Updated July 4, 2023
What is E-commerce?
E-commerce allows individuals and organizations to conduct business, i.e., buy and sell goods and services through an online marketplace using electronic payment systems.
Customers buy products and services from online stores and make online payments against purchases. It includes entertainment services such as movies, music, shopping, and necessities such as net banking and e-tickets for transport. The facilities are available to anyone with a smartphone, a tablet, a laptop, or any other smart device.
For example, after running a physical store for years, John created an e-commerce store for his business. He set up a website and made an online catalog of his products. He chose a secure payment gateway and added features such as product reviews and wishlists. His website attracted a wide range of customers and increased his profit margin. Moreover, John saw an increase in customer loyalty through the convenience of his e-commerce store.
- In e-commerce, businesses and individuals buy and sell products and services online.
- Here, there are seven types of transactions, such as B2C, B2B, B2B2C, B2G, C2B, D2C, and C2C.
- An effective e-commerce strategy can help businesses increase sales, reach new customers and build brand loyalty.
- Although it gives a global business experience to manufacturers, businesses, and consumers, risks of cyber fraud persist.
How does E-commerce work?
Following are the steps to start and run an E-commerce business:
Step #1: Building a Website: Businesses first develop a website that customers can visit and browse.
Step #2: User Interface: They create a user-friendly interface that makes it easy for customers to find products they are looking for and learn more about the business.
Step #3: Traffic: They focus on driving traffic to their website and converting visitors into customers after activation.
Step #4: Advertisement: They use search engine optimization (SEO), content marketing, social media marketing, and pay-per-click advertising to drive traffic to your website.
Step #5: Secured Checkout: Once the customers make a purchase, they get a secure and user-friendly checkout process.
Step #6: Payment Options: Customers’ payment methods can include credit cards, PayPal, or other digital wallets.
Step #7: Encryption: The use of encryption technology protects all sensitive information.
Step #8: Management: Managing inventory levels, keeping track of orders and shipments, and analyzing the online store’s performance are responsibilities of the business holder.
Step #9: Monitoring: By monitoring sales, businesses can determine which products are selling well and adjust their marketing strategies accordingly.
History of E-commerce
- The first e-commerce transaction occurred in 1994 between friends as one of them bought a CD from another through a NetMarket website.
- In 1994, entrepreneur Jeff Bezos launched Amazon, a revolutionary online store.
- It was the first major e-commerce site and made its first sale, that of a book, in 1995.
- It quickly gained popularity, allowing customers to purchase items from the comfort of their homes and have them delivered to their doors without visiting a physical store.
- This convenience was a game-changer that soon revolutionized the way people shopped.
- Over the next two decades, more businesses began offering online services and products that were globally accessible.
- It has an estimated global sales worth over $5,717 billion in 2022, and it is going to reach $6.310 trillion in 2023.
Examples of E-commerce
Amazon’s exceptional B2B and B2C infrastructure and global supply chain management allow the company to deliver products quickly and efficiently to customers around the world. In 2022 its global sales neared $689.2 billion. Its Prime membership program offers exclusive discounts and access to streaming global content.
It is a China-born e-commerce website selling consumer electronics, apparel, sports equipment, beauty products, and industrial machinery. Founded in 1999, it presently has taken up one-fourth of the world’s electronic commerce market.
eBay is a significant example of a C2C model in e-commerce that deals in auction articles as well as fixed-price articles. Founded in California in 1995, today, eBay’s extensive sales connecting 190 markets globally make it a great option for cross-border trade.
It is a B2b model e-commerce platform enabling small business owners to set up and manage online stores. Founded in Canada in 2006, Shopify had a net income of $47 billion around the third quarter of 2022.
Types of E-commerce
- In B2C, consumers buy products directly from businesses without any intermediary in the process.
- Here, the customers access the business’s official website or online store to purchase the product.
- When a wholesaler buys products from a manufacturer’s/ business’s website, it is a B2B transaction.
- The transaction can take place either between a manufacturer and a wholesaler or a wholesaler and a retailer.
- In this transaction, a business sells its products to another business and then to a mutual target audience online.
- This kind of transaction strengthens the relationship between the two businesses helping them grow further in the market.
- In B2G, a manufacturer sells his products directly to a government agency (state, government, local, or federal) online without any intermediary intervention.
