The Evolution of E-Commerce

In it’s simplest definition, e-commerce is the online transaction of business, featuring linked computer systems of the vendor, host, and buyer. Electronic transactions involve the transfer of ownership or rights to use a good or service. (export.gov/sellingonline/whatisecommerce.asp).

There are two main types of e-commerce. The first, and most common, is business to consumer (B2C), which as the name implies, involves e-businesses providing goods and/or services to end consumers. Common examples of popular B2C e-commerce include Amazon.com, BestBuy.com, and NewEgg.com. On the other side of the e-commerce spectrum, we have business to business (B2B) e-commerce, which is the electronic transactions between multiple businesses, and does not involve common products or consumers. B2C e-commerce has been changing the way people shop and conduct business online for well over ten years, and has become a significant staple in the way modern retail giants attract and maintain loyal consumers from all over the globe. The number of online e-tailers (electronic retailers) continues to grow each and every year, and new marketing strategies are constantly being developed by businesses to ensure that their products are ultimately being found online and purchased by the end-user.

This growth is being spawned by the mere fact that more and more people are buying online each year. Looking back at the first quarter of 2004, the U.S. Department of Commerce reported that $15.5 billion was spent online, an increase of 28.1% from the first quarter of 2003. This sales figure accounted for 1.9% of total retail sales that quarter. Going forward, the progress of retail e-commerce has all but slowed, with online sales increasing no less that 25% each year until the first quarter of 2007, where an estimated $31.5 billion in online spending was reported. Worth noting, however, is that while total e-commerce sales increase, also increasing is total retail spending as a whole. Keeping this in mind, the most effective way to gauge the increasing impact of e-commerce on retail is to look at the percent of total retail that was conducted online. As previously mentioned, 1.9% of retail sales were made online in the first quarter of 2004. This number increases in each first quarter over the next 3 years: 2.2% in 2005, 2.7% in 2006, and 3.2% in 2007. At this rate of increase, one can only assume that by the year 2020, roughly 10% of all retail business will be conducted online.

As a result of this online shopping phenomenon, both commercial and independent brick and mortar shops are looking to integrate e-commerce solutions into their business models in an attempt to compete with the evolving marketplace, yet are falling behind as a result of poor site design, faulty programming and functionality, or weak marketing efforts. In order to effectively sell online, e-tailers need to be able to look at what their site offers through the eyes of the average consumer and come to grips with the fact that running a store online is essentially no different than a physical brick and mortar shop.

Justin Mattison is an Internet Marketing Specialist with Mountain Media E-Commerce Solutions in beautiful Upstate New York.

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