The history of Ecommerce started 40 years ago, but online shopping only became possible when the internet was opened to the public in 1991. At first, the big players like Amazon and eBay were dictating the Ecommerce market, but in 2018 Amazon is the leading Ecommerce company in the United States with $53 billion revenue a year.
This article will address some of the key players and milestones of Ecommerce in the USA.
The start of retail
In 1872 retail made its entry into the USA with the introduction of the mail-order catalog. Montgomery Ward published the first general-item mail-order catalog and shipped it to farmers. Ordering via the catalog would save people 40% by removing the middleman such as General Stores. The incentive for buyers was low prices and saving money. Many payment methods were available like COD, US Post Office money order, American Express money order, or cash at a local Express office.
Macy`s opened the first store in 1878: “A Place Where Almost Anything May Be Bought”. Department stores were popping up in the United States. Ward had no stores in 1926 but had five hundred just three years later. In 1950 shopping malls were built with department stores such as Sears and J.C. Penney.
In 1962 Sam Walton opened this first Walmart store. Sam took physical retail to the limits of efficiency by using technology and introducing self-service. Walton pioneered the idea of accepting lower margins in exchange for higher volumes. In 1966 Walmart adopted the IBM computer to capture sales information and manage inventory and logistics. He was the first to create a computerized warehouse and distribution system. By 1980 Walmart had 276 stores that were generating $1.2 billion in revenue.
Two decades later the traditional commerce of retail transitioned smoothly into Ecommerce.
[tweetshareinline tweet=”Retail smoothly transitioned into online commerce in the United States. And is now a $390 billion market! http://ow.ly/WnLj30kOTfN #ecommerce #history” via=”no”]
Amazon vs. eBay
Jeff Bezos worked for a New York financial firm, where he got inspired to start Amazon. The internet started to take off and Jeff began an online book store, Amazon. The efficiency and technology of Walmart inspired Bezos. Amazon took advantage of the systems and processes that Walmart had helped create. Amazon also benefited from the common use of credit cards. Time magazine presented Jeff Bezos as Person of the Year in 1999.
In the San Francisco Bay Area, Pierre Omidyar, build a site called AuctionWeb for used products. He realized that the Internet might be a great way to connect buyers and sellers of used items and collectibles. Within a year AuctionWeb’s sales reached $7.2 million and one year later, AuctionWeb’s sales reached $95 million. As his website grew massively popular, Omidyar changed AuctionWeb’s name to eBay in 1997.
Amazon grew into the leading everything store for new products. eBay grew into the leading store for everything else: used goods, collectibles, and one-of-a-kind products. The only remaining question was, which of these companies would ultimately dominate global Ecommerce?
Trust as an accelerator
The fundamental ingredient of Ecommerce is trust. Trust between the merchant and the customer. The customers already knew the brands of many retailers, so it was easy for them to enter the Ecommerce market. Another form of trust was the protection of customers for fraud or disputes between the seller and buyer. For payment customers and retailers are used to Credit Card payments. US retailers know they will get their money when delivering the product. US customers knew that credit agencies would hold the vendor accountable if there was something wrong with the product.
This environment of ‘trust’ allowed many retailers to create an online storefront and plug it into existing logistics and payment infrastructure. And when Google introduced search advertising, more customers could find their way to the online stores.
From $390 to $700 billion USD in 6 year
The Internet is growing now every US citizen have access to it with the smartphones. Ecommerce market will continue to evolve and expand. With the use of social media, the conversation between sellers and buyers has become more engaging, making it easier for transactions to happen online. Ordering a product or service from the palm your hand is not the future anymore.
In 2016, 79% of the 328 Million US citizens are buying products online. 15% percent buy online on a weekly basis. The online sales in the United States in 2016 was about $390 billion USD. It expects to grow to $700 billion in 2022. The revenue of Amazon in 2017 is $53 billion USD and second-placed Walmart sold $14 billion USD.
These are some impressive numbers, clearly showing that Ecommerce is still a growing market in the United States. The big factors for this growth are the hunt of US citizens for the lowest prices and getting rich. It pushes retailers to invest in efficiency to reduce costs. And this high-trust environment – pay or get sued, deliver or get sued – between buyers and sellers, is an accelerator in doing business online.
If you want to read more about the history of Ecommerce in the US and learn about the rising Ecommerce market of China and India, I recommend reading the book Six Billion Shoppers by Porter Erisman.