Jan 07, 2022
What Is eCommerce? A Complete Guide With Examples
If you have spent some time surfing the World Wide Web, chances are you have stumbled upon the word eCommerce.
eCommerce stands for electronic commerce and refers to all transactions completed electronically. This includes various online tools and activities, from internet banking and electronic wallets to online ticketing and auctions.
However, when people talk about eCommerce, they usually refer to online shopping – buying and selling goods on the internet. A good example of an eCommerce platform is Amazon.com, the biggest online marketplace in the United States.
If you are interested in starting an eCommerce website to sell online, this article may be right for you. We will explain all about eCommerce stores – how profitable they are, the main eCommerce business models, different types of products and services to sell online, and the benefits of eCommerce businesses.
Without further ado, let’s begin, shall we?
eCommerce Trends: How Profitable Is Electronic Commerce?
The eCommerce industry is ever-growing. Here are some notable statistics about the growth of eCommerce businesses:
- In 2020, online sales accounted for over 18% of all retail sales worldwide. They are expected to keep growing and reach 21.8% in 2024.
- The pandemic resulted in an overall growth of $183 billion in terms of online spending and the figure is predicted to grow to $1 trillion in 2022.
- Experts predict that eCommerce will make up 95% of all purchases by the year 2040.
In short, the eCommerce industry has inevitably become an inseparable part of many people’s lives.
4 Main Models of an eCommerce Business
There are many ways to categorize eCommerce businesses. This article will group eCommerce websites into four online market segments based on the participants involved in the transaction.
The following are the four main types of eCommerce by business model:
1. Business to Consumer (B2C)
The B2C model refers to companies selling products and services directly to end-users.
They come in various forms, such as:
- Retail – when a business sells goods or services directly to consumers for personal use, as opposed to them reselling to another party. Think of buying a phone from Apple, ordering a pair of shoes from Adidas, or hiring someone from Lawn Guru to mow your lawn.
- Dropshipping – merchants don’t have to keep inventory themselves. The seller purchases an item from a third-party supplier, who ships the item directly to the buyer. to Easy management and low capital are some of the reasons why many small businesses have adopted this model. Examples of dropshipping suppliers include Megagoods and Sunrise Wholesale.
- Crowdfunding – this requires encouraging people to fund a new business or product in exchange for a reward. The reward may be a small gift, monetary interest, or the company stock. Some examples of crowdfunding platforms are GoFundMe and Kickstarter.
2. Business to Business (B2B)
In the B2B model, both participants are business entities. Typically, this transaction happens when a business needs to source materials to create products.
Let’s take automobile production as an example. In this case, an automobile retailer purchases from manufacturers. The B2B transactions might include buying tires, rubber hoses, and glass wipers – materials to build cars that will be sold to customers.
Consequently, B2B eCommerce transactions typically result in high-volume sales and more recurring purchases.
Wholesale eCommerce falls under this category, where businesses sell products in bulk and at low prices to online retailers as opposed to directly selling to end-users.
3. Consumer to Business (C2B)
C2B businesses allow individuals to sell goods and services to companies. This approach gives consumers the power to name their prices.
To illustrate, affiliate programs and freelancing sites are categorized as C2B.
An affiliate program is a marketing system where a company pays someone to promote its goods or services. Businesses are willing to pay for the promotion as the affiliate is usually a well-known person in the industry and has gathered a loyal following. For example, a company selling makeup products can have beauty bloggers as its affiliates.
Companies typically give affiliate marketers unique links they place on their websites. Every time a reader clicks on the link and is directed to the company’s website or online store, the affiliate gets paid a designated commission fee.
On the other hand, a freelancer sells their services to companies. Freelancers can be from practically any field, from web development to financial services.
The flow of transactions may differ from one platform to another. Some may require companies to contact the freelancers first, while others let businesses hire freelancers immediately without prior correspondence.
4. Consumer to Consumer (C2C)
The C2C business model connects online consumers, letting an individual sell to another individual. Similar to other models, the C2C model can be used to sell both goods and services. Many people also use this method to sell handmade or secondhand products.
This process usually takes place in online marketplaces that get a cut out of the profit. Examples of B2C eCommerce websites helping customers sell to other consumers by signing up for an account include Etsy and Craigslist.
Some eCommerce platforms such as eBay also allow customers to sell products via online auctions instead of a straightforward purchase.
The merchant puts a product up for auction for a certain period, and people get to bid on the product. When the auction period ends, the person willing to pay the biggest amount of money gets to purchase the product.
