Friday, 23 December 2016

The Rise Of Online Shopping

The Rise Of Online Shopping

How did the enormous online shopping market come to be? Let’s find out

You probably think nothing of going online and browsing through places like M&S, Next, BHS, Boots, or Argos. Other high street stores, and sites like Amazon and eBay, have long been household names – even shopping for groceries at outlets such as Tesco and Sainsbury’s has become a staple of online commerce, such is the massively online world we live in. The Internet and practically every company you can think of is there, all willing to sell you their wares without you even having to leave your chair. There’s practically nothing you can’t buy online, if you know where to look.

We take this for granted now, but this kind of flexibility and ease of use wasn’t always available. Not too long ago, in the grand scheme of things, online shopping was seen as a fad. Something that simply wouldn’t catch on, and big names in retail stubbornly refused to adapt. The high street was believed to be indomitable, with the Internet just a passing gimmick that would fail in the face of the more traditional bricks and mortar shops people knew and trusted.

Oh, how wrong people were. Not only did Internet shopping become bigger than anyone but the most far-sighted could have imagined at the time, it has been the main reason many high street names have gone out of business. Regardless of the size, small, medium, and large businesses fell victim to the online boom, and to this day there’s no better way to sell products and cater to customers than the Internet.

How did this all happen in the last decade or so, though? What were the precursors to the meteoric rise of online shopping as we know it today. How could the Internet have such a huge impact on companies that had been trading from high street stores for generations? Let’s find out.

Swinging Sixties

Although it may not be directly linked to the online shopping experience we have today, and may not even be a seed in the overall timeline, EDI (Electronic Data Interchange) is a good place to start on our journey. Created in the 1960s, this was a technology that allowed electronic transactions to be carried out between companies, with the railway industry reportedly being one of the first. This communication used to facilitate commerce was primitive, sure, but it was one of the first examples of business being done electronically and, for that reason, is important. It wasn’t used by the consumer, though, and was restricted to corporate transactions.

It wasn’t until 1979 that the first incarnation of actual electronic commerce for the masses was created. Often cited as the major mind behind the seed of online commerce, Michael Aldrich was responsible for creating the first electronic grocery store. According to reports from the time, he did this after visiting a supermarket with his wife. During their trip, he came up with the idea of selling groceries to people using phones and a computer. His set up was crude by today’s standards, of course, as he as limited in terms of tech, but the core idea of online shopping was there, making this a very important – though rarely cited – event in the history computing.

This idea came at the same time as Videotex, a technology designed to deliver text-based information to end users. Videotex, or Interactive Video Text was an idea many companies were interested in, and was designed to send text to a dumb terminal, or often simply a TV via modem. The idea was similar to teletext, which was found on all TVs from the 1970s, but has since been discontinued – killed off by... yes, you guessed it... the Internet.

Perhaps one of the earliest successful implementations of this kind of tech in the retail market lies with TRACs, or Thompson Reservation and Administration Control System. It’s a bit of a mouthful, but this system was essentially a variation of Videotex developed by travel agent, Thompson Holidays. In 1981, 66 travel agents around the country began to use this invention, which allowed agents to call up and book holidays on a computerised system. Data could be extracted from the centralised database, making it easy for any staff to assist customers. It’s been called the first example of business to business (B2B) online commerce and, although limited to travel, was a major first step on the road to today’s online marketplace.

Vive La Minitel

The next jump forward in 1982 came courtesy of France in the form of the Minitel. This was a device that’s often said to be the most similar pre-Internet commerce device to what we have now, and it quickly became a success in France. It was a full online purchasing system that included a searchable directory and chat prior to the use of the traditional telephone line systems we came to know in the mainstream. The technology was also made available in the UK, although it didn’t receive the same uptake as it did in its native country.

What did make an impact in the UK was an event in 1984. Tesco, in a move that would foreshadow the company’s spearheading of online grocery shopping we have today made the appropriately named Mrs Jane Snowball the first ever home shopper. Well, at least that’s what has been reported. This was made possible by the first B2C (Business-to-Consumer) online shopping system. Tesco used this to sell products utilising an online shopping basket. This would, of course, later become the online shopping trolley, while basket is still used by many online sites, including giants like Amazon.

CompuServe was the next big name to step in and offer up a major milestone. This took the form of Swreg, a community of developers that created their own gathering of vendors to form an online marketplace. Using merchant accounts, products could be sold electronically to others in the industry. It also included a major step forward in online business: a secure payment system.

The Rise Of Online Shopping

The Epoch-making Moment

Regardless of what you’re shopping for, what kind of user you are, or where you are in the world, what’s the one thing that every single person needs to not only shop online, but get online in the first place? Aside from your Internet connection, that something is a browser and, of course, the Internet itself. This monumental event would arrive in 1990 when a man you may have heard a few things about, called Tim Berners-Lee, unleashed the WorldWideWeb. This would later be re-branded Nexus, and it included an editor for coding websites.

