October 11, 2016
Anthropologists would rightfully argue that the first instance of some kind of an exchange or transaction was most likely before humanoids evolved into humans. As humans evolved into hunters and gatherers, and further into agricultural societies, what started with the barter of commodities – and eventually, other items of necessity – continued to gain complexity.
Today, the CME Group, one of the world’s leading and most diverse derivatives marketplace, handles 3 billion contracts annually worth approximately $1 quadrillion.
There are consumer-to-consumer transactions, consumer-to-business transactions, business-to-business transactions, consumer-to-government transactions, business-to-government transactions and government-to-government transactions. These should cover most (if not all) legitimate transactions around the world. While there must be a way to quantify all of these on a global basis, it’s safe to say that the number is gargantuan. The CME Group statistic is but a sliver of all of the above put together.
Commerce is the trading of products and services. Electronic commerce or e-commerce is the trading of products and services leveraging a network of computers or the Internet. The first instance, in this case, recorded, of e-commerce was when students at Stanford arranged a sale with students at MIT using the ARPANET.
Today, the World Wide Web is used for a variety of different kinds of e-commerce transactions. There are basic transactions between online shoppers and businesses where goods or services are procured over the Internet, the payment is made over the Internet, and goods or services delivered virtually or in the real world.
Digital commerce or d-commerce typically refers to the procurement and delivery of electronic goods or services but is sometimes used in a broader context interchangeably with e-commerce. The basic e-commerce model has several variations facilitating transactions between consumer-to-consumer and enterprise-to-enterprise. Online portals act as aggregators of electronic catalogues. Online marketplaces provide a common congregation point for buyers and sellers, both of the consumer as well as enterprise variety. There are now several established entities and business models that operate globally at a scale unimaginable in the early days of e-commerce. Companies like Amazon and eBay are not only well entrenched but have been replicated and cloned worldwide. In September of 2014, Alibaba claimed the title for the largest global IPO raising approximately $25 billion.
E-commerce systems have evolved gradually, leveraging the electronic channel selectively for different sections of the end-to-end process. From advertising to connecting a buyer with a seller, to procurement and supply chain, to payments and offers, to delivery and logistics, to service and maintenance, each aspect of the transaction process has been gradually optimized over the years.
This optimization has brought its fair share of disruption to the traditional commerce ecosystem. The first wave of successful e-tailers created the misguided notion that all retailers would eventually be put out of business. As e-commerce transactions started to grow as a portion of all commerce, traditional retailers started to adopt various electronic channels, from back-end procurement, supply chain and logistics, to eventually front-end consumer-facing websites and mobile apps, supported by all the profiling and data analytics in between that complemented their physical world presence.
Check out Mehul Desai’s August of Money.