E-commerce

What Is Electronic Commerce (E-commerce)?

• E-commerce (electronic commerce) is the buying and selling of goods and services, or the
transmitting of funds or data, over an electronic network, primarily the internet. These
business transactions occur either as business-to-business (B2B), business-to-consumer
(B2C), consumer-to-consumer or consumer-to-business.
• The terms e-commerce and e-business are often used interchangeably. The term e-tail is
also sometimes used in reference to the transactional processes that make up online retail
shopping.
• In the last two decades, widespread use of e-commerce platforms such as Amazon and
eBay has contributed to substantial growth in online retail. In 2011, e-commerce accounted
for 5% of total retail sales, according to the U.S. Census Bureau. By 2020, with the start of
the COVID-19 pandemic, it had risen to over 16% of retail sales.
KEY TAKEAWAYS

• E-commerce is the buying and selling of goods and services over the internet.

• It is conducted over computers, tablets, smartphones, and other smart devices.

• Almost anything can be purchased through e-commerce today, which makes e-commerce highly
competitive.

• It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain
both.

• E-commerce operates in several market segments including business-to-business, business-to-

consumer, consumer-to-consumer, and consumer-to-business.
How does e-commerce work?

• E-commerce is powered by the internet. Customers access an online store to browse

through and place orders for products or services via their own devices.

• E-commerce uses electronic channels to connect buyers and sellers. It works like a physical
store—customers visit your e-commerce store to browse your products and make a
purchase. However, e-commerce involves back-and-forth communication between your
website and its server host.
Typically, e-commerce follows these steps:
1. A business lists its products and services.
2. A customer browses the catalog to choose what they want and then adds it to the cart.
3. The customer pays for the item using any of the available payment options.
4. The business receives the order on its dashboard.
5. The payment is processed, and the order is approved.
6. An order manager sends the order to the fulfillment department or warehouse to authorize a dispatch.
7. The customer receives the notification of order approval and other details, including shipping and tracking
information.
8. The business ships the product or renders the required service.
Types of e-commerce

• Business-to-business (B2B): e-commerce refers to the electronic exchange of products,

services or information between businesses rather than between businesses and consumers.
Examples include online directories and product and supply exchange websites that let
businesses search for products, services and information and initiate transactions through e-
procurement interfaces.

• A Forrester report published in 2018 predicted that by 2023, B2B e-commerce will reach
$1.8 trillion dollars and account for 17% of U.S. B2B sales.
• Business-to-consumer (B2C): is the retail part of e-commerce on the internet. It is when
businesses sell products, services or information directly to consumers. The term was popular
during the dot-com boom of the late 1990s, when online retailers and sellers of goods were a
novelty.

• Today, there are innumerable virtual stores and malls on the internet selling all types of
consumer goods. Amazon is the most recognized example of these sites. It dominates the B2C
market.
• Consumer-to-consumer (C2C): is a type of e-commerce in which consumers trade products,
services and information with each other online. These transactions are generally conducted
through a third party that provides an online platform on which the transactions are carried out.

• Online auctions and classified advertisements are two examples of C2C platforms. EBay and
Craigslist are two well-known examples of these platforms. Because eBay is a business, this
form of e-commerce could also be called C2B2C -- consumer-to-business-to-consumer.
Platforms like Facebook marketplace and Depop -- a fashion reselling platform -- also enable
C2C transactions.
• Consumer-to-business (C2B): is a type of e-commerce in which consumers make their
products and services available online for companies to bid on and purchase. This is the
opposite of the traditional commerce model of B2C.

• A popular example of a C2B platform is a market that sells royalty-free photographs,

images, media and design elements, such as iStock. Another example would be a job board.
• Business-to-administration (B2A): refers to transactions conducted online between
companies and public administration or government bodies. Many branches of government
are dependent on various types of e-services or products. These products and services often
pertain to legal documents, registers, social security, fiscal data and employment.
Businesses can supply these electronically. B2A services have grown considerably in recent
years as investments have been made in e-government capabilities.
• Consumer-to-administration (C2A) refers to transactions conducted online between consumers and
public administration or government bodies. The government rarely buys products or services from
individuals, but individuals frequently use electronic means in the following areas:

• Social security. Distributing information and making payments.

• Taxes. Filing tax returns and making payments.

• Health. Making appointments, providing test results and information about health conditions, and making
health services payments.
• Mobile e-commerce (m-commerce): refers to online sales transactions using mobile
devices, such as smartphones and tablets. It includes mobile shopping, banking and
payments. Mobile chatbots facilitate m-commerce, letting consumers complete transactions
via voice or text conversations.
Advantages of e-commerce

• Benefits of e-commerce include its around-the-clock availability, the speed of access, the
wide availability of goods and services, easy accessibility and international reach.

