommerce site took almost two weeks to fulfill an order because it does not have, nor does it see any need for, an ecommerce site (even though it offers no way of checking what's in inventory).
A long time ago because it’s been over 23 years since I first got started in ecommerce. As the saying goes, “the more things change, the more things stay the same.”
A Walk Down Ecommerce Memory Lane
So how did we arrive to the current state of ecommerce? One look at Amazon's growth in the last year alone will show how far we've come: from roughly $124 billion in ecommerce sales in 2016, to approximately $160.5 billion in 2017, marking over 29 percent revenue growth.
Given the magnitude of its revenues — that’s billion with a B — that’s a phenomenal growth rate and one that accelerated faster than its 2015 to 2016 ecommerce growth. It's estimated that Amazon accounted for 44 percent of all U.S. ecommerce sales in 2017 and almost 4 percent of all U.S. retail sales (yikes). And its growth will likely go uninterrupted for the foreseeable future.
The early 1990s were a different and exciting time. The internet was finally opened up for commercial purposes in 1992, with Congress passing the Scientific and Advanced Technology Act, which formally permitted The National Science Foundation to connect to commercial networks in support of research and education. From there, numerous companies emerged in 1994 with the aim of commercializing the internet. Phil Brandenberger made the first secure transaction over the world wide web in August 1994 and the pace accelerated greatly with the release of Netscape Navigator in October of the same year.
In the early days the technology wasn’t mature enough to develop really sophisticated ecommerce sites. Buying online was still a relatively new phenomenon and had yet to gain widespread acceptance. The dot com crash of the early oughts acted as a further obstacle, causing many businesses to write off the ecommerce business model while companies like Amazon, eBay and others persevered.
Related Article: Can Anyone Stop Amazon?
From High Cost Investment to Ecommerce for the Masses
Businesses that recognized ecommerce as a significant disruptor still faced challenges. The expense of developing a sophisticated ecommerce presence and the shortage of necessary business and technical skills slowed down the progress of many companies. Ecommerce is much harder than it looks, as many traditional retailers have since discovered. Some companies chose to outsource their ecommerce operations to Amazon in the early '00s (a lesson since learned by both Target and Toys R Us). Amazon launched Marketplace in 2002 to expand its footprint in part as a result of this demand.
The mid '00s is generally when people realized ecommerce was here to stay as it passed 3 percent of U.S. retail sales in the third quarter of 2006. And given Amazon’s early start and success, more and more traditional retailers realized this was a necessity for them to fend off the pure-play etailers. The learning curve was still steep and expensive, but the investments needed to be made to keep pace or otherwise risk losing more ground.
At this point, software vendors such as IBM, Art Technology Group (eventually acquired by Oracle) and Hybris (eventually acquired by SAP) were the primary application solution providers, but new companies and models were emerging to help level the playing field.
A company emerged in 2004 to sell snowboard equipment online. Snowdevil's ecommerce solution was homegrown and developed out of frustration with the existing solutions on the market. This experiment led to the formation of Shopify in 2006, which is now a leading SaaS ecommerce platform. An Australian company called BigCommerce emerged in 2009 as a competitor to Shopify.
While the high priced ecommerce solutions costing in the several hundreds of thousands of dollars are still around, BigCommerce and Shopify helped bring ecommerce to the masses. They dropped the previous average cost ceiling of entering ecommerce from the mid to high five figures to monthly prices as low as $30 plus transaction fees. It even led to Amazon closing down its Webstore solution.
While there are still labor costs associated with both, the cost differential is so significant it’s opened the door to any small firm that doesn’t want to be dependent on Amazon Marketplace or eBay, but that couldn't afford traditional ecommerce solutions.
Related Article: Was Toys R Us Too Slow to the Digital Transformation Party?
Get Off the Ecommerce Sidelines
In the words of Clayton Christensen, author of "The Innovator’s Dilemma," this is an excellent example of disruptive innovation. It will be interesting to watch how Shopify and BigCommerce develop. Both provide the ability to display and sell products via Amazon Marketplace, eBay, Facebook, Instagram, Pinterest and others, so they are working carefully to help their customers reach a broader reach through this presence with existing channels.
If your organization had been using the excuse that ecommerce is too expensive, that rationale no longer has a leg to stand on. There's no reason to sit on the ecommerce sidelines any more.
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