E-commerce, everything you need to know

What is e-commerce?

The term ‘e-commerce’, also known as electronic commerce simply refers to buying and selling goods and services conducted electronically on the internet. It also includes Transfer of funds and data. Virtual stores that sell their products online are e-commerce stores or e-commerce sites. For example, Amazon and eBay. Many physical retailers also have their online stores such as Apple and Walmart.

Some e-commerce Statistics for 2019

  • The global online retail sales are expected to reach 17.5% by 2021
  • Amazon is the leading online retailer with a net revenue of $232.88 billion in 2018. (Statista)
  • 35% of Google product searches turn in to transactions within 5 days. (Jumpshot)
  • The average global cart abandonment rate in Q3 of 2018 was 76.9% (SaleCycle)
  • 83% of people say Instagram helps them discover new products and services. 81% say the platform helps them research products and 80% say it helps them decide whether to make a purchase. (Facebook)
  • People who have a bad mobile experience with your business are 62% likely to become your customers in the future. (Google)

A brief history of e-commerce

It all began in 1979 when Michael Aldrich, considered as the founder of e-commerce, invented electronic shopping by connecting the computer with a TV through a telephone connection. This was done for the transmission of secure data. Although this was entirely different from today’s e-commerce, this idea gave rise to the idea of shopping without a physical store. After that, Boston Computer Exchange launched the first e-commerce platform in 1982. First online shopping happened only in 1994 when a young entrepreneur Dan Kohn sold a CD of Sting’s Ten Summoner’s Tales album to a friend in Philadelphia, who used his credit card to spend $12.48, plus shipping costs, in a transaction that, for the first time, was protected by encryption technology. Then in 1995, Jeff Bezos launched Amazon which became a major milestone in the history of e-commerce.

Advantages and opportunities of e-commerce

There has been a boom in online shopping in recent years. E-Commerce still can’t compete with traditional brick and mortar stores, as online retail sale accounts only 13.7% of global retail sales 2019. However, it is a swiftly growing trend no one can ignore. By 2040, 95% of all purchases are expected to be online. The greatest benefit of e-commerce is that unlike brick and mortar stores, it need not be limited to a geographical area and cost for setting up a business is very low compared to a physical store. You can save the employment costs and overhead costs. All you need is a warehouse to store products. Inventory costs can also be reduced using electronic tools to speed up the shopping procedures. Due to the low operational costs, merchants can offer better deals and offers to their customers. Another great benefit is it’s 24/7 availability. This is a great sales opportunity for merchants as customers can seamlessly view the products at any time immediately. Also, marketing became more easier with emerging technologies, huge access to consumer data and techniques such as target marketing. Moreover, with a laptop and a good internet connection, you can work from anywhere in the world. The major drawback of e-commerce is customers can’t physically view or test the products. Perhaps this can also be tackled with new technologies like augmented reality.

Types of e-commerce business

The most common types of e-commerce in the world are B2B and B2C. Businesses can operate in more than one type of e-Commerce simultaneously. If you are starting an e-commerce business, you will fall into at least one of these five general categories. Each category has its own opportunities and threats. Understanding your target market and which category your idea fits in will help you have a better start.

1. B2C (Business to consumer)

B2C is the traditional business model where merchants sell their products to the consumer directly through their websites. This is similar to common brick and mortar business but done online without a physical store. It is all about impulse buying and consumer satisfaction. Also, there is no bulk buying in this type. Customers only buy a small amount of produce. B2C e-commerce turnover continues to grow at a rate of 13% this year. Examples are Amazon, Walmart, target, wish, etc. Businesses also offer services such as tutoring, financial advising, etc.

2.B2B (Business to Business)

In this type of business model, a business sells products or services to another business. These are the transactions between the manufacturers, wholesalers, retailers, etc. B2B sometimes is more complex than common B2C type and requires more startup money. But customers mostly get the order at a discounted rate as they order in bulk quantities. Software companies, marketing agencies, wholesale goods, and office equipment companies come under this category. Office supplies, gasoline, oil, medical equipment, airplanes, ships, and military equipment are common products that are involved in B2B transactions. Payment methods are PO, Check, ACH, Terms, and Quote. Reports say global B2B e-commerce revenue will top $6.7 trillion by 2020. Some of the fastest-growing e-commerce brands are FlexFire LED, CleanAir, NutreeVit and Alibaba.