• Availability. Aside from outages and scheduled maintenance, e-commerce sites are
available 24/7, enabling visitors to browse and shop at any time. Brick-and-mortar
businesses tend to open for a fixed number of hours and may even close entirely on certain
days.
• Speed of access: While shoppers in a physical store can be slowed by crowds, e-commerce sites run quickly,
which is determined by compute and bandwidth considerations on both the consumer device and the e-
commerce site. Product and shopping cart pages load in a few seconds or less. An e-commerce transaction can
comprise a few clicks and take less than five minutes.

• Wide availability: Amazon's first slogan was "Earth's Biggest Bookstore." It could make this claim because it
was an e-commerce site and not a physical store that had to stock each book on its shelves. E-commerce enables
brands to make a wide array of products available, which are then shipped from a warehouse or various
warehouses after a purchase is made. Customers will likely have more success finding what they want.
• Easy accessibility: Customers shopping a physical store may have difficulty locating a
particular product. Website visitors can browse product category pages in real time and use the
site's search feature to find the product immediately.

• International reach: Brick-and-mortar businesses sell to customers who physically visit their
stores. With e-commerce, businesses can sell to anyone who can access the web. E-commerce
has the potential to extend a business's customer base.

• Lower cost: Pure play e-commerce businesses avoid the costs of running physical stores, such
as rent, inventory and cashiers. They may incur shipping and warehouse costs, however.
• Personalization and product recommendations:

• E-commerce sites can track a visitor's browse, search and purchase history. They can use
this data to present personalized product recommendations and obtain insights about target
markets. Examples include the sections of Amazon product pages labeled "Frequently
bought together" and "Customers who viewed this item also viewed."
Disadvantages of e-commerce

• The perceived disadvantages of e-commerce include sometimes limited customer service,

consumers not being able to see or touch a product prior to purchase and the wait time for
product shipping.

Limited customer service: If customers have a question or issue in a physical store, they
can see a clerk, cashier or store manager for help. In an e-commerce store, customer service
can be limited: The site may only provide support during certain hours, and its online service
options may be difficult to navigate or not answer a specific question.
• Limited product experience: Viewing images on a webpage can provide a good sense
about a product, but it's different from experiencing the product directly, such as playing a
guitar, assessing the picture quality of a television or trying on a shirt or dress. E-commerce
consumers can end up buying products that differ from their expectations and have to be
returned. In some cases, the customer must pay to ship a returned item back to the retailer.
Augmented reality technology is expected to improve customers' ability to examine and
test e-commerce products.
• Lack of Instant Gratification (Wait time): When you buy an item online, you must wait for it to be
shipped to your home or office. However, e-tailers like Amazon make the waiting game a little bit less
painful by offering same-day delivery as a premium option for select products.

• Security: Skilled hackers can create authentic-looking websites that claim to sell well-known products.
Instead, the site sends customers fake or imitation versions of those products -- or simply steals credit card
information. Legitimate e-commerce sites also carry risk, especially when customers store their credit card
information with the retailer to make future purchases easier. If the retailer's site is hacked, threat actors
may steal that credit card information. A data breach can also lead to a damaged retailer reputation.
• Inability to Touch Products: Online images do not necessarily convey the whole story about an item, and
so e-commerce purchases can be unsatisfying when the products received do not match consumer
expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image
indicates.

• Reliance on Technology: If your website crashes, garners an overwhelming amount of traffic, or must be
temporarily taken down for any reason, your business is effectively closed until the e-commerce storefront
is back.

• Higher Competition: Although the low barrier to entry regarding low cost is an advantage, this means
other competitors can easily enter the market. E-commerce companies must have mindful marketing
strategies and remain diligent on SEO optimization to ensure they maintain a digital presence.
Top E-Commerce Platforms

• There are several platforms for building your e-commerce store, such as Shopify,
Squarespace, and Wix. Every website builder varies in terms of ease of use, price, features
and customization capabilities, so it’s important to pinpoint which is right for your online
store. The top e-commerce platforms are detailed below:
• Squarespace

• Squarespace has the features you need to run an e-commerce website, so you won’t need to install a plugin. Its e-
commerce builder starts at $23 per month and offers you a wide range of free template designs. You can also
customize your e-commerce website with CSS or JavaScript, and sell as many products as you want. Squarespace
also offers e-commerce analytics and the ability to tag your products on Instagram.

