Online shopping is the act of purchasing goods and services on the Internet, and involves a customer and a seller. Online shopping is typically business-to-consumer (B2C) or consumer-to-consumer (C2C) trading, but sales portals do exist for business-to-business (B2B) trading. Online customers are also referred to as a: patron, purchaser, client and a consumer. Online sellers are also referred to as a: retailer, trader, merchant, vendor and a dealer.
Online shopping is mostly transacted on the World Wide Web, simple referred to as the 'Web', it's a service that was launched on the Internet on the 6th of August 1991. The Internet and the World Wide Web are not the same thing, but are sometimes confused. The origins of the Internet predate the Web by over twenty years -- having evolved out of the Arpanet and Nsfnet wide area computer networks -- and likewise, shopping was transacted on the Internet long before the web existed. However, present day, virtually all Internet shopping is transacted via the web, which is an information system that is comprised of websites that use hypertext documents, also referred to as webpages. The web is based upon a client server model, and the client software that is used by shoppers is called a web browser: The browser is the application that communicates across the Internet to send and retrieve data.
While the majority of online shopping is transacted on the traditional World Wide Web, referred to as the clearweb, a limited amount of online shopping is transacted on the deepweb and darkweb. Michael Bergman coined the term deepweb, and it refers to parts of the World Wide Web that are not accessible to search engines: A paywall for newspapers and magazines is one example of commercial content that is only available on the deepweb. The darkweb is securely hidden from the clearweb through the use of software that uses encryption, and it's done so intentionally. The primary purpose of the darkweb (also referred to as the darknet) is to maintain anonymity, and the Tor network is one example of a darkweb software platform; Tor encrypts data through three relays. Silk Road is generally credited as one of the first shopping marketplaces launched on the darkweb: Launched in 2011, it principally allowed users to sell and buy illegal drugs.
While the activity of selecting and paying for goods/services is done on the Web, other Internet services are used to market and arrange payment. The most obvious of these services is email: Launched in the early 1970s, it is one of the first Internet services, and continues to be a popular way to receive information. Likened to an electronic postal letter, email is often used by retailers to promote new products and deals. Email, has, however, come under scrutiny and criticism for the scams that fraudsters try to initiate via email, due to the technologies relative anonymity.
Michael Aldrich, an English entrepreneur, is generally credited as being the inventor of online shopping: In 1980, he created the 'Teleputer', a technology that used Internet protocols to provide a Business-to-Business (B2B) shopping system. The first business to use Aldrich's B2B system was Thomson Holidays, who used his technology in 1981. Tesco was the first UK retailer to use Aldrich's Business-to-Consumer (B2C) shopping system in 1984, and Gateshead pensioner Jane Snowball is credited as being the first ever online shopper. By 1986, CompuServe, one of the first Internet Service Providers, created an electronic mall service that operated in 30 cities in the United States of America.
(Pictured: HTTPS, an extension of HTTP, that encrypts data via either Transport Layer Security (TLS).
While online shopping existed prior to the World Wide Web, Internet usage was minuscule compared to the present day, and ecommerce was a minor service used by this small user base. The World Wide Web was the service that popularised the Internet, launched in 1991, it has continued to be the most popular service used on the Internet. During the mid 1990s the problem businesses had was taking payment information securely. Internet security was an urgent issue for early web browsers, and the web browser that tackled this problem was Netscape Navigator. In 1994, Netscape Communications developed an encryption security protocol called Secure Sockets Layer (SSL), and Taher Elgamal, a scientist at Netscape Communications, is described as the 'father' of SSL. HTTP is the core protocol that provides data communication for the World Wide Web. Netscape created HTTPS, which is simple HTTP over SSL, providing encryption for secure data communication, ensuring that a 'man in the middle' attack cannot steal payment information, and making ecommerce possible.
