What is Ecommerce?
KH Nazmul Ahamed
Chief Executive Officer @ Al Jaami Technologies | Business Strategy Planning
Ecommerce stands for Electronic Commerce and refers to a digital platform and a business model where you can buy or sell products online. Every time you purchase a product online, you participate in the ecommerce economy.
The term is quite broad and flexible, as it not only includes Amazon or eBay, but online banking, software services, remote service providers, or online course platforms (basically, any transaction made online). However, depending on the context, “ecommerce” is often used to refer to the typical online store that sells shirts to end consumers.
Examples:?
“Over the years, ecommerce businesses are growing and becoming more common than ever.”
“I wanted to build a SaaS first, but instead, I think I’m going to open an ecommerce site to sell pizza ingredients.”
Ecommerce Definitions
As said before, ecommerce is a broad and flexible term. This means there’s no consensus on what it means precisely or what counts as an “ecommerce business” or not.
So let’s start by exploring different definitions. First, there’s the definition you get when googling “what’s ecommerce,” where it simply refers to any transaction made on the Internet:
Then, if you look at Investopedia, their definition seems to refer to a “business model” that allows online transactions to happen from any device. So it’s not only a type of transaction but a type of business:
As for Amazon’s definition, ecommerce is a brick-and-mortar store transformed into online storefronts to trade goods and services over the Internet. It specifies that it can be either a business model or a distribution channel, depending on its strategy, as it is what allows businesses to reach customers worldwide.
But does an exact definition matter? According to Alexander Graf and Holger Schneider in their ecommerce book, the e-commerce definition has been pretty unclear, stating that:
What happens (with ecommerce) is that when people try to adopt a definition of their role, company, or overall professional environment, they find it hard to describe precisely what has changed as against the situation ten years ago. E-commerce seems everywhere, in every process, channel, and tool.
Alexander Graf & Holger Schneider
Yet, people seem to be using the term every day and making buzzwords off of it. Explaining that:
Over the last decade, words like ‘multichannel e-commerce or ‘omnichannel commerce’ have emerged to back up questionable strategies(…). The result is little more than new buzzwords to describe failing approaches. Even as e-commerce experts, though, we have trouble formulating an exact definition of this term.
?Alexander Graf & Holger Schneider
So, what should you settle for if ecommerce experts can’t formulate an exact definition? Maybe, you should keep it simple and stay with the first sentence of this article as your official definition.
Difference Between Ecommerce and E-Business
By its definition, it might sound like ecommerce involves every business transaction made online—but that’s not necessarily true.
Ecommerce is a subset of e-business. It covers particularly the sales and purchases made on the Internet—while e-business involves any online business activity, including sales calls, procurement of materials, signing contracts, etc.
An ecommerce business only requires a website as its only platform to work. In contrast, an e-business might require Customer Relationship Management (CRM), a digital workplace, and Enterprise Resource Planning (ERP).
For example, “ecommerce” is more appropriate when referring to an online store that sells physical products to the internet user, as there’s no touch between you and the customer and the whole sales process happens online.
On the other hand, an e-business often refers to a B2B consultancy agency that receives inquiries from potential clients. There, the sales process is more complex and requires introductions, sales calls, a proposal, and an onboarding process. So the actual “transaction” is only one part of the business operation.
Why Ecommerce is So Important and Talked About: The Stats
The simple ability to make purchases online has changed our lives forever. And despite having unclear definitions, ecommerce is here to stay.?
The ecommerce industry is growing exponentially, more ecommerce businesses are emerging, and the digital economy is continuously expanding while reaching every corner of the world that has internet access.
If you’re still skeptical about the impact of the ecommerce industry, here’s some data:
We’re living in an era where there are more people with a smartphone than people living in urban areas and where the Internet has developed strong roots in your personal life.
This means ecommerce is an industry that’s reaching almost anyone in the world with internet access—offering both conveniences to buy products and opportunities to start a business.
