E-Commerce & Internet OVERVIEW
This vast base of high speed Internet users encourages businesses to innovate in order to offer an ever-evolving array of online services.
Sectors that are growing very rapidly online include the sale of entertainment products, event tickets, travel, apparel and consumer electronics.
Even groceries have moved into the fast lane, as online grocery sales are growing quickly in the U.S.
thanks to a growing list of same-day delivery options.
The most powerful trends on the Internet include access via wireless devices, the migration of entertainment to the web and cloud-based software-as-a-service. Today, consumers are more focused than ever on finding the best prices, as consumer attitudes and shopping habits changed dramatically as a result of the 2007-09 recession.
Consequently, e-commerce firms that offer high value at low prices are well-positioned to prosper.
The standout winner in e-commerce continues to be Amazon, where sales have soared thanks to aggressive discount pricing, free shipping for its “Prime” members and an ever-growing variety of merchandise categories.
Amazon’s revenues soared from $34.2 billion in 2010 to $107.0 billion in 2015.
The firm’s sales outside of North America are booming as well, despite the fact that it has major foreign competitors, particularly from relatively new companies based in China.
Clearly, there is growing
The global Internet audience continues to grow steadily,
with the worldwide base of broadband Internet users (including fixed and
wireless) in the 3.2 billion range as 2016 began. This vast base of high speed Internet users
encourages businesses to innovate in order to offer an ever-evolving array of
online services. Sectors that are
growing very rapidly online include the sale of entertainment products, event
tickets, travel, apparel and consumer electronics. Even groceries have moved into the fast lane,
as online grocery sales are growing quickly in the U.S. thanks to a growing
list of same-day delivery options. The
most powerful trends on the Internet include access via wireless devices, the
migration of entertainment to the web and cloud-based software-as-a-service.
Today, consumers are more focused than
ever on finding the best prices, as consumer attitudes and shopping habits
changed dramatically as a result of the 2007-09 recession. Consequently, e-commerce firms that offer
high value at low prices are well-positioned to prosper. The standout winner in e-commerce continues
to be Amazon, where sales have soared thanks to aggressive discount pricing,
free shipping for its “Prime” members and an ever-growing variety of
merchandise categories. Amazon’s
revenues soared from $34.2 billion in 2010 to $107.0 billion in 2015. The firm’s sales outside of North America are
booming as well, despite the fact that it has major foreign competitors,
particularly from relatively new companies based in China. Clearly, there is growing adoption of online
consumer purchases throughout the world’s major economies, and the soaring
number of broadband users is paving the way.
Analysts at eMarketer reported American retail
e-commerce sales in 2015 of an estimated $347.3 billion (up significantly from
$304.1 billion in 2014). This figure includes
online retail sales, travel sales and digital downloads, but not online
gambling. Global Internet retail sales
exceeded $1.59 trillion in 2015, according to eMarketer, and could top $1.88
trillion in 2016. China is posting
phenomenal growth in e-commerce, up by 32.0% in 2015, according to analysts at
eMarketer, to a total of $562.7 billion.
Euromonitor forecast growth in online travel
dollars spent at nearly 8% for 2015, in a broad view of the sector including
car rental, hotel rooms, transportation and tourist attraction sales totaling
more than $600 billion. The success of
new accommodation sharing sites like Airbnb and vacation home rental sites like
HomeAway is boosting this trend.
Online and mobile advertising in 2015 in the
U.S. collectively reached $58.6 billion, according to eMarketer, taking 30.9%
of the advertising market. Online leader
Google’s recent results are a good indicator of the strong growth in online
advertising. The firm saw revenues soar
13.6% in fiscal 2015, to $75 billion.
Growth in broadband subscriptions worldwide
continues at a strong pace. The number
of American homes and businesses with broadband access capabilities topped 104
million by early 2016, according to Plunkett Research estimates, thanks in part
to modest monthly fees at Internet service providers. This number does not include mobile broadband
subscriptions, estimated at another 266 million.
A significant evolution is taking place in the
world of business, as more and more telecommunications services move to the
Internet. VOIP (Internet-based telephone
calls via Voice over Internet Protocol) continues to grow in popularity. Meanwhile, the concept of “unified
communications” threatens to completely revolutionize business by combining all
communications into one screen on the desktop, including phone, fax, e-mail,
instant messaging, voice mail and teleconferencing. Voice communications will be digitized and
archived, just as e-mail is today. A
user’s communications tools will move seamlessly from the desktop to the mobile
The Internet is about saving time (and therefore saving money) as well
as eliminating physical and geographical boundaries. The full potential of the Internet has barely
been tapped. New methods of taking
advantage of efficiencies are becoming widely accepted, as access to high-speed
broadband Internet connections becomes commonplace. The long-awaited phenomenon of “convergence”
of entertainment, computing and communications arrived around 2004 when enough
consumers had subscriptions to broadband to create a true mass market and new
online service offerings proliferated.
The smartphone (and tablet) revolution accelerated this trend. Now, the latest televisions come equipped
with built-in Internet connections. This
is creating radical changes in the way TV viewers obtain their movies and TV
programming. For example, subscribers to
Netflix are able to stream downloaded movies directly to their
Internet-connected TV sets.
