History of e-commerce: The small beginnings preceding the World Wide Web
The 1960s to 1980s marks the birth of early forms of e-commerce and a company you may have not thought of as a startup — FedEx
(This is Post #2 of the History of e-commerce series. Read Post #0 here and Post #1 here!)
In the decades of the 1960s to 1980s, long before the internet became a household staple, the seeds of e-commerce were quietly being sown. This period, often overlooked in the history of digital commerce, was a time of groundbreaking innovation and daring entrepreneurship. It was an era when the concept of e-commerce took root not through online platforms, but via phone orders, early data exchanges, and visionary business models. Among these pioneering ventures was FedEx, an early example of a modern-day startup, which raised a staggering $91 million (equivalent to almost $700 million today) to revolutionize logistics with air transport. This introduction to the beginnings of e-commerce will explore how these early adaptations and inventions set the stage for the online shopping revolution, painting a vivid picture of an era when ordering groceries from a TV was the cutting edge of technology and convenience.
Electronic Data Interchange: The digitization of purchase orders and invoices
In the 1960s, a quiet revolution began in the world of business-to-business commerce with the introduction of the Electronic Data Interchange (EDI). This groundbreaking technology replaced the slow and error-prone process of mailing and faxing documents with a swift, digital transfer of data from one computer to another. EDI marked a significant shift in how businesses communicate and conduct transactions, laying the foundational framework for what would become modern e-commerce.
EDI’s impact was profound and far-reaching. For the first time, purchase orders, invoices, and shipping notices could be exchanged electronically, dramatically reducing processing times and costs. This innovation also played a pivotal role in early globalization, enabling companies across the world to interact and transact with unprecedented speed and efficiency.
The adoption of EDI signaled a departure from traditional methods of commercial interaction, moving towards a more automated and streamlined approach. It was more than just a technological advancement; it was a new way of thinking about business transactions, one that emphasized speed, accuracy, and efficiency. This paradigm shift in data exchange was a crucial step towards the digital marketplace, setting the stage for the e-commerce revolution that would unfold in the decades to follow.
On-line shopping and Teleshopping: Ordering groceries from a TV
The late 1970s witnessed a significant milestone in the evolution of e-commerce with the advent of online shopping and teleshopping. This revolutionary concept was brought to life in 1979 in the United Kingdom by inventor, innovator, and entrepreneur Michael Aldrich. He introduced a system that allowed transactions to be conducted electronically, connecting a modified TV to a transaction processing computer via a phone line. This innovation laid the groundwork for the modern online shopping experience.
One of the most notable implementations of this technology was the Gateshead Shopping Experiment. Aimed at assisting pensioners with mobility issues, this initiative offered a new way to shop for daily necessities. Jane Snowball, a 72-year-old woman, became the first person to use this system. From the comfort of her home, she ordered groceries like margarine, cornflakes, and eggs from her local Tesco supermarket. The groceries were selected through a TV menu and a remote control, and then delivered to her door, where she paid in cash. This event marked a significant shift in retail, demonstrating the potential for technology to transform the shopping experience.
The concept of shopping from home, initially through television and later through computer systems, represented a novel convenience for consumers. It opened up new possibilities for retailers to reach a wider audience, especially those with limited access to physical stores. This early form of e-commerce was not just about buying and selling; it was about accessibility and innovation, paving the way for the complex online shopping systems that would emerge in the following decades.
The advent of Bulletin Board Systems: Technology that enabled the first e-commerce platform
The early 1980s marked another significant milestone in the evolution of e-commerce with the introduction of Bulletin Board Systems (BBS) and CompuServe. These technologies played a critical role in bringing e-commerce into the homes of ordinary consumers, further expanding the reach and possibilities of electronic shopping.
Bulletin Board Systems, introduced in the early 1980s, were rudimentary online platforms that allowed users to connect over a telephone line using a modem. These systems enabled users to share information, post messages, and, crucially, conduct electronic transactions. BBSs represented a significant leap forward from the earlier, more limited forms of e-commerce, offering a more interactive and communal online experience.
In 1982, a significant advancement in e-commerce emerged with the inception of the Boston Computer Exchange, often regarded as the first true e-commerce platform. Initially starting as a paper database, it evolved into a sophisticated computerized system, marking a pivotal transition in how goods were bought and sold.
The Boston Computer Exchange began as a simple concept: a marketplace for people to buy and sell used computers. However, its transformation into a computerized database represented a leap forward in the e-commerce domain. This database was updated daily and made available on the Delphi bulletin board system, a precursor to modern online marketplaces.
This platform was revolutionary in several ways. Firstly, it digitized the traditional classified ads system, making it faster and more accessible. Buyers and sellers no longer had to wait for the next publication of a paper catalog; they could access the latest listings and information in real-time. Secondly, it laid the groundwork for online consumer-to-consumer (C2C) marketplaces, showcasing the potential of the internet for facilitating personal transactions.
CompuServe (CIS), introduced in 1984, took this concept even further, creating what could be considered one of the first electronic malls. This platform allowed users to browse and purchase a variety of products online. A significant feature of CompuServe’s electronic mall was its ability to display full-color product photos, a major advancement over the text-only listings of earlier BBS systems. This visual element of online shopping greatly enhanced the user experience, making it more engaging and similar to browsing in a physical store.
The success and innovation of these platforms demonstrated the viability of online marketplaces, inspiring future platforms that would come to dominate the e-commerce landscape. This early model of e-commerce was a critical step in moving away from physical retail and traditional mail-order catalogs, paving the way for the dynamic, digital marketplace we are familiar with today. These developments were not just technological milestones; they were also cultural ones. They represented a shift in consumer behavior, where shopping from home became a viable and increasingly popular option. The convenience, variety, and novelty of buying products via BBS and CompuServe played a foundational role in shaping consumer expectations and experiences.
FedEx: An early startup that disrupted the logistics industry
The inception of FedEx in 1971 stands out as a hallmark in the history of e-commerce and logistics, epitomizing the spirit of innovation and entrepreneurship that characterized this era. Founded by Frederick W. Smith, FedEx (originally Federal Express) was born from a visionary idea to revolutionize logistics through dedicated air transport, a concept that was nearly unheard of at the time.
In its early days, FedEx was a radical departure from the conventional ground-based delivery systems. Smith’s idea was to create a system where packages were transported via air to a central sorting facility and then delivered to their final destinations. Although delivery by air was already being performed by multiple carriers, it was unreliable as these companies did not own their own fleet, and available cargo space was decided on a whim of the passenger airlines they depended on. Smith’s model was not only faster but also more reliable compared to the existing systems. The startup faced considerable challenges, not least of which was the significant funding required to get the operation off the ground. Yet, FedEx managed to raise an impressive $91 million (almost $700 million in today’s value), a testament to the compelling nature of its business model.
The impact of FedEx on e-commerce and global logistics cannot be overstated. By drastically reducing delivery times, FedEx opened up new possibilities for businesses and consumers alike. It set a new standard in the logistics industry, demonstrating that speed and reliability could be achieved at a large scale. This development was particularly significant for the nascent e-commerce sector, as it provided a reliable solution to one of its biggest challenges: efficient and fast delivery of goods.
FedEx’s innovative approach and success story represent an early instance of a modern-day startup disrupting an established industry through technology and new business models. Its story is not just about a logistics company; it’s about how a disruptive idea can reshape industries and consumer expectations, laying the groundwork for the rapid growth of e-commerce in the years that followed.
The journey from the 1960s to the 1980s marked the dawn of a new era in commerce, laying the groundwork for the digital marketplace that characterizes modern day e-commerce. This period, brimming with technological advancements and pioneering business models, transformed the landscape of consumer shopping and business transactions. Innovations like EDI, online shopping systems, and the creation of FedEx’s logistic networks reshaped the way goods were bought, sold, and delivered, setting the stage for a future dominated by digital transactions and global physical connectivity.
As we look ahead to the next post, we will delve into the transformative decade of the 1990s. This era witnessed the birth of the World Wide Web, an event that fundamentally changed the face of commerce and communication. The 1990s heralded the true advent of modern e-commerce, where the seeds planted in the preceding decades flourished in the fertile ground of the internet. We will explore how this period catalyzed the explosive growth of online shopping, giving rise to iconic platforms and digital marketplaces that have become integral to our daily lives. Stay tuned as we continue to chart the remarkable evolution of e-commerce, from its early beginnings to its current status as a cornerstone of the global economy!
