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ECommerceTimes.com

The Evolution of E-Commerce

By Jennifer LeClaire
Feb 7, 2005 5:00 AM PT

We've come a long way, baby!

The Evolution of E-Commerce

Indeed, e-commerce has evolved from online billboards to a fully functional, personalized shopping experience over the past decade. While there were admittedly a few bumps along the road, the path from 1994 through the 2004 holiday shopping season is full of crucial milestones of Internet pioneers and technology innovators.

A stroll down memory lane reminds us of terms like "stickiness," "eyeballs" and "personalization" that once captured the essence of articles about what it takes to be successful on the Web. However, even as we look back at 10 years of growth, many analysts have one eye on the future and they are saying, "we've got a long way to go."

A quick glimpse at the data promises much more evolution in the years to come. Forrester Research, for example, predicted American firms alone would sell US$316 billion in goods and services via the Web by 2010. That figure would more than double 2004's online spending to account for some 12 percent of all retail sales, up from about 7 percent today.

In the Beginning, There Was Amazon

However, that's the future. In the beginning, the Internet was characterized by slow dial-up connections and online billboards. Netscape came on the scene in 1994 with its point-and-click Web browser that opened the door to the billion-dollar revenues e-tailers enjoy today. Two of the first online purveyors were, of course, eBay and Amazon.com.

Looking at Amazon's evolution offers a pretty clear picture of the evolution of e-commerce, according to Nielsen//Netratings senior retail analyst Heather Daugherty.

"Amazon has been around since almost day one," Daugherty said. "They were the first ones to offer one-click ordering that people now expect to find. Although Amazon certainly had a lot of skepticism from the street as to when it was going to become profitable, the company kept at it."

Perseverance paid off. Amazon finally posted its first net profit two years ago, marking one of the most important milestones for e-commerce. This past holiday season, its 10th, was its busiest ever. Amazon set a single-day record with more than 2.8 million units ordered, or 32 items per second, worldwide during the holiday season.

Controversial Times

Within a few short years after Netizens began surfing the Web, DSL entered the picture. SBC Communications began offering high-speed connections in 1998. However, it was hardly uphill from there. Controversial times would soon follow.

Look no further than Napster, the online music swap site that started a war with the music industry that is still raging. The Recording Industry Association of America continues to file lawsuits in droves to stop music file sharing. Analysts said the coming years will surely see an evolving digital music landscape.

And who could forget Toysrus.com's devastating 1998 holiday season, when children didn't receive their Christmas presents on time. The company still couldn't keep up with demand a year later.

That, combined with the denial-of-service attacks that made headlines in early 2000, shook consumer confidence and ushered in a new era of focus on security. Not too long afterward, the Internet bubble burst, seeing major players like Boo.com fold.

However, a rebound wasn't too far off.

"A major turning point came when people started to trust online shopping vendors about two years ago," Gartner analyst Adam Sarner told the E-Commerce Times. "We got through the Toys R' Us fiasco, and business started picking up. People started to find out that it was convenient to get their holiday shopping done online."

Innovative Technology

Rich Riley, vice president and general manager of Yahoo Small Business, told the E-Commerce Times that the essence of the Internet is the establishment of a level playing field for communicating and collaborating. Riley believes the power of the Internet has enabled innovators and entrepreneurs to reach their audiences efficiently and effectively over the past decade.

"Specifically, an important milestone in the evolution of e-commerce is the development of affordable, easy-to-use e-commerce solutions that have enabled hundreds of thousands of entrepreneurs to transform their unique ideas into online successful businesses," Riley said.

One of the most important milestones was order fulfillment technologies, including shipping, according to UPS Vice President for Customer Technology Jordan Colletta. Colletta told the E-Commerce Times that online buying is mainstream today as compared to a decade ago.

"There is increased confidence in online order fulfillment, the security of personal data, and easier online return options," Colletta said. "Another critical turning point is the evolution of the online payment process. By making the payment process easier, the shipping process has become easier and more visible. Once a shipment is en route, it's trackable at all points along its journey."

Looking Ahead

What will the next 10 years bring? UPS' Colletta said we've only just begun: "During the next 10 years we anticipate seeing more ease of use, even better technology, dramatically improved visibility as well as a wider array of solutions for both online buyers and merchants."

Nielsen//Netratings' Daugherty expects to see significant changes as wireless e-commerce grows. "In 10 years, consumers ordering products online through their cell phones and PDAs will probably become commonplace," she said. "In-store pick up will allow consumers to place the order on their wireless device and get the product easily."

Gartner's Sarner said that as consumers tap into broadband, on-demand services would gain greater momentum. "If you don't want to drive to the store to pick up your favorite artist's new album, and you don't want it mailed three days later, then you can order the content online instantly," he said. "Broadband and instant access is going to change the way we think about e-commerce."


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