e-commerce

   Since the introduction of credit cards and the beginning of banking automation in the 1960s, computers and com-munications networks have played an increasing role in the infrastructure of commerce (see banking and computers). Some businesses also established proprietary networks (for example, to allow pharmacies to order drugs directly from suppliers).

Electronic sales directly to consumers were pioneered by “teletex,” such as the French Minitel, as well as such ser-vices as CompuServe and America Online. However, these services were proprietary, meaning that businesses could only market to subscribers. The widespread adoption of the Internet in the mid-1990s (see World Wide Web) created an open and potentially much larger marketplace.

   The first e-commerce boom came in the late 1990s, when enthusiasm about the seeming potential for unlim-ited profits drove numerous online startups, often with poorly conceived business plans that assumed that rapid expansion and low prices would result in gaining con-trol of a particular sector and achieving a dominant (and profitable) position. Among the numerous casualties of the “dot-bust” of 2000–2001 was WebVan, a company that sold and delivered groceries directly to consumer’s homes.

While the bursting of the “dot-com bubble” was pain-ful to investors, entrepreneurs, and workers, recovery was soon underway. The recovery was aided by the steady growth of Internet users (particularly those with broad-band connections), innovative software for interacting with consumers and analyzing transaction information, and the coming of age of a generation that had virtually grown up online.

   Today e-commerce is a steadily growing sector, and it is increasingly international, fed by nearly 1.5 billion Internet users worldwide. (China, with more than 250 million Web users, has become the world’s largest online market.)

Meanwhile in the United States in 2007 total consumer retail sales on the Internet reached $136 billion, up nearly 20 percent over the previous year. According to a report from Forrester Research, online retail revenues (excluding travel-related services) will pass $250 billion by 2011. Sur-veys show that about 80 percent of American Internet users have bought something online, while many users who buy products off-line originally searched for information about them online.

The most popular e-commerce sectors today include the selling of books, music and movies, travel-related services, electronics, clothing, luxury goods, and medications. (In 2006, online buyers actually spent more money on cloth-ing than on computers and related products.) A number of other online activities can be considered part of e-com-merce, although they are usually not included in retail-ing statistics (see auctions, online; online gambling; online games; and social networking).

Infrastructure

   Successful e-commerce depends on a complex array of ser-vices, facilities, and software. For marketing and consumer communications, see online advertising and customer relationship management. Behind the scenes, trans-action data is constantly being collected and analyzed to determine the success of the marketing program and to “personalize” the customer experience and allow for tar-geted marketing (see cookies and data mining).

   The actual transaction processing requires shopping cart software and a connection to the credit card processing infrastructure (see digital cash). Specialized forms of sell-ing require additional software and support systems (see, for example, auctions, online). An ongoing e-business must also deal with functions shared by “brick and mortar” (traditional) stores: inventory control, ordering from sup-pliers (see supply chain management), taxes, payroll, and so on. The broader e-commerce sector also includes busi-nesses that do not target consumers but, rather, the needs of business itself—so-called business to business or B2B.

Security and Privacy

   One continuing obstacle to the growth of e-commerce has been consumers’ concerns about the theft or misuse of per-sonal information gathered as part of the shopping process. This can involve either fake Web sites (see phishing and spoofing) or legitimate businesses that sell information about customers without their knowledge or consent (see privacy in the digital age). According to a report from Gartner Research, more than $900 million in e-commerce sales during 2006 was lost because of consumers’ security concerns, and about a billion dollars more in sales was lost because customers decided not to buy online at all.

Trends

   E-commerce is maturing even as it continues to evolve. Some trends in the second half of the 2000 decade reflect changes in what is presented to the consumer, how it is delivered, and how users can participate in ways other than simply viewing content and selecting products:

•  delivery of richer and more interactive multimedia experience, catering to the widespread availability of broadband connections

•  integration of marketing using programming inter-faces (see mashups) with popular online services such as Google Maps, online game worlds, and social networking sites (see online games and social net-working)

•  increasing participation of consumers in develop-ing the quality of the shopping experience, such as through user product reviews and blogs (see user-created content)

•  increased emphasis on serving rapidly growing for-eign markets, such as India and China

•  the spread of e-commerce to new mobile platforms (see pda and smartphone)