How well do you know the world of modern ecommerce?
With retail ecommerce sales having exceeded $5.7 trillion worldwide in 2022 and projected to reach loftier heights in the next few years, now is a good time to gain more-in-depth understanding.
What is ecommerce?
Electronic commerce — ecommerce for short, or simply online shopping — is the buying and selling of goods and services in online stores. It encompasses a very wide range of business transactions, from retail shopping sites and marketplaces to banking and auctions.
How did ecommerce start?
- An early concept: in the 1960s, organizations used the Electronic Data Interchange (EDI) to aid transfer of documents between supply chains.
- A first online transaction: in 1971–72, marijuana changed hands between students at Stanford and MIT on ARPANET, an early version of the Internet.
- By conventional definition, in 1994, the first true ecommerce transaction was the sale of a CD on NetMarket, a retail website.
Things have progressed considerably since those heady days of incubation. Ecommerce understandably became enshrined during the pandemic, and then it continued its new reign far beyond the days of lockdown.
In order to compete with the likes of Alibaba, Amazon, eBay, and Etsy, traditional brick-and-mortar retailers have had to embrace the online option and develop their own ecommerce sites and, in many cases, entire online marketplaces.
This popular way of doing business is continuing to revolutionize the ways that goods and services are promoted and sold. Along with the rise of social media, ecommerce has become an integral part of most people’s daily lives, enabling us to shop from the comfort of home or conveniently place orders while on the go, through mobile devices and mobile apps.
Types of ecommerce business models
Multiple variations of ecommerce deliver specific needs for different audiences:
Business to consumer (B2C)
This is the most common type of ecommerce experience. Every time you browse or buy something on an online retail site like Best Buy, Costco, or Home Depot, you’re involved. Need a Mets hat from Amazon? Looking at sofa beds on Wayfair? Browsing Etsy for a personalized handmade gift? B2C strikes again.
Business to business (B2B)
You might be thinking this model is dull compared with the flash of B2C. You might be wrong about that. B2B is gaining significant ground and status in the ecommerce world. Whether it’s a promising startup or small business launched using solely an online model, whether it’s the endless depths of Alibaba’s catalog or the innovative products of Salesforce, the B2B ecommerce world is not staid.
Consumer to consumer (C2C)
This is when a third-party ecommerce platform connects shoppers to buy and sell preowned items. Got a swanky leather jacket that doesn’t go with your look anymore? It’s time to cast it out of your closet and pocket a few quick bucks by selling it on a site like thredUp, Poshmark, or another C2C clothing platform.
Consumer to business (C2B)
With C2B, individuals, as opposed to businesses, are the ones creating the value, offering their products or services to companies. One example is Fiverr, a freelance services marketplace thriving with the talent and ingenuity of professionals who excel at things like website design and copywriting.
Direct to consumer (D2C)
This is when a business sells its products directly to end users — everyday people — rather than going through a retailer, distributor, or wholesaler. The advantages? According to Shopify, “DTC eliminates several steps of the buying cycle and often provides a more efficient customer experience.” According to Insider Intelligence, by 2024, DTC sales are projected to hit $161.22 billion. Examples of D2C sites include Away and The Honest Company.
Business to administration (B2A)
This less-talked-about ecommerce sector involves transactions between online businesses and administrations or government agencies. It enables agencies, for instance, to run more efficiently with the latest hardware and software. An example: IBM providing cloud computing and AI solutions to government entities.
Consumer to administration (C2A)
This is another less-well-known ecommerce model, this time involving consumers completing a transaction with an administration or government entity. When you file a tax form online, you’re engaging in a C2A transaction.
Key components of an ecommerce website
Phew, that’s a lot of ecommerce variations to keep straight. Let’s back up a bit and start at the beginning.
What are the building blocks of an ecommerce website? Given the wide range of ecommerce models, not every commerce site contains the same components or utilizes the same features. But for the most part, you’ll find business owners using certain ecommerce solutions on their sites:
An online catalog
As with a brick-and-mortar store, an ecommerce version features a collection of products. The first stop for many shoppers: an attractive, colorful, engaging online “storefront” (home page). This is where appearances matter most, and it’s the starting point for jumping into the store’s potentially huge catalog.
In the online catalog material of a successful ecommerce store, the item listings are well organized and attractive, with catchy copy and clear visuals. The category pages and product detail pages alike appeal to visitors’ preferences and needs.
A shopping cart
An ecommerce virtual shopping basket in which shoppers can place and keep track of items (or services) they may (or may not) purchase at checkout is a must. One advantage: unlike with an unwieldy physical shopping cart, your pile of prospective purchases isn’t going to spill out and clutter up an aisle. However, your products’ continuing presence in your e-cart could result in a cluttered email in-box, when reminder messages like “Don’t forget…this item is still in your cart” start arriving.
