Electronic commerce, or ecommerce (sometimes conducted by online “etailers”), is the selling of products and services online and through other electronic services. Since the 1990s, it has been a growing sector of the American economy, with significant impact both on the economy in general and on specific industries. It is especially associated with online stores located on the World Wide Web, which for many people is metonymous with the internet itself.
The earliest electronic commerce was enabled by the development of electronic funds transfer—the shifting of money electronically from one account to another, whether in the form of online banking, direct deposit and debit, or the use of credit and debit cards at ATMs and points of sale. In that sense, the first ecommerce consumers were aware of was the use of electronic systems to facilitate credit card purchases, in the 1970s and early 1980s. ATMs and telephone banking spread throughout the 1980s, allowing more and more access to one’s money without needing to go to the bank; by the end of the decade, debit cards were in use at many supermarkets and gas stations, and through the 1990s debit cards became more universally useful as Visa and MasterCard branding was attached to them and regional interbank networks such as MAC and Pulse adopted mutual agreements.
Visaand MasterCard-branded debit cards soon assisted online ecommerce as well, by enabling online purchases without the use of a credit card and without the delays or security concerns of an electronic checking balance transfer. Early online marketplaces were bulletin board system (BBS) based, predating the arrival of internet access in most homes. The Boston Computer Exchange—BCE or BoCoEx—was the first of these, enabling the buying and selling of used computers and computer parts in 1983, arriving at the same time as the IBM XT (the successor to IBM’s original PC).
A precursor to eBay, BCE allowed home users to browse inventories uploaded by sellers; but in these early marketplaces, only the shopping was done online, and purchases were conducted over the telephone. BCE realized an early side benefit to running its marketplace, issuing each week the BoCoEx Index, listing the high, low, and closing prices for the most popular items in its marketplace. The Index quickly became the “blue book” for used computers, used in asset valuation and court cases, and was published by the major industry magazines. Within a few years, BCE was licensing its software and technology to computer exchanges in other cities—and in Chile and the Soviet Union.
1994 was the big year for home internet. Though available through dial-up internet service providers for years in many cities, the popularity of the internet was slim compared to online services like America Online and Prodigy—in no small part because those services offered graphics and a single program interface, while internet access was spread out among multiple protocols like telnet, email, and FTP, with limited or no graphics. But in 1994, Netscape’s browser for the World Wide Web was introduced; through the use of hypertext, the Web (as proposed by Tim Berners-Lee at CERN) unified multimedia content in an experience much like using America Online, with far more content. Commerce arrived quickly: Pizza Hut instituted online ordering in some markets, online banking began, and online pornography and flower delivery were introduced within months of each other. Netscape soon upgraded its browser to provide encrypted communications, making credit card transactions more secure. The following year, Amazon and eBay—still the two giants of ecommerce—launched.
The dotcom boom shortly followed, even before DSL and cable internet access made high-speed home internet access commonplace. Companies like Amazon, eBay, PayPal, Google, Yahoo, and YouTube became household names, introduced by and associated with a technology adopted as fast as radio and television had been. The bubble burst in 2000, in part because of exuberant over speculation, venture capitalists who didn’t understand the marketplace well enough because it was too new to be known, and too many big ideas that didn’t clearly lead to profit; but the internet quickly showed that it would become more and more integrated into everyday life rather than fading like a fad, and ecommerce was no less integral a part of the economy when the boom died off. In 2003, Amazon posted its first profits. By 2008, American ecommerce accounted for over $200 billion in sales.
Newer, robust protocols and systems have been developed to process online transactions, for the protection of privacy and financial data, in an environment of increasing concerns over identity theft and other fraud. Whole industries have emerged around or developed in response to ecommerce. Even more than catalogue mail order, ecommerce has enabled the success of niche direct-to-consumer companies, from barbecue shacks selling their sauce online to independent record labels making their albums available for purchase. The mp3 has become the common commercial unit of music, and billions of dollars of ringtones are purchased each year, directly from cellular phones. Amazon has introduced its Kindle, an ebook reader revolutionary not in its design—competing models are similar—but in its integration with Amazon’s inventory and the ability to purchase ebooks wirelessly without need of a home internet connection.
Companies like Netflix, which rents a flexible number of DVDs a month for a flat fee, have successfully competed with their “brick and mortar” counterparts. Blockbuster soon found it necessary to offer a DVDby-mail subscription service as well, while Movie Gallery, the second-largest American movie rental chain, filed for bankruptcy in 2007.
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- Henry R. Cheeseman, Contemporary Business and Online Commerce Law: Legal, Internet, Ethical, and Global Environments (Pearson Prentice Hall, 2009);
- Jonathan D. Frieden and Sean Patrick Roche, “E-Commerce: Legal Issues of the Online Retailer in Virginia,” Richmond Journal of Law & Technology (v.13/2, 2006);
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- Pat Seybold, Customers.com (Crown Business Books, 2001);
- Efraim Turban, David R. King, and Judy Lang, Introduction to Electronic Commerce (Pearson Prentice Hall, 2009).
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