Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app. Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine, which displays the same product’s availability and pricing at different e-retailers. As of 2020, customers can shop online using a range of different computers and devices, including desktop computers, laptops, tablet computers and smartphones.
An online shop evokes the physical analogy of buying products or services at a regular “bricks-and-mortar” retailer or shopping center; the process is called business-to-consumer (B2C) online shopping. When an online store is set up to enable businesses to buy from another businesses, the process is called business-to-business (B2B) online shopping. A typical online store enables the customer to browse the firm’s range of products and services, view photos or images of the products, along with information about the product specifications, features and prices.
Online stores usually enable shoppers to use “search” features to find specific models, brands or items. Online customers must have access to the Internet and a valid method of payment in order to complete a transaction, such as a credit card, an Interac-enabled debit card, or a service such as PayPal. For physical products (e.g., paperback books or clothes), the e-tailer ships the products to the customer; for digital products, such as digital audio files of songs or software, the e-tailer usually sends the file to the customer over the Internet. The largest of these online retailing corporations are Alibaba, Amazon.com, and eBay.
Alternative names for the activity are “e-tailing”, a shortened form of “electronic retail” or “e-shopping”, a shortened form of “electronic shopping”. An online store may also be called an e-web-store, e-shop, e-store, Internet shop, web-shop, web-store, online store, online storefront and virtual store. Mobile commerce (or m-commerce) describes purchasing from an online retailer’s mobile device-optimized website or software application (“app”). These websites or apps are designed to enable customers to browse through a companies’ products and services on tablet computers and smartphones.
One of the earliest forms of trade conducted online was IBM’s online transaction processing (OLTP) developed in the 1960s, which allowed the processing of financial transactions in real-time. The computerized ticket reservation system developed for American Airlines called Semi-Automatic Business Research Environment (SABRE) was one of its applications. There, computer terminals located in different travel agencies were linked to a large IBM mainframe computer, which processed transactions simultaneously and coordinated them so that all travel agents had access to the same information at the same time.
The emergence of online shopping as it is known today developed with the emergence of the Internet. Initially, this platform only functioned as an advertising tool for companies, providing information about their products. It quickly moved on from this simple utility to actual online shopping transaction due to the development of interactive Web pages and secure transmissions. Specifically, the growth of the Internet as a secure shopping channel has developed since 1994, with the first sales of Sting’s album Ten Summoner’s Tales. Wine, chocolates, and flowers soon followed and were among the pioneering retail categories which fueled the growth of online shopping. Researchers found that having products that are appropriate for e-commerce was a key indicator of Internet success. Many of these products did well as they are generic products which shoppers did not need to touch and feel in order to buy. But also importantly, in the early days, there were few shoppers online and they were from a narrow segment: affluent, male, 30+. Online shopping has come a long way since those early days and – in the UK – accounts for significant percentage (depending on product category as percentages can vary).
As the revenues from online sales continued to grow significantly researchers identified different types of online shoppers, Rohm & Swaninathan identified four categories and named them “convenience shoppers, variety seekers, balanced buyers, and store-oriented shoppers”. They focused on shopping motivations and found that the variety of products available and the perceived convenience of the buying online experience were significant motivating factors. This was different for offline shoppers, who were more motivated by time saving and recreational motives.
Michael Aldrich, pioneer of online shopping in the 1980s.
English entrepreneur Michael Aldrich was a pioneer of online shopping in 1979. His system connected a modified domestic TV to a real-time transaction processing computer via a domestic telephone line. He believed that videotex, the modified domestic TV technology with a simple menu-driven human–computer interface, was a ‘new, universally applicable, participative communication medium — the first since the invention of the telephone.’ This enabled ‘closed’ corporate information systems to be opened to ‘outside’ correspondents not just for transaction processing but also for e-messaging and information retrieval and dissemination, later known as e-business. His definition of the new mass communications medium as ‘participative’ [interactive, many-to-many] was fundamentally different from the traditional definitions of mass communication and mass media and a precursor to the social networking on the Internet 25 years later. In March 1980 he launched Redifon’s Office Revolution, which allowed consumers, customers, agents, distributors, suppliers and service companies to be connected online to the corporate systems and allow business transactions to be completed electronically in real-time. During the 1980s he designed, manufactured, sold, installed, maintained and supported many online shopping systems, using videotex technology. These systems which also provided voice response and handprint processing pre-date the Internet and the World Wide Web, the IBM PC, and Microsoft MS-DOS, and were installed mainly in the UK by large corporations.
The first World Wide Web server and browser, created by Tim Berners-Lee in 1989, opened for commercial use in 1991.
Thereafter, subsequent technological innovations emerged in 1994: online banking, the opening of an online pizza shop by Pizza Hut, Netscape’s SSL v2 encryption standard for secure data transfer, and Intershop’s first online shopping system. The first secure retail transaction over the Web was either by NetMarket or Internet Shopping Network in 1994. Immediately after, Amazon.com launched its online shopping site in 1995 and eBay was also introduced in 1995. Alibaba’s sites Taobao and Tmall were launched in 2003 and 2008, respectively. Retailers are increasingly selling goods and services prior to availability through “pretail” for testing, building, and managing demand.