The Short Answer
E-commerce is short for: “electronic commerce”. It refers to the buying and selling of products and services over the internet.
Think of ecommerce as a big marketplace on the internet where you can use your bank card (credit card, debit card or digital wallet) to buy anything that can be sold online without going to a physical – brick and mortar store. Some common products sold online are clothes, gadgets, books, groceries, shoes and perfumes, etc.
The Longer answer
Evolution of E-Commerce
E-commerce has come a long way from the time it started in the form of electronic data interchange (EDI) and electronic funds transfer (EFT).
This phenomena experienced a major transformation with the uptake of the internet in the 1990s.
The 3rd industrial revolution made online marketplaces possible: enabling businesses and consumers to transact outside the limitations of geographical limitations.
4 Types of E-Commerce
e-Commerce business models come in different forms and shapes.
B2B (Business-to-Business): This refers to businesses that do business with other businesses as opposed to the typical business to consumer transactions. Quick examples here are business transactions between businesses and suppliers selling to wholesalers.
B2C (Business-to-Consumer): This type refers to the typical scenario where businesses sell their products or services to consumers. This type of ecommerce is usually referred to as online retail.
C2C (Consumer-to-Consumer): This type involves individuals selling products and services to individuals. The common example of this is the business exchange that takes place in classified ads.
C2B (Consumer-to-Business): This type of ecommerce is the inverse of the business to consumer (B2C). A good example is a scenario where freelancers offer their services to businesses. Good examples are the exchanges that happen on freelancing platforms such as Upwork.com, TopTal.com, freelancer.com, Fiverr, etc.
Key Components of E-Commerce
There are many components that make ecommerce possible.
Online Marketplaces: Online marketplaces like Amazon, eBay and Etsy, etc bring sellers and buyers together.
Electronic Payments: Online payments are the backbone of ecommerce. e-Commerce is driven by secure online payments where consumers use credit cards, digital wallets and cryptocurrencies to pay for goods and services online.
Online Advertising and Marketing: Digital marketing is also a big part of ecommerce. Online stores typically require digital strategies for getting traffic and driving sales.
Common marketing strategies are Search Engine Optimisation (SEO), social media marketing, and pay per click (PPC) advertising. Some brands go into strategic influencer collaborations to give their online store brands maximum traction and mileage.
Inventory Management: Just like there are inventory management and inventory control mechanisms for physical stores, there are also inventory control and inventory management tools for ecommerce.
Customer Data Management: E-Commerce businesses also have capabilities to collect and analyse customer data. This enables ecommerce brands to personalize experiences of their customers to enhance customer satisfaction and improve sales.
Benefits of E-Commerce
There are many benefits of ecommerce as compared to traditional brick and mortar businesses.
Convenience for Consumers: The spread of the internet has gotten more and more people online. eCommerce brings shopping experience to the hands of consumers. Ecommerce offers consumers the convenience to buy products online from the comfort of their homes 24/7.
Increased Market Reach for Businesses: E-Commerce is not bound by geographical limitations. With ecommerce, businesses can easily reach a global audience.
Cost Efficiency: Depending on the nature of the ecommerce venture, eCommerce can be a low entry barrier type of business. For example, eCommerce models such as drop shipping don’t involve inventory costs making such business models easy to start.
As such, ecommerce business models often have lower overhead costs when compared to the traditional brick-and-mortar stores.
Data-Driven Decision Making: The digital nature of ecommerce makes it easy for businesses to leverage data and make data driven decisions to tailor offerings, pivot or grow and scale their businesses.
Challenges and Considerations
eCommerce is not without its challenges and dynamics to be considered.
Security and Privacy Concerns: The spread of the internet comes with increased Cybersecurity threats and data breaches. These may pose risks to both businesses and consumers.
It’s better to leverage solid ecommerce platforms like Shopify – which have robust security mechanisms that would be difficult and expensive to build and sustain on a stand-alone ecommerce website.
Competition and Market Saturation: The E-Commerce landscape can be highly competitive depending on the niche and industry. This can make it challenging for new businesses to stand out.
Technological Advancements: The world of tech is ever evolving and keeping pace can be overwhelming. eCommerce platforms like Shopify and BigCommerce make it easy for the business owners to focus on growing their businesses while they handle the technical needs of ecommerce.
E-Commerce Trends and the Future of eCommerce
There are several trends that are shaping the future of ecommerce.
Mobile Commerce (M-Commerce): Mobile commerce is on the rise. More and more consumers are doing their shopping on their mobile devices. This is why ecommerce platforms like BigCommerce have adopted a mobile first approach.
AI and Chatbots in E-Commerce: Artificial intelligence and chatbots are playing a huge role in enhancing customer service and streamlining various e-commerce processes. This trend will take a more central role going forward.
Sustainable E-Commerce Practices: Consumers are increasingly shifting towards businesses with eco-friendly and socially responsible practices.
eCommerce has completely changed the face of buying and selling. The phenomenon also presents vast entrepreneurial opportunities for go-getters willing to line up their ducks and put in the work to claim their stake in this lucrative $26673.64 billion industry.
If you are keen to start an ecommerce business consider the following guides we have published: