Ecommerce

Through the third quarter of 2020, consumers spent $580 billion online with U.S. retailers according to the U.S. Department of Commerce. Naturally, the fact that millions of Americans were sitting at home during the COVID-19 pandemic had a lot to do with this, but those big numbers were already trending higher. From Amazon, to Ebay, to Shopify, more people than ever are buying and selling online than ever before.

Most consumers know all too well that buying in an instant is easier than ever—from essentials like paper towels to novelties like birthday gifts to splurges like home décor and clothes. And, it seems one purchase always leads to the next, especially because of the carefully curated advertisements and reminders that are automatically triggered by online retail platforms to pop up on our screens.

Here is the short story of how the ecommerce we know on our screens today came to be in a relatively short period of time and why it’s both ever improving and here to stay.  

What Is Ecommerce?

Electronic commerce, typically known as ecommerce, refers to the “buying and selling of goods, products, or services over the internet.” It extends beyond the transaction of money to funds and data. Think software subscriptions, streaming services, and data storage, to name a few.

Online shopping as we know it was later thought up by Michael Aldrich in the United Kingdom in 1979.  Aldrich dreamed of buying his weekly groceries remotely (something that is all too familiar now) while on a walk with his wife. He accomplished this in a way by connecting a television to a transaction processing computer with a telephone line. He called it “teleshopping,” which referred to shopping at a distance.

Still, the first secure, official online retail transaction didn’t take place until in 1994 when a group of cyberspace entrepreneurs sold a Sting CD from one member to another. The transaction successfully utilized data encryption software to ensure data privacy, which was crucial to the adoption of online shopping.

That same year, in 1994, ecommerce giant, Amazon, launched. Since then, the “e-tailer” founded by Jeff Bezos has grown into the world’s largest online retailer; one that currently dominates B2C ecommerce. Originally selling only books, Bezos’s operation was doing $20,000 per week in sales within 30 days of launch. 

Since then, the security, ease of use, and convenience, safety, and user experience of ecommerce have all improved exponentially. These improved factors have made ecommerce a viable and profitable new frontier for businesses large and small.  

There are generally four types of ecommerce models. These include direct sellers, which operate similar to a physical store for customers but with transactions taking place online (Amazon and Wayfair); marketplaces, which offer platforms for buyers and sellers to connect (think Etsy); software providers, which sell subscriptions to cloud-based software; and logistics, which deliver goods (like UPS and FedEx). Within these four types, ecommerce generally happens one of six ways— Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), Business-to-Administration (B2A) and Consumer-to-Administration (C2A). 

Why Invest in Ecommerce?

Purchasing habits are changing with more Americans making purchases online than ever before. And, companies are listening by continuing to expand their technology budgets, which are up 4.2% in 2020 over 2019, in part with the shared goal to improve ecommerce sites and boost online sales.

More than ever, consumers are comfortable using their payment information in secure online platforms. According to a study by Price Waterhouse Coopers, more than half (51%) of respondents paid bills and invoices online in 2018, demonstrating an increasing comfort level with buying and completing transactions online.

Sellers aren’t shying away from the internet either, with numerous benefits for new ecommerce-based entities and traditional brick and mortar establishments alike. From the ability to be open for business and thereby make money 24/7 in an online platform, to providing an online space to accurately describe products in detail, to using SEO to attract consumers, selling online is giving retailers the opportunity to communicate better with customers, reach more people, sell more products, and be more successful.  

In other words, the technology that facilitates the buying and selling of goods online, not to mention the companies selling more than ever online, offers extensive investment opportunities. Rest assured, online retail, and business generally, is poised to continue its pattern of growth and innovation.

How to Invest in Ecommerce

Naturally, in something as broad as ecommerce, investing isn’t as simple as choosing a few companies. In order to reach the full scope of this trend it’s important to invest broadly in all of the different sectors and niches that are shaping and being reshaped by this shift. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that cover ecommerce.

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The information and data are as of the July 28, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.