Online Shopping History

A Brief History of Online Shopping

Tuesday, November 12th, 2019, 12:02:17 PM

In the past few decades, online shopping has developed from being the preserve and dream of a few computer geeks to a normal, mainstream activity. Nowadays, 80% of Americans regularly purchase goods online. And although that number is not quite so high in Europe, 25%, with variations from country to country, the trend is steadily upwards. So when and how did the dream become a reality? Here we'll take a brief look at the history of online shopping.

The Beginnings

Most people don't know this, but online shopping predates the Internet As We Know It. As far back as the 1960s, big businesses, mostly in the transport industry, were using something called the Electronic Data Interchange (EDI) to do deals. Although this definitely counts as e-commerce, it was confined to B2B (business to business) transactions.

The first-ever recorded consumer online transaction actually happened in 1972. Stanford University students harnessed the advanced technology at their Artificial Intelligence Lab to connect with their colleagues at Massachusetts Institute of Technology in order to arrange a deal. What was so important that it spurred some of the best minds of the generation to harness the most advanced technology available at the time in order to sell it? – And the answer is; Marijuana, quantity unknown.

A Quantum Leap

It wasn't until the late 1970s however, that people began to think seriously about the potential of B2C (business to customer) electronic transactions. A certain Micheal Aldrich, an English inventor is credited with inventing online shopping as we know it in 1979. The story is as follows;

One afternoon, probably a Sunday, our hero was roped into a shopping trip to the local supermarket by his wife. The experience was apparently so traumatic that he returned home, determined never to have to repeat it. Being a devoted husband and decent human being as well as an inventor, he also wanted to spare his wife and others the torture known as "the weekend shop". To this end he hooked up a TV, a computer and a telephone line and Teleshopping, the granddaddy of today's online shopping, was born.

Teleshopping - a precursor of Online Shopping

His invention was used for the first time in 1984 in Gateshead, England. In May of that year, Mrs Jane Snowball, a 72-year-old grandmother connected to her local Tesco through her TV and landline and ordered cornflakes, eggs and margarine. The items were paid for cash on delivery.

Although this system had potential and certainly saved many man-hours of traipsing around supermarket aisles, take-up wasn't great. Navigating through the list of items on offer using a tv remote was tedious and time-consuming for the consumer, and as the only payment methods possible were Cash in Advance or Cash on Delivery, there were high elements of risk for both businesses and consumers.

B2B e-commerce flourished over the next decade, but B2C electronic sales lagged far behind. It wasn't until the 1990s and the invention of the Internet As We Know It that things really took off.  Amazon was already a player and eBay and Etsy quickly appeared on the scene. But there was still a problem.

Teething Troubles

Consumers could now order goods online with relative ease, but payments still had to be done the old-fashioned way, cash on delivery or through bank transfer (meaning you actually had to physically go to your bank to complete the transaction).

It wasn't until 1994 that all steps of a purchase, including payment, were completed online. A guy bought a Sting CD from a friend and sent him his credit card info, encrypted of course. Now real B2C e-commerce was poised to take off. But didn't. Although online payments by credit card were now possible, they took days to process. This resulted in all sorts of scams and left both businesses and consumers exposed.

First Credit Cards used for Online Shopping

Despite the huge boom in online companies in the mid-'90s (the dot com bubble), none of them were seriously looking into this problem. These companies were relying on investor frenzy for their capital and were not concerned with how people could quickly and safely pay for their goods or services, if they ever got round to offering any. Solving this issue was left to the only industry that had recognised and exploited the full comercial potential of the Internet right from the start: Pornography.

People involved in pornography are not noted for their trustworthiness or high moral standards. With online credit card payments now possible, but slow, a situation quickly developed where the providers were trying to scam the customers with hidden charges, etc and the customers were trying to scam the providers any way they could. This resulted in many sites losing their Merchant accounts with credit card companies.

Enter Christopher Mallick, a young entrepreneur. Chris and his company Paycom acted as middlemen between the banks and pornographers and developed a way to handle credit card payments in real-time. Mallick claims they were handling over a billion dollars a year in credit card transactions at the peak of their success. The 2009 film Middle Men, which Mallick produced himself, is based on his experiences during this period of his life.

Online Payment Method – Paypal founded in 1998

Now that there was finally a quick, secure payment method in place, online shopping really took off. The next big notable development was the founding of the e-wallet provider PayPal in 1998, the first of many come. This made it even more convenient to shop online as it allowed consumers to store funds securely online separately from their bank accounts.

The Future is Now

The advent of smartphones in the 2000s made online shopping more popular than ever. Now consumers could access a global marketplace and pay for goods all from a device they carried in their pocket. So that is exactly what they started to do. In 2017 more than a third of online purchase in the US were made on a mobile device, and mobile sales are predicted to account for 50% of global e-sales by 2020.

Smartphones in 21st Century

So even if you've never considered online shopping before, all that is about to change. More and more companies are moving to online-only sales and, even more importantly, major players are now accepting Bitcoin in payment. In just 40 years online shopping has gone from clicking through a list of groceries on your TV screen to a flawlessly smooth experience that allows you to purchase just about anything you want, at any time and from any location. And you can even generate your own currency to pay for stuff. Obviously, this is the way of the future!