The first glimpse of online commerce was experienced by some students at MIT (Massachusetts Institute of Technology) in the 70’s. On their terminal-style computer screen they saw an unusual offer: An opportunity to buy marijuana. That’s how the story of online commerce begins – and it gets even better. Here are the milestones you need to be aware of if you are into e-commerce of any kind.
Marijuana was illegal, but so were commercial activities in general in the early years of the internet. Many people were afraid of the cyber territory, as you will find out later in this post. In fact, the commercial ban on the internet wasn’t lifted until 1991.
When reading this story, keep in mind that e-commerce sales is expected to hit almost 2800 billion dollars this year alone – just including retail. Maybe even more unbelievable, Amazon alone now has more than half a million employees – half the size of Stockholm.
Okay, let’s begin. It’s going to be exciting, fun and educational. Just wait and see.
The embryo of e-commerce: The famous marijuana deal
This took place during the hippie era of the early 70’s. Some curious students at Stanford Artificial Intelligence Lab used the brand new Arpanet (a pre-internet computer network between universities in the US established just a couple of years before, in October 1969) to set up a marijuana deal with students at MIT, Massachusetts Institute of Technology.
The big takeaway: The idea of selling – and buying – stuff from a computer had appeal from the moment computers, and some adventurous people behind them, could connect.
What happened to the students? We haven’t been able to find out. If you happen to know any of them, please let us know by emailing firstname.lastname@example.org.
The first e-commerce “stores” (1984)
What if the full range of grocery items from my local supermarket could somehow show up on my television screen at home? That out-of-the-box thought came to mind one day for inventor Michael Aldrich when he was walking his dog. A few years later, in 1984, his groundbreaking Videotex technology was introduced to 72-year old grandmother Mrs Snowball living in a community centre in England. She was amazed when she saw groceries from her local Tesco listed on the TV screen, thanks to a connection via a domestic phone line. She decided to order eggs, cornflakes and margarine. She placed the order with her remote, while comfortably sitting in her armchair at home. A while later the delivery man showed up on her doorstep with the items. You can read more about Mrs Snowball in our story about the first online shopper here.
At the same time, network company Compuserve launched a service called the Electronic Mall. 60,000 PC users who paid a yearly membership fee could take advantage of discounts from 85 merchants connected to Compuserve’s network. The connection was 300 bps (10,000 times slower than today’s connections of 3Mb/s) for 13 cents per minute, meaning that spending hours browsing would reduce any savings fast. Luckily for these tech-savvy subscribers, the network company sent out physical catalogs to support their shopping experience.
The invention of “click here” and the webpages that make web stores possible (1990/1991)
Next time you check your daily statistics for the number of clicks you get in your web store, give a thought to a man named Tim Berners-Lee.
He was the one who invented hyperlinks and the idea of web browsing in 1990/1991. Just imagine e-commerce without the option to click on links that take you and your customers to different web pages. He was working as a researcher at CERN (the European organisation for nuclear research) in Geneva when he came up with this way to organise and display information. He subsequently developed URL, HTML and HTTP.
You can see the very first webpage ever published here.
Nothing fancy about that page, but it was a game-changer. Suddenly there was a way to make information easily accessible to anyone in the world who had a computer and an online connection. Secure online payments were still not available, but that was just around the corner.
The first e-commerce payment (1994)
Netscape 1.0 was the first web browser including an SSL security protocol. It was released in 1994 and enabled secure payments.
One of the first items to be paid for on the web was a pizza from Pizza Hut. The pizza company claims that this pizza – a large pepperoni and mushroom pizza with extra cheese – was the very first purchase on the web. However, that is disputed. The first purchase seems to have happened a week or so before that.
An article published in the New York Times on August 12, 1994, wrote about what is described as “apparently the first retail transaction on the Internet”.
That order was not for a pizza, but a Sting CD (for our younger audience, a “CD” is like Spotify but with just 10-15 songs instead of 30 million). The newspaper reported how Phil Brandenberger of Philadelphia made his purchase from a team of young cyberspace entrepreneurs in the city of Nashua:
“From his workstation in Philadelphia, Mr. Brandenburger logged onto the computer in Nashua, and used a secret code to send his Visa credit card number to pay $12.48, plus shipping costs, for the compact disk “Ten Summoners’ Tales” by the rock musician Sting.”
The entrepreneurs celebrated the success of their first secure sale online with champagne:
“Even if the N.S.A. was listening in, they couldn’t get his credit card number,” said Daniel M. Kohn, the 21-year-old chief executive.
Later Randy Adams, former CEO of Internet Shopping Network, claimed that he had beaten both Pizza Hut and the Nashua entrepreneurs by a month, selling computer equipment online.