The Origin of Ecommerce and Its Evolution
The first ecommerce transaction was made in 1994. Phil Brandenberger used his Mastercard to buy Sting’s Ten Summoners’ Tales via the Internet for $12.48. This transaction made history and signaled to the world that the “internet is open” for ecommerce transactions.?
Why? Because it was the first time encryption technology was used to enable an internet purchase.
Since then, ecommerce has grown by leaps and bounds.
The rise of ecommerce giants like Amazon and Alibaba in the mid -1990s changed the face of the retail industry. They capitalized on the global internet penetration and digitalization of the financial system, which contributed to the decline in retail sales for many brick-and-mortar stores.
After that, Google’s growth and massive traffic made it possible for business owners to pay for ads, do performance-based marketing with more data than ever, and attract customers organically through search engine optimization (SEO) to make their websites rank for high-valuable keywords.
Plus, the rise of social media brought the attention of business owners, too, replicating the same phenomenon as Google but with a social layer and making the online experience more interactive and targeted.
Ecommerce has also impacted the retail workforce. The U.S Bureau of Labour Statistics (BLS) has revealed that from 1997 to 2016, employment in the ecommerce sector increased by 80%. And today, in 2022, there are already 787,104 U.S employees in the ecommerce space.
Today, anyone can start an ecommerce business from scratch using platforms like Shopify or BigCommerce without coding or having any technical skills. And if you know how to code, there are plenty of open-source platforms you can use to build any business you want.
In the future, ecommerce might simply become “commerce” once it becomes the default method to buy groceries for your home—offline Commerce will become a different but optional experience.
Types of Ecommerce Businesses
You can categorize ecommerce businesses according to the products or services they sell, the parties they transact with, or even the platforms on which they operate.
We’ll look at all three aspects to give you a clear picture of the types of ecommerce sites.
Classifying Ecommerce According to “Who” is Selling
Looking at the parties participating in the e-commerce transaction is another way in which ecommerce sites can be organized. These typically include:
1. Business to consumer (B2C)
As the name suggests, the B2C model represents a business that sells products or services to individual consumers. B2C ecommerce is the most common business model among physical and online retailers, as the number of potential customers is larger and scalability is higher.
An example of a B2C business is Cocokind. A B2C ecommerce brand that sells skin care products online to the people who will use them. Thus, you can see them enhancing their customer experience with quizzes, routine builders, and blogs to incentivize their target audience to purchase their products for personal use.
2. Direct to consumer (D2C)
The popular D2C brands are businesses that sell products to customers and manufacture them—cutting out intermediaries between the brand and the end consumer.?
The key here is that these brands can interact and build relationships with the people using their products, get feedback, build an audience, and make shipping more efficient.
JOI is an excellent example since they offer a “unique” product for making plant-based milk that isn’t 98% water.
Instead of recurring to intermediaries or amazon to sell their product, JOI builds its brand and owns its distribution so it can sell directly to the people they’re trying to help in the first place.
And take a look at their website. You’ll notice that they’ve built a very particular brand to which no intermediary would’ve ever done justice.
3. Business to business (B2B)
In the B2B model, both parties involved are businesses. Here, one company provides the other with products or services.
B2B companies are often service-based or software companies (and they’d simply be referred to as “agencies” or “SaaS,” respectively). B2B businesses that sell products also exist. Depending on their place in the productive chain, they’re often vendors or manufacturers selling to retail stores or manufacturers.
A simple example is Avery Dennison’s store. It sells labelers and attachers for business customers who are often packaging stuff. Its catalog is extensive enough to cover everything you might need as a busy retailer.
4. Consumer to business (C2B)
The C2B business model represents a transaction in which individuals create value for businesses. Unlike the traditional business-to-consumer model, consumers provide companies with products or services, co-operate on projects, and ultimately help companies increase their profits.
Shutterstock comes to mind as a great C2B example. It allows professional photographers to sell royalty-free photos that businesses might use for their marketing efforts.
This model allows regular individuals to make money by helping businesses with high-quality media that might result in greater productivity.