A payment gateway
The equivalent of a brick-and-mortar store’s cash-register counter (albeit, with no line), a payment gateway (for example, PayPal) in ecommerce is a secure portal for processing credit-card payments to expediently complete transactions.
An order management system
This essential component for shoppers and ecommerce managers alike, an order management system, or OMS for short, is a system for tracking orders, managing inventory, and handling customer-service queries, facilitating the completion of the ordering process.
Advantages and disadvantages of ecommerce
Ecommerce is so many things to many people: a convenient way of doing business that caters to personal preferences and is becoming more firmly ensconced in everyday consumer life every day. It has distinct advantages, true. It also has some drawbacks. Here’s a quick look at the pros and cons of doing business in the online-sales universe:
- Convenient for shoppers: From New York to Tokyo to small towns and provinces all over the world, physical location is not an issue in the ecommerce world. Shoppers anywhere can browse, compare, and purchase products with a few clicks.
- A larger range of products: Ecommerce websites can obviously offer far more products than retailers can place on shelves in physical stores. Expansive catalogs give shoppers more options to consider and more ways to get their needs met.
- Lower costs for sellers: Without a need for physical storefronts, operating costs are lower. Yes, building an ecommerce site has financial challenges. However, you still stand to save more when taking your store into cyberspace.
- Extended reach: Looking to go global with your products or services? Ecommerce is the way to get there. Assuming you have your shipping ducks in a row, all your products and services can be sold to shoppers worldwide.
- The ability to personalize the shopper journey: Marketers can personalize shopping only so much in a physical store. By using customer data to craft personalized recommendations that encourage online purchases, you can provide customer experiences that result in higher sales. If you get personalization right, you can potentially generate 40% more revenue.
- Lack of a personal touch for shoppers. If you’re one of those people who likes to grab items off of shelves in person to see how they feel and look at them up close, excursions in ecommerce malls aren’t going to be as satisfying. It’s a different kind of shopping experience, with no attentive salespeople laser-focused on what you want or that immersive happy retail-therapy thing in a pleasant-smelling store.
- Shipping costs: Free shipping is a benefit on some sites (e.g., with Amazon Prime), but on many others, online shoppers are stuck with paying shipping charges. For inexpensive items, that can cause hesitation, but even if you’re making a more substantial purchase, having to dig deeper in your wallet just to have it duly arrive on your doorstep is a downer.
- Shipping time: After an online purchase is completed, there’s the required patient wait for your package to arrive, even if you’ve sprung for an expedited shipping option. In this era of instant gratification, that can be patently annoying.
- Possible privacy and security issues: Online transactions require the sharing of sensitive personal and financial information, which can be a target for hackers. Do you trust ecommerce sites with your data? Not everyone is comfortable with handing over their credit-card information and other details to a payment system, and some ecommerce site infrastructure is less securely fortified than others.
- Returns and refunds: We all make purchasing mistakes online — since you couldn’t try on the item, the coat is unfortunately swimming on you or the jeans are too tight. Returning and being refunded for items bought online that don’t quite work isn’t always a cinch. And when the customer and the business are in different countries, things can get more complicated.
- More seller competition: The global nature of ecommerce means businesses face competition from all over the world, 24×7. In a sea of ecommerce sites and their thousands of items, getting your products in front of the right audience and standing out from the pack of sellers can be tough.
Where are things headed?
What’s the crystal ball showing for selling electronically? With advances in technology such as those emerging in AI, ecommerce is sure to become even more personalized and seamless than ever.
A few areas to watch:
Augmented reality and virtual reality
Everyone’s talking about ChatGPT, but let’s not forget augmented reality (AR, which uses a real-world setting) and virtual reality (VR) technology. These immersive and interactive technologies are transforming the ways in which online shoppers look at items, for instance, by allowing them to virtually try on clothes and visualize how items such as pieces of furniture will look in their homes.
In today’s digitally focused world, convenience and personalization rule. With the D2C model, letting people subscribe to regularly receive items or a service is one extension of that philosophy. A couple of examples: Barkbox and Dollar Shave Club.
Sustainability and ethical practices
Shoppers are becoming more conscious of the impact their consumerism is having on the planet, and many companies are adopting more-sustainable and ethical practices in response. Ecommerce retailers are expected to shift even more to embrace ethical product sourcing, packaging, and manufacturing. A great example of a company committed to these types of standards is Allbirds.
Set up your site for ecommerce success
In a world where the elements that can substantively help ecommerce stores succeed are continually being re-jiggered, having the right search and discovery tools for your online commerce platform is a first step in providing the caliber of customer experience your online shoppers demand.
Ready to enhance your search capabilities? Algolia has been found to boost revenue for B2B and B2C ecommerce companies alike. Plus, our capacities go beyond near-real-time search to encompass product recommendations and AI-powered solutions that produce relevant suggestions for shoppers.
Contact us and let’s get started elevating your standing in the world of ecommerce today!