In addition to eCommerce sites, C2C transactions can also happen via money transfer platforms such as PayPal or social media sites like Instagram or Facebook.
Types of eCommerce Businesses According to Goods and Services Sold
The following are the types of business ideas and services eCommerce stores can offer:
- Physical products. These are tangible items, like clothes, beauty products, jewelry, food, cars, and computers.
- Digital products. This refers to non-tangible products, such as songs, eBooks, online courses, and computer software.
- Services. This is when people offer their skills to perform a specific type of work and get paid per project or hourly. Examples of people offering services online include graphic designers, web developers, and translators.
Businesses online may offer these products and services via a one-time purchase or a subscription system.
A one-time online purchase means the transaction only happens once. For example, the transaction is complete when a customer purchases a shirt and the item is delivered to them.
Meanwhile, a customer will pay for a product or service monthly or yearly with a subscription system. The buyer can enjoy a service or have products delivered to them regularly for the period they paid for.
For example, when a customer purchases a web hosting plan from Hostinger, they can choose to buy the plan for one year. Customers can also choose to renew the plan manually or automatically.
Another example is a meal kit delivery service such as HelloFresh. This online business delivers pre-portioned ingredients and corresponding step-by-step recipes to customers every week. People can also adjust the meals according to their diet type and choose the number of recipes per week.
What Are the Benefits of Starting an Online Store?
There are plenty of advantages in joining the growing eCommerce industry.
Here are some reasons why setting up an online store could be better than the traditional brick-and-mortar business:
eCommerce Unlocks the Global Market
eCommerce overcomes geographical barriers. It lets merchants increase their revenue and sales by selling to anyone anywhere. Online shopping is also made even easier by the prevalence of mobile devices, contributing to eCommerce growth.
Both global eCommerce and mobile commerce have been steadily growing throughout the years. Global mobile commerce sales from retailing are expected to exceed $132 billion by 2024, while global eCommerce sales are expected to reach $5.4 trillion by 2022.
An online shop makes products easier to discover and purchase, letting small businesses sell trending products at a scale impossible to achieve with a physical store.
In addition, not only does an online store have a wider market reach, but it also removes the need to set up physical stores. With brick-and-mortar businesses, you have to build up inventory, rent store space, and hire employees. With eCommerce businesses, on the other hand, you can start building an eCommerce store as soon as you know what to sell and are ready to go online.
Having your business on the internet means you are always ready to sell.
An online store increases sales opportunities for merchants. Unlike with a physical store, your revenue doesn’t have opening hours. Furthermore, 87% of shoppers begin product searches online, so creating an online store will expose your business to a wider audience.
For buyers, online shopping grants them instant gratification. No matter the time, consumers can shop online via their desktop or mobile device. With just a few clicks or taps, the product can be theirs.
This convenience is especially beneficial for those targeting a global audience. You never know which time zone people are in, and opening 24/7 decreases your chance of losing customers.
To further maximize customer satisfaction, use chatbots on your online store to provide round-the-clock customer support.
Low Operational Costs
Other than eliminating the need to build or rent brick-and-mortar stores, starting an eCommerce store also reduces several operational costs.
When you sell online, you can save on warehouse and product storage expenses by choosing a dropshipping business model. Let the supplier fulfill the orders for you.
Depending on the eCommerce platform chosen, setting up an online store can also be quite affordable. For example, you can purchase web hosting for an eCommerce website at Hostinger for as low as $1.39/month and a .com domain extension for $9.99.
Besides the paid advertising options, there are also free methods to market products. Examples include creating organic social media or blog posts and improving your site’s search engine optimization (SEO). Don’t forget to adjust your marketing strategy to stay on budget.
In addition, you can eliminate the cost of payroll by running and managing the business yourself. Even if you need staff, you won’t have to hire many employees, thanks to the advanced features available in various eCommerce solutions. We will discuss this further in the next section.
eCommerce businesses can automate inventory management with the help of tools and services. They simplify and ease the operational tasks associated with running a business.
For instance, you can add, track, and manage product inventory from a single page.
Shipping and delivery details are also taken care of with real-time calculation tools. Thus, creating a manual table shipping rate is not necessary. eCommerce platforms also typically offer a variety of payment options, and customers can choose one familiar to them.
Some eCommerce platforms even come with professionally designed and customizable pre-made templates, so there is no need to hire a graphic designer. Just pick the one you like the most for your eCommerce website, and adjust the elements to your liking.
For example, the Business Name Generator can offer brand name ideas, and the Logo Maker can help design an attractive and professional-looking logo to go with the business name.
