A Brief History of Ecommerce

written by Carlos Alvarez
4 · 14 · 22

The eCommerce industry reached heights of 13 trillion dollars in 2021. At this point, shopping online feels natural. Only a few decades ago, however, it was unheard of to buy products online. There’s a story wrapped up in eCommerce history. We’re going to look at the history of eCommerce today, giving you some insight into how this massive industry took hold and skyrocketed.

We hope the ideas below give you more perspective when you start selling online for yourself. 

Let’s get started. 

The History of eCommerce: Where Did It Begin?

To understand this story, we need to look back farther than you’d imagine. eCommerce has its roots in rudimentary computer technology. Machines the size of large rooms producing mathematical calculations.

These machines used complex systems of pressurized air, wires, and stock cards to perform functions and offer numerical solutions to issues. That’s what computers were in the late 50s throughout the early 60s

After that, the creative and user-friendly capacity of computers began to emerge. In 1969, a company called CompuServe was founded and began to share computer data through phone lines between companies. 

This is the first practical application of data sharing through computer systems. Around this time, MIT students start to utilize computer technology to facilitate the sale of marijuana among students. 

These individuals were at the cutting edge of computer technology, developing ARPANET for the United States military. The story goes that these brilliant college students capitalized on computer technology as a way to communicate about their cannabis deals with absolutely no way of getting caught. 

1970 to 1979

In the mid-70s, computer technology was used to facilitate actual financial transactions. It was rudimentary technology compared to what we have now, and it would by no means be safe to use on the scale that we require today. 

That said, companies secured patents for secure online transaction processing. It was created for financial institutions. The ability for safe transactions planted the seed for inventors and corporations to imagine online shopping. 

A few years after secure online transactions were developed, CompuServe inventors demonstrated televisions that could facilitate sales. The television would be connected to a computer chip that could process sales and receive transaction information via a telephone line. 

So, you’d see a commercial and call the number. You would then ask the representative for the product. The representative would send your computer chip the financial information and that would relay a purchase to your financial institution. 

It seems like a lot of effort now, but that was a revolutionary idea in the late 70s. Note the rapid rate of development here. 

Moore’s Law

Sharing information on the internet was only possible 10 years before this television processor idea. Before that, we were limited to telephone lines for just under 100 years. 

Note the rapid rate of innovation as we move forward. 

This rapid advancement of technology tends to follow something called Moore’s Law. This theory suggests that the number of transistors in a microchip will double every two years. It also suggests that the production costs will diminish by half during that time. 

In theory, technology gets twice as good and half as cheap every two years. The law was proposed in 1965 and has generally held up over the last 62 years.

1980 to 1989

In the early eighties, states started to recognize the possibility and value of electronic commerce. 

California was the first state to have legitimate meetings to recognize and facilitate this new type of commerce. Their first hearing dealt with “electronic commerce” and held industry experts to testify. 

Shortly after, the State of California passed the Electronic Commerce Act that set rules on the sale of goods via computer networks. 

1984 marked the advent of “electronic malls.” This was the first time you could comfortably shop through your computer and avoid the hassle of visiting an actual mall. This was nowhere near the type of shopping we do now. 

If you had a home computer, you also needed a catalog. The catalog held thousands of product numbers and photos. Shopping online required basic coding knowledge. 

You’d enter the product numbers and send a brief message, and that was it. You might have to wait a month or two to get your product. That’s the first method that resembles our current situation. 

Personal Computers Popularize

Note that computer skills and coding knowledge were very rare at that time. It was also difficult to use these machines without training. 

Toward the end of the 1980s, awareness of personal computers was high. Everyone knew what a personal computer was and what it could do. That allowed individuals to start to realize the personal benefits these devices might have. 

Around 15.2 percent of households owned computers by the time 1990 rolled around. 

1990 to 1999

The World Wide Web was proposed in 1989 by Tim Berners-Lee who was working for the European Organization for Nuclear Research (CERN). 

His vision was a digital space where scientists could share their research. There wasn’t an easy way to communicate research at that time. CERN’s research was extremely important. 

Cutting-edge research could save lives if it was communicated quickly. So, Tim created an early iteration of the World Wide Web. It was a network of hypertext connected via links for users to navigate. 

That’s still what the internet is. The web was limited to CERN employees at first. That graduated to a wider network, and there were around 500 different web servers in 1993. 

Interest and availability started to scale upward over the next few years. There were 130 websites in 1993 and over 2,700 in 1994. Over the next two years, over 250,000 websites would emerge. 

That trend continues to scale as we approach 2,000,000,000 websites this year. 

The first secured online transaction made by a consumer occurred in 1994. The ubiquity of the internet led to credit card technology, allowing Phil Brandenberger to purchase a Sting CD over the internet. 

Digital Titans Emerge

Around 1995, we start to see the key players in our modern eCommerce life. Well, the key player. 

Jeff Bezos launched Amazon in 1995, starting the company as a bookseller. This was also the year that eBay launched. These two companies normalized and somewhat monopolized the eCommerce space for decades to come. 

A few years later, PayPal popped up as a way for individuals and businesses to transfer money online. This company quickly merged with Elon Musk’s banking company at the time.

