What is ECommerce?

As modern technologies become much more accessible to the global community, the world is becoming an online storefront as brands enable their ecommerce platform. And more recently with COVID-19, ecommerce has risen to an unprecedented height. However, what exactly is ecommerce?

Ecommerce, short for electronic commerce, is defined as “the activity of electronically buying or selling of products or services over the Internet.” [1]. These selling products can be physical, such as food, clothing or furniture. A product can be digital, such as flight tickets or magazine subscriptions. Services, such as online courses, consulting or renovating, can also be purchased. The key element of the ecommerce platform is performing the exchange of a product with a payment. This transaction is done over the internet.

The key advantages of an ecommerce platform are the following.

  1. Ubiquity: Since the internet is available everywhere, online marketplaces can be created anywhere, with no geographical limitations like a brick and mortar store.
  2. Global interaction: Millions of merchants and their customers around the world can connect and interact with each other through the ecommerce platform.

As for the main disadvantages of ecommerce:

  1. Highly competitive: There are millions of stores and products that exist online. Therefore, customers can easily bounce from one site to another if they find a better deal.
  2. Lack of physical interaction: Since ecommerce is conducted online, customers cannot try the products beforehand (e.g. clothing to check its size and fit), or the merchants cannot physically interact with their customers to understand their non-verbal shopping cues.
  3. Security and privacy: Cyber attacks and privacy breaches do occur, where the websites do not have high encryption for secure online transactions or to protect online identity.

There are four main types of ecommerce models that can describe almost every transaction that takes place between consumers and businesses [2].

  • Business to Consumer (B2C): This type of transaction involves the business selling a good or service to a consumer. For example, a customer buys a smartphone from an online retailer.
  • Business to Business (B2B): For this ecommerce model, one business sells to another business, such as selling a payroll system to a banking company.
  • Consumer to Consumer (C2C): Consumers can sell directly to other consumers. This type of transaction is commonly found in online classifieds.
  • Consumer to Business (C2B): A consumer sells their services or products to a business, such as freelance work.

Most people will think that ecommerce is just a shopping cart, where the customer makes a payment for a product and the business then ships the order. However, there is much more than that in the ecommerce ecosystem. It is a complex network that includes the following: ecommerce website, payment gateways, inventory software and shipping logistics for physical products, digital marketing tools, customer relationship management, and more.

Ecommerce is still a relatively new industry, where the first secure online purchase was made in 1994 through NetMarket. Since then, online shopping has become a multi-trillion dollar industry. By the end of 2020, worldwide ecommerce sales will be $4.2 trillion USD [3] and are predicted to grow to $6.5 trillion USD in 2023.

Why are online marketplaces, such as Amazon, growing at such a rapid rate? With the ease of technologies, the consumer’s shopping habits have changed immensely. Consumers have increasingly shopped with online retailers to take advantage of the added convenience of shopping at home and the ability to compare prices at the click of a button.

There are many benefits to establishing an ecommerce store for merchants. For example, setting up an ecommerce platform has lower startup costs than a brick and mortar store due to fewer licenses and permits required. Merchants can attract new potential customers due to the global reach that ecommerce provides. They can also learn new shopping behaviors and product interests from their customers through online engagement and analytics. Orders can increase with the 24/7/365 timing and digital sales channels (e.g. Facebook Shop, Google Shopping).

With the explosive growth of ecommerce and its ease of online experience, the world of shopping has changed tremendously and will continue to evolve. 

 

REFLECTION

  • What kind of ecommerce store do you want to start?
  • What are you most excited about having an ecommerce store?

  

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