The arrival of a graphical method of browsing the Internet was a huge event. This was followed in 1991 when the National Science Foundation opened up the Net for commercial use. Previously, it was a closed system to the general public, but following this move, millions of hosts sprung up around the world, and the Internet we know was born. 1991 also saw the arrival of ‘Gopher’, the first point-and-click browser, which was created by the University of Minnesota.

The importance of the creation of a point and click GUI for browsing the Internet simply can’t be overstated. Without one, the medium just wouldn’t be accessible enough for the masses, and just as Windows 3.11 finally made the industry take the graphical operating systems seriously, so too did the point and click browser.

Another ground breaking event came with Netscape’s Navigator browser. Now dead and buried, the previously popular browser introduced encryption certificates. This made it possible for people to transmit data securely. As the first major form of online security, it paved the way for something that would be needed for nay form of mainstream online commerce to become a reality; known as Secure Sockets Layer, or SSL, it is still in use across the internet today.

Among the first businesses to utilise the newly minted methods of online interaction were pizza delivery services such as Pizza Hut, as well as other areas including car sales. Also prominent in establishing online transactions was one of the most commonly cited early adopter of a whole raft of notable Internet innovations: the adult entertainment industry.

1994 would be historically seen as a huge year in the history on online shopping. This is mainly due to the fact it saw the creation of a then-small company by the name of Amazon. The website, which is now one of the biggest online retailers in the world, began life as a fairly modest book store, selling books thanks to an arrangement with John Ingram of Ingram books. The site started out slow, with a five-year plan to profit, but would eventually grow into the enormous success it is today.

Up until 1995, domain names used online were free. Anyone could register a new domain name and operate it with no need for any charges. That changed in 1995, and the NSF (National Science Foundation) began to charge for domain name registration. The charge at the time was on average around $100 for a two-year registration. In January of this same year was registered, and became the most popular search engine of the time, opening the doors for a lot of eCommerce as it gave users an easy way to search for specific items or vendors. Oh, and during this period another name surfaced: AuctionWeb. That was a website dedicated to letting users sell their wares, old and new, to other users via a shared marketplace. Sound like a familiar concept? It should, as it eventually changed its name to eBay; the rest is history.

Moving forward to 1998, we come to a year that would not only catapult online shopping further, but the Internet in general: the arrival of Google. September ‘98 saw the would-be search giant begin its journey to becoming the almost-allconsuming name we know today. It quickly supplanted every other search engine around, not only providing what many consider the most accurate and usable searches but also helping online shopping at the same time. Google became synonymous with the Internet, to the point where the company’s very name was used as, and is now officially considered, a verb meaning ‘to search on the Internet’.

Following on from this, another, perhaps equally important player in online commerce arrived. In 1998, PayPal was also launched (it’s currently owned by eBay, which acquired it four years later, in 2002). Now one of the most popular online payment methods, and one that is supported by companies throughout the world, big and small, PayPal made it possible for people to securely pay for items and manage money online without providing sensitive banking details to every vendor they had contact with.

Burst Your Bubble

The quick rise and obvious potential of the Internet attracted a lot of money from investors looking to make a killing. Venture capitalists flocked to plough more and more moolah into a new area of commerce and business. The 1990s saw investors gambling on the future of the Internet with the belief that any money put into it at the time could only pay out even more in the long run. Greed took over, promises were made, and the dream of huge profits meant there were suddenly huge sums tied up in online interests.

Sadly, around 2000, this all went wrong. The infamous ‘dotcom bubble’ burst, a collapse caused by speculation surrounding over-sold internet business opportunities that had caused stock market equity to soar, and put fledgeling companies in a position where they could essentially inflate their actual value by simply branding themselves with ‘e-’ prefixes or ‘.com’ suffixes. For a while, there had been such a clamour to get involved, and so much faith in the future success of dot-com businesses, people couldn’t invest fast enough. This was where it all went wrong.

Around the turn of the century, many of these companies failed, and a domino effect hit the market as stock prices dropped as quickly as they had risen, if not quicker, and money was being lost hand-over-fist. The effect was severe, and many of companies and investor fortunes involved didn’t survive the levelling out. Those that did were still hit with huge losses, but somehow turned things around in order to survive. A few even became bigger than ever before, such as the aforementioned Amazon and eBay.

The dot-com bubble was bad for most people involved, but it was also a solid sign that, for good or bad, online shopping had become big business. While simply having an Internet-like name, i.e. adding ‘.com’ to your company’s letterhead was no longer a guarantee of oodles of capital, it was still enough to encourage more interest and potential sales.

Whilst the bubble demonstrated that there was more to making a name online this than simply fettling a name, and that online commerce was far from easy and guaranteed, it did afford us a glimpse of what the future would be. Just as the video game crash of the 80s lead to the gaming industry becoming one of the biggest in the world, so too did the dot-com bubble in relation to eCommerce. It rose from the ashes like a convenient phoenix.


