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The ability to easily buy and sell goods and services online is dramatically changing how people shop.
Electronic commerce, or e-commerce, is any form of commercial activity conducted online. This includes the purchasing of goods and services, but can also include the buying and selling of intangible items such as data or electronic currency. Some companies like Amazon and eBay do the vast majority, if not all, of their business online, but nearly all traditional brick-and-mortar retailers have an online marketplace as well.
Variables to consider
While e-commerce existed before internet-connected mobile phones and tablets were commonplace, their introduction was a significant factor in the growth of e-commerce. The convenience and ease of access provided by mobile devices allows people to shop for goods and services online while commuting, watching TV, or any number of other activities without needing to be tied to a computer. Today, mobile-optimized e-commerce storefronts are a hallmark of some of the most successful e-commerce retailers
Having access to the internet, whether through home broadband service or mobile data plans, is a critical factor in e-commerce. Rural areas tend to have less reliable access to the internet than urban areas, and research shows that rural Americans have consistently lower levels of broadband adoption. Lower-income Americans are also less likely to have home broadband service and more likely to be “smartphone-dependent” internet users than those who are higher-income.
- Affordability is a significant factor in e-commerce, particularly among the larger retailers. The ability to search through a massive catalog of products and compare prices allows people to find better deals than they might find when presented with a more limited selection of goods in a brick-and-mortar store, and the lack of a physical storefront and associated financial overhead can allow for lower prices overall. According to findings from the Pew Research Center, consumers base their ultimate decisions on where to buy something based on price.
- Customer convenience and ease of access are also major factors in the growth of e-commerce. Customers don’t need to travel to and from retailers, wait in lines to pay, find parking, or engage in any of the other potential hassles of brick-and-mortar shopping. Instead, anyone with an internet connection and a debit or credit card can place an order for the exact product they want at any time from the comfort of their own home, or anywhere else, and have it delivered directly to their doorstep.
- Market competitiveness drives e-commerce as well. Many retailers have started offering faster delivery services, including same-day and even hour-based delivery in order to compete for e-commerce market share. After Amazon announced in April 2019 that it would make one-day shipping the standard for all Prime members, for instance, both Target and Walmart quickly followed suit.
- E-commerce reduces opportunities for social interaction between a customer and a seller, and consumers have to rely more heavily on product reviews since they cannot “touch and feel” the product. This means that a customer can miss out on the expertise and customer service offered by a salesperson, which can result in less informed purchasing decisions. If an item ordered online doesn't meet the buyer's needs, returning the item to the online seller can add expense or hassle for buyers and sellers alike.
- Detrimental effects on local economies stemming from e-commerce competing with smaller brick-and-mortar retailers can create friction within communities. Many smaller retailers find it difficult to compete with the pricing, availability, and speed of online ordering and delivery.
- Regulatory issues can arise when e-commerce retailers establish significant presences in towns and cities, especially around the topic of labor laws. Given the increasingly breakneck pace of deliveries and the tendency toward utilizing independent shipping contractors, these types of delivery models may skirt the regulations that apply to other delivery providers.
- Online retailers such as Amazon, Alibaba, JD.com/Jingdong (京东), and eBay are some of the biggest names in e-commerce.
- Certain brick-and-mortar retailers such as Walmart, Target, Barnes & Noble, Safeway, and Tesco have been investing heavily in expanding into the e-commerce market, while other stores have started using e-commerce to complement their in-store operations, such as by offering online delivery and in-store pickup.
- Technology companies such as Google and Facebook have also invested in e-commerce by facilitating connections between consumers and third-party retailers on a commission basis. Technology companies also often provide advertising services for e-commerce retailers.
Use case examples
- E-commerce can be used for simple convenience. Even if no other factors are present, the ability to purchase goods or services without needing to travel anywhere is often reason enough to warrant the use of e-commerce. The fast shipping services offered by many online shopping sites mean that goods arrive quickly with little effort by the buyer. Many online retailers also offer a subscription service which allows customers to choose items that will automatically ship according to a schedule.
- E-commerce can be used when brick-and-mortar retailers don’t stock an item. This can include items that aren’t typically stocked at all as well as items that are temporarily out of stock. Some retailer chains take a blended approach by carrying a partial selection of items in-store and offering customers the option to order additional sizes, colors, or models from their website while still in the store. This approach allows the retailer to offer customers a full range of products without dedicating floor or stock space to each variation.
- E-commerce can be used when getting to or from a brick-and-mortar retailer isn’t feasible. This can include situations where a brick-and-mortar retailer is nearby but is unreachable due to health or logistical considerations, as well as situations where a specific retailer or good is not located in the nearby area.
Pilots & developments
1989 – Peapod, the first online grocery-delivery company, is founded.
August 1994 – The first secure retail transaction on the internet occurs.
November 1995 – Jeff Bezos launches Amazon.com, with the intention of becoming “Earth’s biggest bookstore.”
December 1998 – PayPal, an online money transfer company, is created, making it easier and faster for people to make purchases online.
June 2007 – Apple releases the first iPhone, disrupting the smartphone market and making it easier to buy things online with one of the first mobile browsers that supports full websites.
January 2009 – Bitcoin emerges as the world’s first cryptocurrency.
June 2015 – Amazon Echo, Amazon’s voice assistant, become available for ordering and allows users to purchase items from Amazon using only their voice, making online shopping even easier.
December 2018 – E-commerce sales as a percent of total sales reaches 10%.
2018 – The three largest couriers in the United States delivered 13.5 billion packages in 2018. USPS delivered 6.2 billion and UPS and FedEx delivered 5.2 billion and 2.1 billion packages, respectively.
February 2019 – E-commerce sales are higher than general merchandise sales (sales from department stores, warehouse clubs, and supercenters) for the first time in history.
December 2019 – Cyber Monday 2019 is the largest online shopping day in U.S. history with online sales reaching $9.2 billion according to Adobe Analytics.
Policies, Pilots, and approaches
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