5. Consumer to consumer (C2C)
C2C ecommerce happens when the two parties involved are consumers that trade with one another. They are typically marketplace platforms where individuals can communicate and agree on deals.
eBay and Craiglist are the most basic examples, as their platforms allow any individual to sell or buy anything from anyone in the world in one place without having to purchase from a business.
Classifying Ecommerce Businesses According to “What” They Sell
Now, let’s go over “what” and “how” ecommerce businesses can sell online. And these include:
1. Retailers selling physical goods
These are your typical online retailers selling clothing, furniture, tools, and accessories. Shoppers can buy a physical product through online stores by visiting the stores’ websites, adding items to their shopping cart, and checkout.
Most of these are B2C or D2C brands selling products. But they can also be B2B vendors.
A good example is H&M’s ecommerce store and the clothes they sell on their website. They’re entirely focused on attracting customers to add products to their cart and make a purchase.
H&M owns multiple physical stores throughout the world, but their website allows anyone to buy from them without problems.
2. Service-based businesses
You can also purchase services online. And they can include people who offer specialized services to businesses, such as freelancers, agencies, and consultants.
Due to how services can vary, the buying process for benefits depends on the merchant. Depending on the service, some may allow you to purchase their services straightaway from their website or require you to get in touch with them first (i.e., book a consultation) to determine your needs.
Most service-based businesses are B2B, offering specialized marketing, coding, or design work for other brands, such as Contently, as it offers content marketing for your business and has its platform for payments, onboarding, and so on.
Digital B2C services still exist too. If you go to Fiverr, you’ll find people offering all kinds of services, going from the most professional side, such as relationship therapy, to the most mundane, like coaching for online games like League of Legends.
3. Digital products
Digital products refer to all items that are in a digital format, including ebooks, online courses, graphics, and virtual goods. Businesses selling these types of products fall into this category.
Course marketplaces, niche sites with info products, or premium newsletters are among the businesses selling digital products. They offer a product that doesn’t require shipping, and they can scale without stock limitations.
Skillshare is a course marketplace, for example. And it offers a tremendous amount of educational courses for learning any skill you want, including cooking, carpentry, and even public speaking.
Skillshare is catered toward the general public (B2C), so its pricing and platform are set for anyone to use, like Netflix for courses.
4. Wholesale vendors
These are businesses that sell products in bulk. Often, to retailers who sell them to the end consumer. You could categorize them as B2B ecommerce since they sell products to businesses. Still, their role is simply to act as vendors for the brands who put those products on the market.
Alibaba, for example, is a traditional ecommerce wholesale vendor. They provide products from Chinese suppliers to thousands of ecommerce stores selling products through dropshipping—and they only need to order products from their website.
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5. Dropshipping
Dropshipping is a method where the retailer sells a product online, and the supplier handles the shipping. Therefore, a dropshipping business is an online store where you only need to take care of the online sales and not worry about logistics or inventory management.
It’s not surprising that this method is trendy due to how accessible it is to build an ecommerce business this way. Dropshipping apps like Oberlo and AliExpress are as easy as installing an app.
There are thousands of online stores doing dropshipping. Warmly, for example, simply sells home decor.
Its website is a pretty organized catalog of domestic products you can buy. The fact that they’re a dropshipping store means they don’t manufacture those products—they only sell them.
6. Crowdfunding
Crowdfunding is the collection of money from potential consumers to help bring a product to the market. They’re often businesses that facilitate businesses to raise funds for their projects.
What’s engaging about crowdfunding is that the upfront money allows the business owners to develop the product under specific conditions given by their audience-building some sort of relationship right away without making the first transaction.
A popular crowdfunding platform is Kickstarter, where you can either make your ideas public or invest in developing other products. Thanks to this platform, multiple businesses have risen as this platform makes it easy to publish an opinion or donate.
7. Subscription-based businesses
These are businesses that “rent” online services for a monthly price.
Most of the time, these are software-as-a-service businesses (SaaS) that offer access to a software product for a recurring payment—often with various subscription plans and different price ranges.