With the right eCommerce platform, you can achieve efficiency and productivity with ease, thereby focusing more on growing your business. Furthermore, using the right platform means your eCommerce store is more likely to provide a great user experience for customers shopping online.
Descriptive Information and Personalized Lead Targeting
With a physical store, you can only display a limited amount of information about each product.
However, that is not the case with an eCommerce store. You can add detailed descriptions about products or services and display as many product variants as you’d like. Business owners can even provide complete information about their brands’ history to build credibility and gain customers’ trust.
These little features might seem insignificant, but they can encourage online shoppers to purchase. According to a study, informed customers feel more satisfied and confident about their purchasing decision.
Having an eCommerce business also lets you use lead targeting strategies, such as personalized email marketing or targeted ad campaigns.
Since your online store can gather customer data, you have the option to do personalized marketing depending on the customer’s information – whether it is purchase history, gender, or age.
By understanding your target audience, you have a higher chance of increasing conversion rates. Use the customer data to serve different kinds of marketing content and personalized recommendations to different demographics.
Examples of Successful eCommerce Sites
To help inspire and give you a better understanding of what an eCommerce site could look like, let us take a look at some of the best eCommerce companies in the business.
One of the biggest players in the industry, Amazon is an American technology company and online retailer. The fields it focuses on include eCommerce, digital streaming, cloud computing, and artificial intelligence.
Amazon.com has numerous subsidiaries providing various products and services. Some examples include Amazon Fresh, a grocery delivery service operating in the United States, and Amazon Web Services, a subsidiary providing APIs and cloud-computing platforms.
A fellow American retail company, Walmart provides virtually any product or service imaginable. Examples of some trending products it sells include gardening tools, office supplies, movies, and books. This company also provides services such as health and automobile care services.
One of the reasons behind its success is its principle to offer low prices to its customers. Walmart achieves this through various methods such as minimizing operation costs, advanced barcode technology, and supply chain management, as well as its direct collaboration with various manufacturers.
Also known as the Alibaba Group, Alibaba is a Chinese online retailer and technology company focusing on various eCommerce market segments, search engines, and cloud computing services.
It owns a variety of subsidiaries to drive its online efforts in different niche markets. For example, Alibaba.com is an online marketplace focused on B2B wholesale transactions, while AliExpress caters more to B2C transactions. There is also Taobao, an eCommerce platform only available in Chinese built to facilitate C2C eCommerce transactions.
Different from the previous eCommerce giants providing almost everything, Wayfair operates in one particular niche – home furnishing. However, make no mistake as to its size – the eCommerce website still offers millions upon millions of products to choose from.
Formerly known as CSN Stores, this American company operates via dropshipping, working with over 10,000 suppliers worldwide. The company sells its products through five different retail websites – AllModern, Joss & Main, Perigold, Birch Lane, and the main Wayfair website. Each site provides furniture and home decor of different styles.
This American eCommerce company focuses on B2C and C2C transactions. In addition to allowing immediate purchases, this online marketplace’s unique quality lies in its auctioning feature that lets people bid on items during a certain period of time.
The eCommerce website lets people buy and sell various kinds of products, including electronics, beauty products, industrial equipment, clothes, and sports gear.
To recap, although the term eCommerce can refer to all types of electronic commerce transactions along with their related tools and activities, it mainly refers to online shopping. As an industry, global eCommerce is predicted to continue to be a lucrative source to make money online. Examples of successful online stores include Amazon, Walmart, Alibaba, Wayfair, and eBay.
We have discussed four eCommerce business models:
- Business to consumer (B2C). Online retailers sell online directly to end-users.
- Business to business (B2B). Wholesalers sell products in bulk and at lower prices to eCommerce retailers.
- Consumer to business (C2B). Individuals offer services and expertise to companies.
- Consumer to consumer (C2C). Individuals offer products and services to other individuals, whether via one-time online purchases or an online auction system.
Online stores can also sell both physical and digital products as well as services. Online shoppers can purchase the products and services via a one-time purchase or subscription system. In addition, we have explained the benefits of starting an online store instead of a physical one:
- The possibility to sell to international customers.
- A business that is open round-the-clock.
- Lower operating costs.
- Handy tools for easy store management.
- More detailed product descriptions and personalized marketing.
Whichever model you choose and whatever products or services you plan to sell, don’t forget to choose the right eCommerce platform to suit your needs. We hope this article has been useful in helping you start your internet commerce journey. Good luck!