It’s no wonder that two of the individuals who capitalized on the early internet are now some of the richest people in the history of the world.

Before the turn of the century, the eCommerce industry was a 150 billion dollar industry. 

2000 to 2010

Just after the new millennium arrived, and eCommerce bubble burst to leave thousands of companies bankrupt. Google wasn’t terribly damaged, however. 

They had just released the idea that would pervade society, commerce, and business marketing for decades. The idea was “pay-per-click” advertising. 

This idea rewired the philosophy used in online business. Instead of selling products in the traditional way, you could now market your products to targeted users online. 

Businesses create ads, list them on websites through Google’s platform, and only pay when someone clicks. Google is the bottleneck through which billions of people use the internet, so marketing with Google exposes companies to most demographics. 

Pay-per-click (PPC) advertising is the dominant way that Google and all social media platforms make their profit in 2022. We’ll touch on that in the next section.

Online retailers utilized PPC heavily and started to experience a resurgence. After a few years, the eCommerce business was booming again. In 2005, Amazon introduced Prime and gave its users the luxury of free 2-day shipping. 

That precedent changed the expectations around shipping and online shopping. Shortly after, the Shopify platform was introduced in 2006. 

Many eCommerce businesses utilize Shopify to this day. It’s a middleman that facilitates the creation of your online store. Numerous other eCommerce platforms emerged around this time as well. 

Data Harvesting and User Experience

As a result of PPC, there was a massive incentive to gather user data. The more data profiling you can do on a person, the more likely you can give them ads that they’re interested in. 

If users are more interested in ads, businesses are more likely to pay you to use those ads. Moore’s law keeps churning while companies devote resources to improving their ad-targeting technology. 

We all experience the result of this every time we use the internet. Advertisements and curated online experiences based on our personal interests. 

Note that the advent of targeted ads coincides with the explosion of social media. 2003 and 2004 mark the origins of Myspace and Facebook, respectively. These companies were revolutionary, sure, but they might not have had the profits to expand without PPC. 

Myspace died out, although it still lurches in the periphery of the internet. Facebook, on the other hand, is still massive and facilitates a lot of eCommerce activity. 

2010 to 2019

The period from 2010 to 2019 is one of massive expansion in the eCommerce realm. In large part, we owe that growth to advancements in technology. 

Smartphones are ubiquitous, allowing people to access eCommerce sites at all times. Social media applications are also inherent in billions of lives. eCommerce advertisements are inherent in those applications. 

As a result, eCommerce advertising exists in our lives almost every given day. For example, 70% of Facebook users say they use the platform every day. 

This period also marks the explosion of food delivery services. Whether you’re ordering a pizza online or getting your groceries delivered through Instacart, you’re participating in eCommerce. 

Technology on the back-end of the industry has also developed. There are myriad ways to optimize your shipping, handling, and packaging processes. 

These processes are automated in a lot of cases. The result is a relatively smooth system that meets the needs of people in every country across the world. Naturally, a system so interdependent gets damaged and fails sometimes, but it’s largely effective. 

Toward the end of this decade, brick-and-mortar businesses started to see a decline. The ease and prevalence of eCommerce are hard to compete with. Small businesses also struggled during this time. 

Most of these businesses have entered the digital space, though. Approaching 2020, eCommerce showed no sign of slowing down. 

2020 to Present

The global pandemic took hold in early 2020. That stripped most individuals from the ability to shop in an actual store. 

Only essential goods like groceries were permitted for in-store purchase. eCommerce gave people the ability to avoid entering stores altogether, though. 

Shopping online was and continues to be the norm. This only accelerated the growth of eCommerce and reduced the health of physical businesses. The coronavirus is slowing down, allowing businesses to open back up and welcome customers. 

There was a period of two years when individuals dealt with their business online, though. This required rapid innovation and new technology to meet the needs of a globalized world. The result was better user interfaces, easier access to eCommerce, and a population that’s accustomed to shopping online. 

If we scan back to 1985, there might be a dozen people who could shop online. Fast forward 35 years and billions of people do the majority of shopping on their phones. 

It’s not an exaggeration to say that eCommerce has revolutionized much of society. There are positive and negative aspects to this. 

For one, it’s easy to access billions of products that we might not be able to otherwise. That’s a good thing. On the other hand, producing and transporting those products takes a serious toll on the environment. 

Meta and Virtual Workspaces

The most recent development in eCommerce is the idea of virtual reality workspaces. These aren’t prevalent yet, but they could help us reduce our carbon footprint and streamline operations. 

Meta is Facebook’s take on virtual reality. It could be similar to what the internet was in 1989. Only time will tell if the world gets revolutionized by virtual reality technology. 

Want to Learn More About Selling Online?

We hope our look at the history of eCommerce was useful to you. There’s a lot more to learn about the digital world, though. We’re here to help you get insight into how to sell online. 

Explore our site for more resources about selling online, marketing your business, selling on Amazon, and more. 

Carlos Alvarez

Alvarez sums up his mission to help online sellers with a quote he heard early on in his career. New sellers constantly compare their Chapter 1 to another seller’s Chapter 20. They see what other veteran sellers are doing and they judge their success and failures by this benchmark. His goal is to show sellers a realistic path to success, and how they can enjoy every chapter of their own, unique journey.

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