3. C2C (Consumer To Consumer)

Online business sites such as eBay, Craigslist, and Amazon help a consumer to resell used products. C2C is a new type of business that has emerged using e-commerce technology and the sharing economy. It enables customers to trade with each other in an online marketplace by auctions and advertisements. The main drawbacks of C2C are the lack of quality assurance and payment guarantees. 

4.C2B (Consumer to Business)

In this type of model, the customer demands specific products/services from the business. It is entirely opposite to the traditional way of doing business. C2B examples include Freelancer, Fiverr, Google AdSense, Commission Junction, and Amazon.

5. C2A (Consumer to Administration)

These days, you can make almost every payment such as taxes, electricity and water bills, university fees, etc. online. These direct interactions between the administration and consumer are called C2A. This enables better communication between Government and its people.

6.B2A (Business to Administration)

B2A model websites are used by Government to approach business organizations. These websites support tenders, auctions and application submission processes.

5 most popular e-commerce business models

1.Dropshipping

Dropshipping is the fastest-growing e-commerce method due to the low barrier to enter, millions of product choices and plenty of automated tools that promote selling products online. In dropshipping, you don’t have to keep products in stock. Instead, the store sells the product and passes the sales order to a third-party supplier, who then sends the order to the customer. There are a lot of negative reviews on this method. As you put in less money, you will only get less profit. Most of the money goes to the supplier. You have to do a lot of sales just to cover the expenses.

2.Wholesaling

eBay, AliExpress, and Alibaba are the leading marketplaces for online wholesale business.

Wholesale is mostly a B2B practice, in which traders offer their products in bulk at a discount. One of the most challenging parts of an online wholesale business is finding reliable suppliers.

3.Private labeling and white labeling

These two words are the most confusing terms in e-commerce. In private labeling, a company buys a product from the manufacturer and sells it under its brand. Retailers have full right on the product further. Hence, they can further develop it or make any changes to the product according to their wishes.

While the white label means to give retailers’ name and brand to a generic product purchased from a manufacturer or distributor. Here, the distributor sells the same product to other retailers too.

4.Subscriptions

Subscription e-commerce is also an emerging trend in online purchasing. Through subscription, customers can avail recurring product deliveries or continue using existing services in exchange for a recurring payment. This model is beneficial to both businesses and customers.

5.Your own product

This model, otherwise called D2C (Direct to consumers) is a practice of cutting of middlemen from the business. In other words, running a business on your own without the help of any distributors, marketing agencies, etc. so you don’t have to share your profit with anyone. Examples are Wone, Warby Parker and Casper.

Setting up a new business, you don’t have to use any one of the business models mentioned above. You can always mix and match according to your convenience. According to Steve jobs, “I’m convinced that about half of what separates successful entrepreneurs from the non-successful ones is pure perseverance.” Anybody can easily set up an online business. To stand out, you must make use of the opportunities. It is always better to choose the market first rather than the product. There would definitely be a group of people searching for something which has fewer options available on the internet. You can find this by keyword research. This is better than competing with giants. Other essential factors that help to improve your business are detailed planning, good research, new age marketing techniques such as Target marketing and email marketing, top-notch customer support, high-quality product images, technically updated websites, etc.

About the Author Bandi Fouziya

Hi, I am a VBA Developer, working on automating office apps. I have 16+ years of experience in developing visual basic applications for the clients around the globe. I have worked on many complex projects of which are: 1. Creating Interactive Dashboards 2. Bulk web Data Scraping 3. Automating web app task from Excel through API integration with VBA 4. Mailchimp Automation 5. Real Time Indicators Statistical Analysis 6. Access database application development - multi user platform with sql server as backend 7. Statistical Analysis using R and R shiny apps through VBA and many more. I am passionate in learning new tools and techniques and would love to share with you all. Join in hand to learn smart tools. Apply in your life and be more productive. Check out my profile on Upwork: https://www.upwork.com/freelancers/~01f0ac790f1b3265ff

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