(Netscape Navigator was not the first web browser, earlier browsers included: WorldWideWeb browser, MacWWW, Line Mode Browser, Lynx, ViolaWWW, MidasWWW, Cello, Erwise and NCSA Mosaic. Netscape Navigator 1 evolved from NCSA Mosaic and Mosaic Netscape. Secure Sockets Layer (SSL) is now known as Transport Layer Security (TLS), and HTTPS is provided as standard for the majority of web traffic.)
Netscape implemented HTTPS in Netscape Navigator in 1994. Two of the Internet's biggest ecommerce websites were launched a year later: Amazon.com and eBay.com. Some other early ecommerce websites include: IndiaMART (1995); ECPlaza (1996); HomeGrocer (1997); Zappos (1999), and Alibaba (1999). The early ecommerce success stories were typically startup companies, with the majority located in California's Silicon Valley, which is a southern area of the San Francisco Bay Area that includes the following cities/towns: Sunnyvale, Stanford, Santa Clara, Los Altos, Redwood City, Mountain View, San Jose, Palo Alto, Loyola, Menlo Park, Burbank and Cupertino. While London's tech entrepreneurs managed to secure £11bn of funding in 2020, there is a general acknowledgment that Europe did not invest enough into emerging technologies in the 1990s. The tech boom of the 90s was Americentric, with established bricks and mortar UK retailers slow to launch online services, and no UK startups to rival the likes of eBay or Amazon. Throughout the 2000s online shopping saw an exponential year-on-year growth, and it helped to propel two of its earliest adopters (Amazon and Ebay) into unrivaled gargantuan global companies; Jeff Bezos, the founder of Amazon, is currently one of the World's richest individuals. While it's obvious who the early dotcom winners are, many startups failed, such as: Boo.com, Webvan.com, Razorfish.com, Broadcast.com, Kozmo.com, and Pets.com.
The early development of e-commerce also coincided with a stock market bubble that is referred to as the dot-com bubble. Sometimes called the "high-tech bubble", it was a speculative bubble that lasted from 1997-2000, and helped fuel a rapid expansion of the Internet. Excess amounts of liquidity from the Federal Reserve (U.S.), designed to protect against the Y2K bug, resulted in record investment in technology companies listed on the Nasdaq, most of whom operated at a loss, but with the assumption, with time, that their market share would equate to long-term profitability. Between 1995-2001, the NASDAQ Composite index climbed from 1000 points to over 5000 points, and when the dot-com bubble burst in 2002, the index crashed back to nearly 1000 points. The chief causes of the dot-com bubble are usually highlighted as cheap money, complete speculation and over-confidence. The majority of dot-com companies that were publicly traded on the NASDAQ Composite from 1995-2000 folded, some mentioned in the previous paragraph, but included the likes of: theGlobe.com, eXcite.com, Ritmoteca.com, DEN.com, Flooz.com, and eToys.com. The dot-com bubble resulted in a loss of trillions of dollars in market capitalization, but it has been speculated that the investment did trickle down to build the backbone of the Internet, its servers and software.
Online payment transactions involve a payer and a payee, with the payer (customer) making a payment to the party who is providing the goods or services, typically referred to as a payee (retailer). It is the decision of the payee to decide upon which payment method they will accept for the goods or services they are selling.
While on the 'face of it' it may appear that there are only two parties involved in an online payment transaction, there are usually four: The bank / financial system that issues the payment and the bank / financial system that receives the payment. There is the potential for just the payee and payer to be involved in the transaction if they are bartering between themselves, but many bartering trades involve a third party bartering platform, such as: Home Exchange, Listia, Barter Quest, GoSwap.org, Barter Only, and CraigsList.
The most common payment method for online orders are credit cards and debit cards (Visa, Mastercard, Delta, Visa Electron, Maestro and American Express). Credit cards are probably the most popular method due to the Section 75 laws in the UK that protect customers if things go wrong. The drawback to credit cards are that not everyone is eligible for one (those with a poor credit history or with no credit history) and some credit cards do come with fees (annual membership fee, fee for foreign currency transactions, late payment fee).