Brief History of the Online Sector: The e-commerce and Internet sector has evolved
rapidly, going through several distinct stages since its beginnings in the
The Internet Is Born: First, there were the early days, when the
Internet was seen by many as a realm for techies only, one that would produce
few, if any, commercial enterprises.
Initially designed in 1973, the Internet was a series of communication
protocols written by Vinton Cerf as part of a project sponsored by the U.S.
Department of Defense’s Defense Advanced Research Projects Agency (DARPA). The first demonstration of a three-network
Internet protocol-based connection occurred in November 1977. Eventually, a well-enabled Internet was
rolled out in 1983, primarily as a failsafe method of defense communications
and as a means for researchers at various universities to communicate.
The Web Is Created: Next, the World Wide Web and the coding
language of HTML were conceived in 1989 and implemented between 1990 and 1993
by Tim Berners-Lee, enabling a never-ending hyperlinked cyber world where
sharing unlimited data became user-friendly thanks to the magic of linked
The Boom Ensues: Starting in 1993 and 1994, entrepreneurs and
financiers realized that hyperlinked, electronically posted data could be
commercialized with vast, global potential.
A dramatic revolution in retailing, publishing and entertainment was
visualized, one in which consumers and business people alike would eagerly pay
for the convenience of online shopping, trading and viewing of published
data. An economic boom ensued, the likes
of which hadn’t been seen since the beginnings of earlier technological
breakthroughs: electricity, the
railroad, the telephone, the automobile and the passenger-carrying airliner.
Thousands of hopeful new businesses were
launched. Capitalization for these new
Internet-enabled companies ranged from cash-strapped ventures launched in
garages with Visa card credit lines, to companies like WebVan that received
vast sums from professionally managed venture capital firms only to fail miserably. Roughly 6,000 new firms of significant size
raised a cumulative total of more than $100 billion in venture capital in the
boom period (1994-2000). About 450 of
these companies sold their stock to the public via IPOs (initial public
offerings). Stock markets soared and
instant billionaires were made, although many of those stocks later
plummeted. Venture funds that cashed out
early reaped phenomenal gains, and financiers easily found additional investors
for new venture capital pools. Companies
with little or no sales and profits, led by the success of Netscape’s IPO,
found eager buyers for their newly issued stocks. The NASDAQ index of stocks rose to 5,000 by
early in the year 2000, and the Chairman of the Federal Reserve warned of
“exuberant optimism.” Some said this
boom couldn’t last—others said it was the beginning of a “new economy” that
would last forever.
The Bust: In
mid-2000, the Internet industry entered a bleak and dreary phase after the
NASDAQ collapsed in March, bringing the entire sector to its knees. By October 10, 2002, the NASDAQ was down to
1,108 from a high of 5,132 in March 2000.
Hundreds of thousands of people lost their jobs. Stock portfolio values plummeted. Thousands of firms closed their doors, filed
bankruptcy, downsized or were scooped up at bargain prices by competitors. Sellers of hardware, software, consulting and
telecommunications services suffered mightily.
Entrepreneurs found it nearly impossible to raise funds to launch or
sustain their businesses. The dream of a
“new economy” became a nightmare for some—profits still matter; business cycles
The Reality Phase: By early 2003, this sector’s dark clouds were
abating, and a “reality phase” was taking shape. Well-conceived, Internet-based businesses
were proving their value. Consumers had
become devoted fans of buying over the Internet. Businesses of all types were finding that the
Internet creates true operating efficiencies and drives profitability. For example, while most of the airline
industry suffered terribly in recent years, value-based discount airlines
Southwest and JetBlue enjoyed superior financial performance, in no small part
because of their use of e-commerce to efficiently book reservations and sell
tickets online. “Efficiency” is the most
important factor in the e-commerce and Internet sector’s newfound success. Consumers find the Internet to be a terrific
way to efficiently expend their shopping and banking efforts. Travelers find the Internet to be an
efficient way to book hotels rooms, flights and rental cars. Consumers of all types use eBay to look for
bargains, autotrader.com to look for cars at great prices and iTunes to
download music. Corporate procurement
managers find the Internet to be the most efficient way to purchase needed
goods and inventory. Hundreds of
millions of people worldwide find e-mail, instant messaging and VOIP telephony
to be the most efficient ways to communicate.
Low Costs Fuel the Steady Global Growth Phase: Today, access to fast Internet, both wired
and wireless, is available at bargain prices in a growing footprint across the
globe. Even in relatively undeveloped
nations, both consumers and businesses have grown to rely on the Internet for
everyday needs. The level of 3 billion
Internet users worldwide has been exceeded, and the fourth billion is clearly
in sight over the mid-term, as inexpensive devices and wireless networks continue
to proliferate. Mobile computing is
accelerating at blazing speed thanks to moderately-priced smartphone plans
offering fast Internet access and very advanced features.
Meanwhile, the cost of developing and
maintaining web sites has plummeted, opening the door to millions of
self-funded entrepreneurs, and making it easier for venture capital firms to
fund startups using low amounts of cash.
Trends such as open software and cloud computing, along with modular
software development tools, have made it easier, faster and cheaper to start
sophisticated web sites.
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WE PROFILE HUNDREDS OF TOP COMPANIES:
- 1-800 Contacts Inc
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- Adobe Systems Inc
- Automatic Data Processing Inc (ADP)
- A B Watley Group Inc
- About Inc
- Acxiom Corp
- AdStar Inc
- ADTRAN Inc