Anyway, it’s fair to say that every one of them was pretty quick to catch the e-commerce ball.
Very few retailers had their own websites at this point. Instead, they connected themselves to services like Internet Shopping Network to post items for sale. At the time the internet was, as Computerworld put it, “decidedly uncommercial”; more a place for ideas and information to be shared. Niche group of users were afraid to see this space hijacked by companies selling stuff. In fact, commerce on the internet was banned until 1991 by the National Science Foundation.
“Advertisers are looking for ways to exploit cyberspace,” the Atlanta Journal and Constitution stated. Intentionally exploitive or not, some very powerful e-commerce giants were about to be born.
The first days of Amazon and Ebay (1995)
In the summer of 1995, Jeff Bezos was excited. He had uploaded one million book titles from CD-ROMs provided by book publishers – which was five times as many titles as could be found in well sorted physical bookstores – and he had made them easy to find and buy on Amazon.com.
The web store looked like this:
Yes. The hugely successful customer reviews feature was there already; an early form of social media where users could write about their own experiences of books and read reviews from others. The review feature was one of the notable characteristics of Amazon. Jeff Bezos also had a no-barriers approach to ordering, where customers didn’t need an account to use the store. “The first time you place an order, you will be given the opportunity to create an account”, he informed his visitors.
Jeff Bezos immediately felt he was onto something big. Within 30 days he had customers in each one of the US states, as well as in 45 other countries. The business picked up speed quickly, massive investments were made, people employed, and the tech developed in ways that the world hadn’t seen before. The company didn’t post any yearly profit until 2003, and even today it keeps throwing cash into progressive initiatives to ensure market domination.
So, now it was proven that people were ready to buy brand new books online.
But how about used stuff? Would people want to bid on each other’s used items?
Software programmer Pierre Omidyar wanted to find out. He coded AuctionWeb, and to explore if there was a market for used goods, he decided to sell a broken laser pointer.
He didn’t need to wait for long.
It was sold within a day, for $14,83.
To make sure the buyer was aware the pointer was broken, he sent the guy an e-mail, just to verify. Once Pierre Omidyar received the buyer’s response, he was pretty sure his e-commerce idea would fly. The buyer explained: ”I’m a collector of broken laser pointers”.
And with that, an era of commerce had begun.
It was powered by web technology and a market that was hungry to explore. New, exciting browsing experiences were on the rise. People were hooked by the excitement of shopping online.
The bubble, crash, and collapse (1997-2002)
While the fun of online shopping was on the rise with websites like Amazon and eBay in the late 90’s, there might have been too much optimism in the entrepreneurial air.
Wikipedia puts it well:
“The dot-com bubble (also known as the dot-com boom, the dot-com crash, the Y2K crash, the Y2K bubble, the tech bubble, the Internet bubble, the dot-com collapse, and the information technology bubble) was a historic economic bubble and period of excessive speculation that occurred roughly from 1997 to 2001, a period of extreme growth in the usage and adaptation of the Internet by businesses and consumers.”
At the time, the focus of many dot-com companies was to pump money into boosting their brand as quickly as possible, to get even more funding.
For example, the Super Bowl ads in January 2000 included 16 dot-com companies that each paid over $2 million for a 30-second spot.
The resulting sales were a joke (if they existed at all) and so were – investors finally realised – the chances of future sales ever making up for the advertising costs. Between 2000 and 2002, the bubble burst. Not even the “Complete Idiot’s Guide to e-commerce”, released on Amazon in 2000, could prevent that from happening. Nor could Google, with its introduction of AdWords the same year.
The bubble didn’t end e-commerce. It was just a bump in the road. Like rain on a hot, humid, sunny day, enthusiasm returned with new fresh air, and e-commerce could continue to evolve in the years to come.
The comeback of e-commerce: From evolution to revolution
The list of things that have happened in the world of e-commerce during the last 15 years is never-ending:
Radically improved digital infrastructure; faster internet connections; and the birth of the social media landscape of YouTube, Facebook, Instagram, Twitter, Snapchat where we see “YouTubers” unpacking products and bloggers becoming rich and famous influencers. Then review sites like Tripadvisor and Yelp, the simplified checkout processes, the rise of UX:ers as a high demand workforce, the personalisation trends, customer service going social, the expectation of fast and transparent delivery processes, brand-enhancing packaging, omnichannel selling, WooCommerce and other WordPress solutions for e-commerce, market platforms like Etsy and Bonanza, subscription e-commerce, the e-commerce ecosystem of Kindle and App Store, localization, retargeting… the list just goes on.
You could say that e-commerce is moving forward as powerfully as the world’s largest river, the Amazon; the river that more than 30 years ago turned into a bookstore, which turned into the world’s largest marketplace, which turned into a city…
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