Following the dot-com crisis there was a lot of understandable uncertainty in the Internet market, and this did affect online sales. However, as we mentioned, there were some companies that managed to weather that particular storm, and – as present day circumstances tell us – eCommerce was far from done.

In 2003 Amazon posted its first yearly profit and returned to the stock market. It was a clear sign that online business was once again growing, and that the lifeblood had returned to the market. Many businesses followed, and the online industry began to stabilise once more.

The key here, though, was a newly found vigilance and measured approach to investment. Those putting their money into online ventures did so much more carefully, and knew that no matter how promising eCommerce could be, there was every possibility things could go very wrong. Overly risky propositions and investments were stopped for the most part (although there’s always someone willing to roll the dice), and this lead to a far more stable financial foundation for the online market, making sure another dot-com collapse wouldn’t happen. This, coupled with the greater familiarity with the technicalities of online business, meant that being no longer attracted buckets of cash by default, and paved the way for the level of eCommerce we have now.

The 2000s saw growth on an unparalleled level, and during this time the biggest names in the industry began to cement themselves as fixtures. Also, just about every company out there established an online presence; from toothpaste to sports cars, there are few companies that don’t have a website and some form of online sales – and with web-based interests like Amazon posting daily turnovers of over $2.5 trillion back in 2009, you can rest assured that eCommerce isn’t going anywhere.

Indeed, the success of many online businesses is down to the fact there is less in the way of bricks and mortar costs, or country borders, getting in the way. Companies online have the entire world at their feet in terms of sales, and as long as a company is well run, and has an established way to ship overseas, there’s no limit to the scope for profit.

From a small bookseller to global domination in just over 20 years, Amazon is the perfect example of just how huge online shopping has become, and that’s just one of many companies that have changed the face of retail.

The Rise Of Online Shopping

Full Circle

To finish up, we should check back in with the first online shopper, Mrs Snowball. Well, almost... Tesco Direct, launched in 2000, would eventually become one of the few online grocery delivery services to remain profitable, having been responsible for that very first transaction. That journey leaves us with a retail sector so vastly different to what it used to be, that its genuinely astonishing. The Internet has reshaped the retail market, and has changed the way the average consumer purchases anything, be it food, games, holidays, books, or even houses.


Surprisingly, although a perfect fit for online retail, video games took quite some time to fully embrace the Internet as a viable platform for sales. While many online retailers have always sold games in their physical forms, relatively speaking, it wasn’t until recently that games have been sold entirely in digital form via online portals.

Spearheaded by services like Valve’s Steam and the big console names like Xbox Live and PlayStation Network, games are now sold and downloaded online, removing the need to visit high street stores, or even wait for a postal delivery. Games are purchased and instantly made available via download. It’s just another sign of the times, and another market sector that’s been changed radically by the Internet.

Social Media

The explosive growth of social media use in recent years may not instantly strike you as being important to online retail, but it’s relevance here is impossible to ignore. Social media has attracted the most diverse groups of people to the online sphere, even people who may not have previously been concerned with the Internet at all. This alone means there are more potential customers now online, certainly many more than previously, and the use of social media to advertise and spread information has become arguably the most valuable tool for marketing.

Just as companies everywhere made the move to open their own websites, regardless of the business, now companies all have their own social media accounts, and have other avenues open to them to reach even more customers. Needless to say, social media has had perhaps the biggest recent impact in online retail.

Web 2.0

Web 2.0 is more of a behind the scenes aspect of online retail, but this too has helped eCommerce grow. Thanks to the increased ability of interaction and creation offered by Web 2.0, this ability for harness user-created content and more interactivity has been a marketing professionals dream.

Web 2.0 is primarily responsible for the growth of social media sites, as well as other huge avenues like YouTube. Blogs and other personal sites also came following the arrival of Web 2.0, and these tools have been used to bolster online retail, and open the way for a new wave of critics and people who can spread the word about a product. Advertising is now no longer limited to appearing on big-name, professional sites, and individuals on YouTube or smaller sites now routinely advertise products and online services.


Definitely one of the stranger evolutions in online retail, and one that’s also gained a rather questionable name for itself, Bitcoin is a totally digital currency created in exchange for processing work or performing tasks. Even letting others utilise your computer’s processing power can earn coins.

By 2015, this digital currency had been embraced by over 100,000 merchants, and transactions using this currency are performed purely between the two parties involved. There’s no middle man.

The Bitcoin digital currency is pseudonymous, which means that the funds themselves are not traceable to any specific person or company. They’re purely digital and are only associated with Bitcoin addresses. This fact has made the currency highly popular with, let’s say, ‘less-than-reputable’ parties. It’s a currency that’s used heavily in online black markets, including the Dark Web, and therefore many associate Bitcoin with illegal activities. This was not the intended goals of the currency, though, and it was simply conceived as an efficient and secure online currency system.

Regardless of the actual use, the simple existence of Bitcoin as actual digital money is just another clear sign of the all-consuming nature of online retail. If eCommerce wasn’t so dominating, there would be no need for such currency methods, and certainly no market for them.