| Dec 4, 2020

The 3 Major Stages of the E-Commerce Evolution

In order to understand where e-commerce is headed, it’s important to look at where we’ve been. With this in mind, we can effectively chart a path forward.
evolution of shopping scaled

For modern buyers, shopping online has become a dependable alternative to traditional retail or in-person buying. It is still very much a work in progress, however. Entrepreneurs and other professionals who need to plan for the future of their businesses can benefit from having a broad perspective of how e-commerce has evolved, as we can use what we’ve already achieved to make some predictions about what soon will become necessary. For a basic context, the history of e-commerce breaks down into these three main stages.

Stage 1: Everybody gets a website

As summarized in an E-commerce Nation infographic, in 1994, Netscape created Navigator, which became the first web browser people used on a wide scale. That initial development allowed Pizza Hut to offer online ordering to customers. Just a year later, both eBay and Amazon got up and running. Suddenly, people started to realize there was a huge convenience in being able to buy items without going to a physical store. Business leaders started to see that they could sell more if they were digitally visible.

In 1998, the founding of PayPal gave shoppers a way to consistently and securely pay for items they saw on company sites. With that missing puzzle piece in place, businesses placed a huge priority on developing their e-commerce sites. They were limited by slower connection speeds, which kept the sites predominantly text-based, but the later development of Flash helped make the sites more eye-catching. By 2001, 70 percent of people who used the Internet used the Web to make holiday purchases. Through the next decade, sites became more interactive and improved aesthetically, and with SEO, everything was more user-centric.

Stage 2: Everything gets put in one place

Most people don’t really like going to multiple physical stores as they shop — they like the convenience and efficiency of having everything in one location. And as people became more comfortable with e-commerce sites, they started to apply this mentality to online stores, too. They no longer wanted to go to Dick’s Sporting Goods for their kid’s cleats and then to Barnes and Noble for a book, for example. So, the big concept in this stage of e-commerce evolution was aggregation. Companies needed to figure out how to bring everything customers wanted into one location online.

One approach to solving this problem was for companies to host a huge range of independent third-party sellers or to establish affiliate partnerships. Businesses also merged and acquired other companies. Good examples are PetSmart’s acquisition of Chewy (2017, $3.35 billion) and Walmart’s deal for Jet (2016, $3.30 billion). Advances like artificial intelligence also allowed shoppers to compare deals across sites, find coupons, and see related items. With these shifts, it became possible for buyers to complete an order involving companies from multiple locations around the world. And as a result, the number and types of items buyers purchased grew.


Stage 3: Everyone gets next-day shipping (or shipping that is as fast as possible)

In the third and current stage of e-commerce, it’s not about the products you have or even whether you can get them to customers at the lowest price. It’s all about whether you can deliver those products or services in the least amount of time. For example, just a few years ago, next-day delivery was considered hyper-fast, and you usually had to pay quite the premium to get that kind of speed.

But today, with companies like Amazon promising two-day or even two-hour delivery, the expectation from consumers is that they shouldn’t need to wait hardly at all to get what they want. And as Ralph Waldo Emerson put it, “The mind, once stretched by a new idea, never returns to its original dimensions.” Consumers have gotten used to the immediate delivery concept, and they’re not likely to go back to thinking that getting their items in a week (or two or three) is acceptable.

Because of this attitude, companies are emphasizing e-commerce for mobile and exploring all kinds of options to deliver faster. For example, our last-mile business — which started just two years ago with 289 cargo vans — has already expanded to over 13,000 cargo vans and counting. And, just wait until next year with other innovations like drones and robots on the way, too.

Add in a global pandemic that has forced non-traditional buyers into the eCommerce world, and we are experiencing the e-commerce evolution faster than ever. As modern consumers merge with these non-traditional buyers, who are exploring e-commerce to meet more basic needs during lockdowns, the need for delivery speed is hotter than ever — and has recently been pushing suppliers to their limits to keep up with the demand.

Looking to the future

One critical point to remember with e-commerce is that, despite how much it has clearly ballooned, we’re still very much in the early stages. In 2019, e-commerce accounted for just 16 percent of total retail sales. So although customers do already have some expectations, and although we’ve already developed some good tools, we’ve only just scratched the tip of the iceberg in terms of what e-commerce can be or will become.

The pandemic undoubtedly will accelerate the move online for not only products but for mobile services as well. Regardless, consumers and companies can work together to decide how to build on what we’ve got. As long as there is clear, consistent two-way communication happening, the potential for outstanding experience (and revenue) is enormous.

Brendan P. Keegan
Executive Author

Chief Executive Officer, Merchants Fleet

Brendan P. Keegan serves as Chief Executive Officer at Merchants Fleet and was recently named the world’s Most Innovative CEO by CEO World Awards®. view profile


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