- Both parties have very efficient communication, and the transaction takes place against bulk orders.
- A consumer or an end-user sells his own manufactured goods online to any business or organization in this type of transaction.
- These transactions are profitable for the sellers as the more they produce, the more they earn.
- In D2C, a manufacturer sells his products directly to the consumer.
- The sales can occur through a social media platform, website, or web store.
- It is when one consumer sells products to another consumer online.
- These transactions generally take place for second-hand products.
Features of E-commerce
- Lower costs – Businesses can save money on overhead costs such as rent, electricity, and staffing by operating online instead of in a physical store location.
- Increased reach – An online business has the potential to reach customers around the world, which can lead to increased sales and profits.
- Convenience – Customers have the convenience of being able to shop from anywhere at any time and compare prices easily.
- Variety – Online stores typically offer a much wider variety of products than physical stores, making it easier for customers to find what they need.
- Personalization – Online stores can use customer data to create personalized experiences for customers, such as customized recommendations and targeted offers.
- Social media integration – Social media can be used to promote products, build loyalty, and engage customers.
- Mobile-friendly – Mobile-friendly websites and apps make it easy for customers to shop from any device.
- Customer feedback – Online stores can gather customer feedback through surveys, ratings, and reviews to improve their products and services.
E-Commerce vs. E-Business
|E-commerce focuses on enabling customers to purchase goods or services online.||E-business uses technology to improve the efficiency of a business by managing customer relationships, marketing, and communications.|
|It provides a platform for customers to purchase products and services directly from a manufacturer or a business via the Internet.||It makes use of the internet, intranet, and extranet for its functioning.|
|It is suitable for B2C (business-to-consumer) transactions.||Suitable for B2B (business-to-business) transactions.|
|It offers features like customer reviews and ratings, personalized promotions and discounts, order tracking, and more.||Includes automating processes, data mining and analysis, supply chain management, and more.|
Advantages and Disadvantages of E-commerce
|E-commerce has multiple scopes of increased reach and access to a global audience.||As with any online transaction, there is always a security risk of fraud or hacking.|
|It allows businesses to reduce their operating costs by eliminating the need for physical storefronts, which can be expensive to maintain and operate.||The internet has made it easier for businesses to enter the global market, which can result in increased competition and pricing pressures.|
|Automated customer service tools help businesses to respond to and resolve customer inquiries quickly, improving customer satisfaction and loyalty.||If a business does not have reliable internet access or its website is difficult to navigate, customers may not return for future purchases.|
|When shopping online, customers can compare products from different companies, leading to better-informed decisions.||Online customers may not have access to the same level of customer service as in-store customers, leading to customer dissatisfaction.|
Through e-commerce, businesses have begun to use online platforms to reach their consumers and build relationships with them. It has opened up several new opportunities for corporations to reach their target customers and increase their market share. With evolving technology, it will become more advantageous to businesses and corporations.
Frequently Asked Questions (FAQs)
Q.1. What is e-commerce?
Answer: E-commerce is the buying and selling of goods or services over the Internet. It is a convenient way to conduct business, enabling customers to purchase goods and services from anywhere at any time.
Q.2. What are the seven types of e-commerce transactions?
Answer: There are seven types of e-commerce transactions, such as B2C (business to consumer), B2B (business to business), B2B2C (business to business to consumer), B2G (business to government), C2B (consumer to business), D2C (direct to consumer), and C2C (consumer to consumer).
Q.3. What are some popular examples of e-commerce?
Answer: Examples of some popular e-commerce websites are Walmart, eBay, Amazon, Aliexpress, Mangakakalot, etc. Compuserve (1969) was the first of its kind, which became popular for its online chat system, gaming, and software libraries. In the present day, many such websites, online stores, and social media platforms are popular all over the world.
Q.3. What are the advantages of e-commerce?
Answer: E-commerce reduces costs, increases efficiency, and offers customers a more convenient shopping experience. It helps businesses access new markets and provide their customers with more personalized services. It also tracks customer behavior to better understand their needs and preferences.
Q.5. What are the limitations of e-commerce?
Answer: Limitations of e-commerce include high technological costs, high shipping costs, and customers’ uncertainty regarding product quality. There are also security risks of hacking and fraudulence.
This was an EDUCBA guide to e-commerce. To learn more, please refer to EDUCBA’s Recommended Articles.