The SaaS industry has its world and best practices, such as freemium plans, free trials, and onboarding processes. So it is a very different business model from an online store selling t-shirts.?
Hubspot is a typical example of a subscription-based business. Its main product is a CRM for sales teams. Still, it also offers many marketing features for email marketing, SEO, blogging, etc.
They have a basic free plan for people who need a simple CRM. However, once you start growing and requiring more capacity/features, you’ll have to upgrade your plan and start paying a full subscription to use the software.
Note: SaaS isn’t the only type of subscription-based business. Other businesses that offer premium newsletters, access to premium communities, or courses can also fall into this category.
The Platforms Where Ecommerce is Taking Place
Now that you know the types of ecommerce businesses in the market right now. Let’s go over the platforms where these businesses are taking place.
1. Online Store Websites
The first place where businesses are doing business is on their website. Using shopping carts and ecommerce platforms, retailers build online stores where they showcase their products and services.
Thankfully, today you don’t need technical skills or hire a web developer to build a website—for there are plenty of ecommerce platforms that do it for you.
Below are listed the most relevant ecommerce solutions currently on the market.
Shopify
Shopify powers over 3,766,071 websites around the globe and owns over 32% of the ecommerce platform’s market share.?
This platform is trendy among beginners and small businesses since Shopify allows you to launch adequate online stores over the weekend. With a user-friendly and intuitive interface and tons of templates, this platform offers flexible shipping rates, automatic taxes, and over 100 payment gateways.
Plus, Shopify enables social media integrations, is packed with built-in SEO features, and is fully hosted. And from their app store, you can install numerous third-party apps to complement your business.
Shopify is best for Small businesses looking for an all-in-one ecommerce solution. If you think it’s not the right platform, you can always try other Shopify alternatives.
Magento
To date, Magento has powered over 772,000 websites around the world.
Magento is a highly flexible ecommerce solution used by medium to big businesses ready to scale. This platform offers robust features to customize all aspects of your online store, including custom templates, modules, and automation rules.?
Suppose you need to extend the features of your Magento store further. In that case, you can always use one of the 5,900 extensions available in the extension store to turn your vision into a reality.
Considered a complex ecommerce platform, Magento also supports you by maintaining an operative community of developers and experts on the Magento ecosystem who are ready to help you, whether you use the enterprise plan or the open-source version.
Magento is best for medium-sized businesses that want to scale and enterprises that need complete website customization.
WooCommerce
This platform powers over 5,102.506 live websites. And over 1,773 plugins designed to integrate with WooCommerce can be bought on CodeCanyon.?
WooCommerce is so popular because it’s one of the most prominent open-source ecommerce platforms, specifically designed to integrate with WordPress.?
WooCommerce has plenty of templates to help you build a unique online store. You’ll get all essential features, including unlimited products, unrestricted customization, order management, and free shipping—and since it’s open-source, you can constantly personalize the platforms to your liking if you know how to code.
WooCommerce is best for Small businesses with a WordPress website and familiar users.
Carrd
Carrd is not a platform built to create an ecommerce website, as it’s made for simplicity and to build one-page sites.
This platform is the cheapest way for freelancer portfolios or handcrafters to sell their work. It’s made for individuals who want a quick, accessible business to run. And the reason it’s relevant is due to the segment it covers in the digital industry, powering over 800,000 websites right now.
Carrd is best for Individual freelancers or one-person businesses selling one service or few products.
2. Product Marketplaces
Online marketplaces facilitate transactions between buyers and sellers, enabling sellers to showcase their products and reach a larger audience. These platforms are popular among customers because of their wide selection of products and services from different sellers and providers all around the globe.
You’re no longer purchasing from the brand’s website in an online marketplace. Instead, you’re buying from a retailer simply reselling products online. Some of those marketplaces include:
Amazon
A company that needs no introduction, Amazon is the largest ecommerce seller in the United States, with a revenue of $469.8 billion in 2021. The ecommerce giant has around 200 million US-based Amazon prime members worldwide who, on average, spend $1,400 a year on online purchases.
Amazon is one of the biggest online marketplaces in the world. It offers customers a wide selection of products from retailers around the globe. It enables businesses to reach a large audience on its platform.
eBay
eBay has a total of 1.5 billion products listed on its platform and around 147 million active buyers in 2021—impacting the ecommerce industry significantly.
Connecting retailers and customers from around the globe, eBay is an online marketplace that can help small and medium-sized businesses establish an international customer base.
eBay is user-friendly, intuitive, and offers several payment options, so almost anyone can buy or sell on their platform. Plus, it has a unique feature that allows merchants to host online auctions and make the market more interactive.
Etsy
Etsy had 2.7 million active sellers and 45.7 active online buyers in 2020, plus 60 million items listed for sale.
Etsy is the perfect platform for creatives looking for an online marketplace to showcase their unique handmade products. It’s trendy among independent creatives and people looking to buy one-of-a-kind, exclusive, and rare items.
Handcrafters and artists come here to put their unique work on sale. And surprisingly, many people are willing to pay good money for them—as Etsy’s platform makes it easy to sell and buy this kind of goods.
Alibaba
Alibaba had 1.24 billion customers in 2021 and $109.48 billion in revenue in 2021. It is a marketplace where retailers can get products from their suppliers.
Alibaba is one of the biggest online marketplaces in the world. As mentioned before, this platform is particularly effective for reaching big manufacturers and purchasing products in bulk. Alibaba dominated the Chinese market, too, with an estimated 960 million active customers.
3. Social Media Marketplaces
There are around 4.62 billion users of social media in the world.
Over the last years, social media platforms—particularly Facebook, Instagram, and Pinterest—have made it easier for brands to reach and get customers.
Despite social media platforms making it harder to get traffic from them, they’re instead allowing brands to sell products directly from their platform.
For example, retailers showcasing their products on Instagram can use Instagram’s checkout option, enabling customers to purchase the items they like without leaving.
Ecommerce companies can also use Instagram Shoppable Stories, allowing businesses to add product stickers to a story. So customers that come across a product they like can simply click on a sticker to start the checkout process.
Facebook is also on this train, as its marketplace has been a famous place to sell and buy products for several years. But more than that, you can launch a Facebook Shop that integrates with your Instagram account.
Pinterest is another social marketplace, as you can sell products with Pinterest Shopping and make your catalog available, publish product pins, and drive traffic to your online store.
Due to the traffic they manage, social media platforms rapidly shift to support the ecommerce industry. So they’re not only helpful in building brand awareness and promoting marketing campaigns but in driving sales too.
4. Unique Digital Platforms
Ecommerce is also taking place on other less centralized platforms. And they’re important because these types of businesses allow individuals to build their audience in unique ways—and from anywhere in the world.
Some examples include:
And this is just the tip of the iceberg. The Internet is flooded with platforms where you can provide products or services online (and make a living).
5. Decentralized Commerce
Given the development of blockchain technology and cryptocurrencies, there has been much buzz around the “web3”. On this decentralized Internet, the user controls the platforms they use.
In the ecommerce industry, there are a few platforms in development that can potentially impact the future of selling and buying online. A pair of them include:
Soon, blockchain technologies will be strong enough and shift the ecommerce industry toward a more decentralized environment— so it’s a good idea to be aware of it now when it’s in its early stages.
You Can Participate in The Ecommerce Industry Too
You’re reading this because you have internet access. And if you have internet access, you can become part of this industry.
There’s only one thing to do: to take action.
Wherever you are right now in your ecommerce journey, there’s always something you need to do next.
Are you starting? Learn how to build an ecommerce business and do it.
Are you trying to get customers? Learn how to market your online store, and do the work.
Are you trying to scale? Consult with us.
We have experienced ecommerce professionals who can help you implement the right strategy in this fast-growing industry. Whether you need advice concerning search engine optimization, product promotion, progress tracking, or branding, our team at EcommerceGuide will be happy to help your ecommerce businesses grow and prosper.
Contact our team to put your business on the right path.