• You’ll also get a shipping calculator to calculate and show customers their shipping fees. You can also send
automated emails to customers who abandon their carts. But don’t expect to get all these features on lower plans.
Also, note that only the Commerce plans exempt businesses from the additional 3% fee on each transaction.
• Shopify

• Shopify provides what you need to launch your e-commerce store, even without design experience. This e-
commerce website builder also enables smooth integration with up to 6,000 apps, making it easy to run
your website. Its plans offer unlimited storage and bandwidth, multiple staff accounts, point-of-sale (POS)
access, abandoned cart recovery, shipping discounts, free SSL certificate and shipping label printing. You
can also sell as many products as you want.

• Shopify’s higher plans offer advanced features such as analytics and reports, and you’ll pay lower fees on
transactions, credit card processing and shipping. You can get started with its three-day trial opportunity.
• Wix

• Wix offers more than 500 free templates and allows you to customize your website with editing tools that
make your website responsive on different devices. Depending on your plan, you can sell unlimited
products, recover abandoned carts, manage inventory and complete payments. And you’ll get priority
customer support, unlimited dropshipping, customized reports and a customer loyalty program to make
running an e-commerce business easy and relate with your customers better.

• This e-commerce website builder also has built-in SEO tools for improving your site’s ranking, and it
integrates smoothly with hundreds of apps, allowing you to add features to your website without coding
knowledge. Wix also offers a free version, but don’t expect much from it. Also, you’ll need to pay $59 per
month to enjoy unlimited storage, which can withstand a content-heavy e-commerce store.
E-Commerce Examples
• For a better understanding of what e-commerce is and
what an e-commerce site should look like, here are a
few e-commerce examples.
Aspect Home

• Aspect Home sells office furniture,

including customizable work chairs and
desks, to those working from home. This e-
commerce store was built with Squarespace
and has an easy-to-navigate layout. You’ll
find category headers, which make it easy
for you to locate an item. Each item also has
its pricing and descriptions, such as height,
width and color, to tell you what’s available,
and you can customize the products.
Vivi et Margot

• Vivi et Margot is an example of a Wix e-

commerce website. The store sells clothing,
jewelry and home items to individuals and
businesses. It has the key features of an e-
commerce website, with its organized layout
of product categories and readable fonts.
Vivi et Margot allows you to browse
categories such as kitchen, textile, clothing,
jewelry and soaps, and most products have
full descriptions.
Modern Market

• Built with Shopify, Modern Market offers

photographers a selection of tools and
designs, including Lightroom presets , online
lessons, legal forms and page templates.
This B2B and B2C e-commerce website uses
a minimal design to showcase its offerings
without confusing visitors. The product
pages use high-quality images to show you
what you get in a preset, and it allows you
to preview as many sets as you want.
 • In addition to crafting what type of e-commerce company a
Types of E-commerce business wants to be, the business must decide how it wants
to make money. Due to the unique nature of e-commerce,
Revenue Models the business has a few options on how it wants to process
orders, carry inventory, and ship products.
• Dropshipping

Often considered one of the easier forms of e-commerce, dropshipping allows a company to create a digital storefront, generate sales,
then rely on a supplier to provide the good. When generating the sale, the e-commerce company collects payment via credit card,
PayPal, cryptocurrency, or other means of digital currency.

• White Labeling

White-label e-commerce companies leverage already successful products sold by another company. After a customer places an order,
the e-commerce company receives the existing product, repackages the product with its own package and label, and distributes the
product to the customer. Although the e-commerce company has little to no say in the product they receive, the company usually
faces little to no in-house manufacturing constraints.
• White label refers to the practice where one company purchases a product from another company and then rebrands it as its
own. Typically, the company selling the final product to the consumer has no direct involvement in manufacturing.
• Wholesaling

A more capital-intensive approach to e-commerce, wholesaling entails maintaining quantities

of inventory, keeping track of customer orders, maintaining customer shipping information,
and typically having ownership of the warehouse space to house products.

Wholesalers may charge bulk pricing to retailers or unit prices for consumers. However, the
broad approach to wholesaling is to connect to buyers of large quantities or many smaller
buyers of a similar, standardized product.
• Private Labeling

Private labeling is a more appropriate e-commerce approach for companies that may not have large upfront
capital or do not have their own factory space to manufacture goods. Private label e-commerce companies
send plans to a contracted manufacturer who makes the product.

The manufacturer may also have the ability to ship directly to a customer or ship directly to the company
receiving the order. This method of e-commerce is best suited for companies that may receive on-demand
orders with short turnaround times but are unable to handle the capital expenditure
• Subscription

E-commerce companies can also leverage repeating orders or loyal customers by implementing
subscription services. For a fixed price, the e-commerce company will assemble a package,
introduce new products, and incentivize locking to a long-term agreement at a lower monthly
price.

The consumer only places an order once and receives their subscription order at a fixed cadence.
Common subscription e-commerce products include meal prep services, agriculture boxes, fashion
boxes, or health and grooming products.