Therefore, for payers unable or unwilling to use credit or debit cards, there
are alternative payment methods available:
1. Cryptocurrencies (Bitcoin, Ethereum, Litecoin, Cardano)
2. Digital Wallet (Paypal, Alipay, ApplePay, SamsungPay, AmazonPay, GooglePay, Skrill, NETELLER, Stripe,)
3. Gift cards, Vouchers and e-Gift Cards (M&S, Asda, Sainsbury's, Currys, Just Eat, B&Q, Argos, Matalan, Boots, Amazon, Topshop, Clarks, Schuh, TKMax, Iceland, Debenhams, Asos, HMV)
4. Cash on delivery (COD), payment is made with banknotes when the goods are delivered (United States dollar (USD), Euro (EUR), British pound sterling (GBP), Australian dollar (AUD), Chinese yuan (CNY), Japanese yen (JPY), Indian rupee (INR), Russian ruble (RUB), South African rand (ZAR), Swiss franc (CHF), Brazilian real (BRL), Mexican peso (MXN), Thai baht (THB), Turkish lira (TRY))
5. Wire Transfer (Torfx, Currencies Direct, Moneycorp, Ofx), Bank Transfer (CHAPS, SWIFT and Bacs) using IBAN and BIC codes, and Postal Orders (Royal Mail).
6. Prepaid payment methods (Store card, Prepaid debit cards)
7. Buy now, pay later schemes (Clearpay, Laybuy, Klarna), that spread the cost of the purchase over weeks or months.
When an online transaction of good/services has been agreed, the payee will typically generate an invoice bill that will be sent to the email address of the payer. Invoice bills generally include the following information: date the order was placed; delivery option; delivery date; address the order will be sent to; selected payment method; order number; and value of the order.
Due to the non-physical and intangible nature of services, many are delivered across the Internet, the prime example being streaming services such as: Netflix, BBC iPlayer and Disney+. If services cannot be delivered across the Internet, then the Internet will typically be used to take payment and arrange a suitable location and time to provide the service. The advent of superfast broadband (fibre-optic landline and 4G/5G mobile networks) changed the way businesses provided their services, Netflix being a prime example: a DVD rental store before the creation superfast broadband, it evolved into a video streaming service when Internet download speeds made it feasible
Goods, on the other hand, are physical and tangible, and typically are distributed by their sellers through the use of professional courier services. Some of the most popular couriers in the UK are: Royal Mail, Royal Mail (signed for), FedEx, Parcelforce, DPD, Yodel, UPS, Hermes, myHermes, DHL, Parcel2Go, and TNT. Sellers sometimes provide free delivery, but when they do charge for delivery, it typically ranges from £5 to £10. Some bulk items, such as large white appliances and furniture, can incur a larger delivery charge. Next day delivery is provided by many sellers, but usually requires the order to be made before a specific cutoff time, such as 3pm-5pm. It is rare for delivery to take longer than 4-6 working days, unless the delivery is coming from overseas or is being made to the Scottish Highlands and Islands.
Online shopping sales are continuing to grow: Alibaba doubled its single day sales record in 2016 and Amazon's UK sales soared by 50% in 2020. The worldwide health concerns of 2020-2021 has further increased the shift towards online shopping and a more digital world: Due to the advantage online shopping has for hygiene. But it has come at a cost: Many high streets in the UK now contain empty shops, and those who rely on them, often the elderly, suffer as a result. Lots of chainstores can directly link their demise to the launch of ecommerce: Blockbuster, Woolworths, HMV, and Toys R Us. The impact upon 'mom and pop' family run stores, while harder to ascertain, has probably been just as severe. While online shopping has been lauded for its convenience and price saving (such as price comparison and cashback sites), it is not without criticism, such as: Bricks and mortar retailers complaining about shoppers checking products instore and then buying online at a discount; Overworked warehouse workers for online retailers; Large international online businesses paying a low amount of national tax; and fake sellers on large auction websites.