CSCMP's Supply Chain Quarterly
October 22, 2018
Forward Thinking

E-commerce 20 years on

August 11 marked the 20th anniversary of the first online transaction. Much has changed in the ensuing two decades.

On August 11, 1994, a U.S. consumer made what is believed to have been the world's first online purchase: A compact disc recording by the British rock musician Sting. Like it or not, that simple transaction transformed commerce forever.

Now online orders are so commonplace that for some age demographics (think younger than you) the idea of buying a product in a store is a foreign concept. Yet the online uptake is a recent phenomenon: For example, the typical U.K. consumer first ordered online in 2005, according to a survey by British retailer Shop Direct that was referenced by the consulting firm Transport Intelligence (Ti) in its recent report, "The online shopping revolution—20 years of logistics innovation." Books were the most popular commodity bought online at the time, according to the report.

Today, the U.K. has the highest per-capita online spend of any country—more than £91 billion in 2013, according to the report. That translates into about US $151 billion.

It may be hard to believe given e-commerce's present-day ubiquity, but consumers were initially cool to its adoption, said Stephen Olugbode, a senior analyst at Ti. Delivery problems, security issues with the use of credit cards, poor stock availability, and cultural inertia kept many consumers away, he said.

The growth of Internet shopping has been driven in part by logistics and express companies' ability to adapt their networks to the new form of commerce. As customers' expectations continue to grow, so has the sophistication of these logistical support systems. Information technology has become the key differentiator. Today, customers can choose specific one-hour windows for their deliveries and can receive continuous text messages updating them on the precise location of their purchases.

IT systems are also a fundamental part of the multichannel mix, with retailers requiring total transparency over stock levels and location. Online fulfillment is more complex than so-called store-based logistics, with goods being picked in a different way and often from different locations.

As a result, many companies are beginning to question whether today's online fulfillment models are viable over the long term, according to Olugbode. The added complexities of the process, combined with the increased labor expense associated with picking and packing, means logistics costs for online fulfillment are much higher than for brick-and-mortar retailing, he said.

The upshot of all this? An opportunity for traditional logistics providers to develop attractive outsourcing solutions to serve online merchants, Olugbode said.

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